BILL ANALYSIS Ó
AB 505
Page 1
Date of Hearing: May 27, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
505 (Melendez) - As Introduced February 23, 2015
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|Policy |Revenue and Taxation |Vote:|9 - 0 |
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Urgency: Yes State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill excludes from gross income, for taxable years
beginning on or after January 1, 2016, and before January 1,
2021, Concurrent Retirement and Disability Pay (CRDP) payments
received by active, reserve, or retired members of the United
States military who served in active duty.
FISCAL EFFECT:
1)Potentially significant GF costs to Franchise Tax Board (FTB)
to administer the changes to forms, procedures, and systems.
AB 505
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2)Estimated GF revenue decreases of $14 million, $24 million,
and $24 million in FY 2015-16, FY 2016-17, and FY 2017-18,
respectively.
COMMENTS:
1)Purpose. According to the author, service members who have
sustained injuries during battle receive compensation for
their sacrifice in the form of Combat-Related Special
Compensation (CRSC). CRSC payments received by an eligible
individual who performed service in a combat zone are exempt
from state and federal taxes.
CRDP is paid to eligible veterans who are retired and entitled
to receive disability income. Currently, CRDP payments are
subject to both federal and state tax liability. The author
argues this bill would allow veterans to take full advantage
of their disability benefits by relieving them of CRDP tax
liability.
2)Veteran Disability Compensation. Before 2002, federal law
prohibited the concurrent receipt of military retired pay and
disability compensation from the Department of Veterans
Affairs for the same period of service. In 2002, federal law
was amended to authorize the payment of additional
compensation for a combat-related disability to certain
military retirees, known as CRSC. CRSC payments are
considered disability compensation and are excluded from gross
income under both federal and state tax laws. In 2003,
Congress authorized CRDP payments to military retirees whose
retired pay was reduced by the amount of disability
compensation, but maintained CRDP payments were taxable.
AB 505
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3)Prior Legislation. AB 2329 (Melendez) of last year was
substantially similar to this bill, and was held on the
Suspense File of this committee.
Analysis Prepared by:Joel Tashjian / APPR. / (916)
319-2081