BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |AB 1944 |Hearing |6/22/16 |
| | |Date: | |
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|Author: |Jones |Tax Levy: |Yes |
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|Version: |6/13/16 Amended |Fiscal: |Yes |
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|Consultant|Bouaziz |
|: | |
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Personal Income Tax Law: gross income exclusion: Olympic and
Paralympic Games
Excludes from income the value of any prize or award won in the
Olympic Games or Paralympic Games.
Background
Generally, federal and state tax law provide that "income"
includes all income from any source, such as wages, dividends,
or capital gains, unless specifically excluded, such as
employer's health insurance contributions, and insurance
payments. California typically conforms to federal law for
exclusions to gross income for ease of administration: in 2015,
the state conformed to the federal exclusion from gross income
of qualified military base realignment and closure fringe
benefits (AB 154, Ting, 2015).
Income includes all gifts and prizes unless specifically
excluded, such as employee achievement awards, and any gift or
prize donated to charity. California also expressly excludes
from income some items that are includible as income in federal
tax, such as lottery winnings, unemployment insurance, and a
portion of social security benefits.
Proposed Law
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Assembly Bill 1944 excludes from income the value of any medal
given by the International Olympic Committee and any prize money
or honoraria received from the United States Olympic Committee
in athletic competition in the Olympic Games or the Paralympic
Games.
The measure applies to taxable years beginning on or after
January 1, 2016 and before January 1, 2021.
State Revenue Impact
The Franchise Tax Board (FTB) estimates General Fund revenue
losses of $100,000 in 2016-17, $6,000 in 2017-18, and $4,000 in
2018-19.
Comments
1. Purpose of the bill. According to the author, "This bill
would exclude from income tax the value of any medal given by
the International Olympic Committee and any prize money or
honorarium given by the United States Olympic Committee as a
result of winning a gold, silver, or bronze medal in the Olympic
or Paralympic games. This legislation does not include income
generated through any sponsorship deals or other endorsements
the athlete may receive. Many countries compensate their
Olympic and Paralympic athletes, but athletes representing the
United States compete on a voluntary basis and earn no prize
money unless they are victorious in competition. Tragically,
American athletes who do win a bronze, silver, or gold medal are
then subjected to federal and state taxes."
2. What about me? The Olympic Games are one of the world's most
enduring and popular traditions, and seek to bring together
representatives from all countries across the globe in athletic
competition. However, global associations of all form and
fashion hold competitions every year to recognize the best among
them, and award fully taxable prizes: Nobel Prizes are awarded
to individuals in recognition of scientific and cultural
contributions to the world, and the American Academy of Motion
Pictures Arts and Sciences recognizes excellence in filmmaking
by bestowing Academy Awards to name a few. These awards are won
AB 1944 (Jones) 6/13/16 Page 3
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by dedicated, talented individuals who work hard to become the
best; however, AB 1944 excludes only prizes won by Olympic and
Paralympic Athletes from tax. Why should one set of successful
competitors be excluded from tax when others have to pay? The
Committee may wish to consider what policy rationale to apply
when distinguishing tax-free winnings from taxable ones.
3. Reverse Nonconformity. California law does not
automatically conform to changes to federal tax law, except
under specified circumstances. Instead, the Legislature must
affirmatively conform to federal changes. Generally, when the
federal government changes its tax laws, California catches up
by enacting its own legislation the following year to reduce
differences between the two codes, thereby easing the tax
preparation burden on taxpayers, tax preparers, and the
Franchise Tax Board. AB 1944 seeks to exclude prizes and awards
won in the Olympic Games and the Paralympic Games from income
before Congress has acted, upsetting the usual timing for
conformity items, and potentially confusing affected taxpayers
by requiring them to include their prizes and awards for federal
purposes but excluding them for state tax purposes. The
Committee may wish to consider deferring action on AB 1944 until
and unless Congress acts, after which it can conform to the
federal change.
4. Prior legislation.
AB 2323 (Gorell, 2014), contained provisions
substantially similar to this bill. AB 2323 was held by
the Senate Committee on Appropriations.
AB 1786 (Mansoor, 2012), would have excluded from gross
income the value of any prize or award won by the taxpayer
in athletic competition in the Olympic Games. AB 1786 was
held by the Senate Committee on Appropriations.
Assembly Actions
Assembly Revenue and Taxation9-0
Assembly Appropriations 20-0
Assembly Floor 80-0
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Support and
Opposition (6/15/16)
Support : San Diego Regional Chamber of Commerce; San Francisco
Chamber of Commerce; United States Olympic Committee.
Opposition : Unknown.
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