BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 1944 (Jones) - Personal Income Tax Law: gross income exclusion: Olympic and Paralympic Games ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: June 13, 2016 |Policy Vote: GOV. & F. 5 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 1, 2016 |Consultant: Robert Ingenito | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: AB 1944 would, for taxable years 2016 through 2020, exclude from income the value of any prize or award won in the Olympic Games or Paralympic Games. Fiscal Impact: Based on historical athlete performance, the Franchise Tax Board (FTB) estimates that the bill would result in revenue losses (General Fund) of $100,000 in 2016-17, $6,000 in 2017-18, and $4,000 in 2018-19. The bill would not significantly impact FTB's administrative costs. Background: The United States Olympic Committee (USOC) pays out a $25,000 bonus per gold medal, $15,000 for silver and $10,000 for bronze (and for the Paralympics, $5,000, $3,500 and $2,500, AB 1944 (Jones) Page 1 of ? respectively). The money does not come from the United States government; instead, the USOC gets it money from the sale of broadcast rights, licensing and trademark income, and corporate sponsorships. As a point of comparison, Kazakhstan pays its athletes the equivalent of $250,000 per gold medal. Under current law, the Olympic-related bonuses are considered taxable income, which includes all gifts and prizes unless specifically excluded (such as employee achievement awards, and any gift or prize donated to charity). Current state law 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: This bill would, for taxable years 2016 through 2020, exclude 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. Related Legislation: AB 2323 (Gorell, 2014) would have excluded from gross income any prize or award won by an individual in athletic competition at the Olympics Games. The bill was held under submission on the Suspense File of this Committee. Staff Comments: The revenue loss from this bill depends entirely on the number of Californians that will medal at each Olympic and Paralympic Games, which is unknown. The 2012 Summer Olympic Games featured 26 sports and 302 events. The 2016 Summer Olympic Games will include 28 sports and a total of 306 events. Likewise, the number of Winter Olympic events in 2018 could rise from the 98 that were included in the 2014 Games. FTB's revenue estimate assumes that California athletes will receive medals, prize money and honoraria valued at approximately $1.3 million during the Summer Olympics/Paralympic games that will be held in 2016, and approximately $120,000 during the Winter Olympics/Paralympic games that will be held during 2018. The estimate assumes future Summer and Winter Olympic/Paralympic performances for California athletes will be comparable to past performances. AB 1944 (Jones) Page 2 of ? Staff notes that, in June 2016, the International Association of Athletics Federations, the governing body for track and field, announced that Russia's track and field team is barred from competing in the 2016 Olympic Games. Additionally, it is possible that Russian athletes in other sports will be precluded from competing as well. To the extent that their absence leads to more Californians winning medals than historical performance would predict, FTB's revenue loss could be understated. The magnitude is unknown, but probably minor. -- END --