BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |SB 251 |Hearing | 5/13/15 |
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|Author: |Roth |Tax Levy: |No |
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|Version: |5/4/15 |Fiscal: |Yes |
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|Consultant|Grinnell & Favorini-Csorba |
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CIVIL RIGHTS: DISABILITY ACCESS
Enacts a tax credit for businesses that make accessibility
improvements and requires some state and local agencies to help
businesses make accessibility improvements.
Background and Existing Law
In California, individuals with disabilities and medical
conditions have legal protections to ensure full and free access
to and use of roadways, sidewalks, buildings and facilities open
to the public, hospitals and medical facilities, and housing.
After Congress enacted the Americans with Disabilities Act (ADA)
in 1990, the Legislature provided that violations of the ADA are
also violations of state legal protections, which are
comparatively higher and independent of the ADA.
Additionally, under the Unruh Civil Rights Act, all persons,
regardless of sex, race, color, religion, ancestry, national
origin, disability or medical condition, are entitled to the
full and equal accommodations, advantages, facilities,
privileges, or services in all business establishments. A
violation of the ADA also constitutes a violation of the Act.
Persons violating the Act are subject to actual damages incurred
by an injured party plus treble damages, with a minimum of
$4,000, plus any attorney's fees as the court may determine to
be proper.
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I. Tax Credits. California law allows various income tax
credits, deductions, and sales and use tax exemptions to provide
incentives to reward taxpayers that incur certain expenses that
benefit the public, such as child adoption, or to influence
behavior, including business practices and decisions, such as
research and development credits. The Legislature typically
enacts such tax incentives to encourage taxpayers to do
something that but for the tax credit, they would not do. The
Department of Finance is required to annually publish a list of
tax expenditures, currently totaling around $51 billion per
year.
In 1990, Congress enacted a disabled access tax credit against
federal taxes for businesses with annual gross receipts of less
than $1 million or fewer than 30 full-time employees equal to
50% of the difference between the amount of expenditures
reasonable and necessary to accomplish the below purposes and
$250, not to exceed $10,000:
Remove barriers that prevent a business from being
accessible to or usable by individuals with disabilities;
Provide qualified interpreters or other methods of
making audio materials available to hearing-impaired
individuals;
Provide qualified readers, taped texts, and other
methods of making visual materials available to individuals
with visual impairments; and
Acquire or modify equipment or devices for individuals
with disabilities.
II. Local Land Use Permitting. Cities and counties have broad
authority to oversee land use within their boundaries, including
the ability to approve or deny permits, licenses, certificates
or other entitlements needed to construct a project or
improvement. The Permit Streamlining Act sets deadlines for
cities and counties to make some of those land use decisions,
such as approving permits. The length of time that a city or
county has to act varies for different projects, based on
factors such as the type of project and whether the project
requires an environmental impact report before the city or
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county makes its decision. So, local building departments make
decisions about how to prioritize permitting applications in
order to meet those deadlines and properly exercise local
governments' police power.
III. Construction-Related Accessibility Standards Compliance
Act. The Americans with Disabilities Act (ADA) as well as
provisions in state law set standards that public
buildings-including businesses-must meet to ensure that persons
with disabilities have full access. Some of these accessibility
standards lay out how public buildings must be constructed. The
standards that any given building must meet depends on the
history of that building, such as when it was constructed and
whether it has been improved.
In 2003, the Legislature enacted the Certified Access Specialist
Program, administered by the Office of the State Architect, to
inspect places of public accommodation to ensure compliance with
disability access standards (SB 262, Kuehl, 2003). Persons
being sued in a disability access action over a property that
has been inspected by a Certified Access Specialist (CASp), and
determined to meet applicable construction-related accessibility
standards, or is pending a determination by a CASp, may obtain a
stay of the action for 90 days and an early evaluation
conference to resolve the case (SB 1608, Corbett, 2008). In
2012, the Legislature again amended the law to provide (SB 1186,
Steinberg):
Any business in California that has received a CASp
inspection has 60 days to cure an access violation and the
Court may reduce statutory damages by up to 75%.
Small businesses with 25 or fewer employees that have
not had a CASp inspection have 30 days to fix a violation,
and the Court may reduce their statutory damages up to 50%.
State law additionally directs the California Commission on
Disability Access to develop educational materials to help
California businesses understand the accessibility standards
they must meet and identify common violations of the ADA.
IV. Charter Cities and Counties. The California Constitution
allows cities and counties that adopt charters to control their
own "municipal affairs." In all other matters, charter cities
must follow the general, statewide laws. Because the
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Constitution does not define "municipal affairs," the courts
determine whether a topic is a municipal affair or whether it is
an issue of statewide concern.
Proposed Law
Senate Bill 251 makes several changes to assist businesses in
complying with ADA requirements.
I. Tax Credits. SB 251 enacts tax credits against the Personal
Income Tax and Corporation Tax for amounts paid or incurred for
eligible access expenditures that exceed $250 for the 2016 to
2022 taxable years, based largely on the current federal credit.
The credit amount is calculated the same way as the federal
credit, and is equal to 50% of the difference between the amount
of the expenditure that does not exceed $10,250, and $250. For
example, a taxpayer with $7,000 in expenditures obtains a credit
of $3,375 (50% x $6,750 [$7,000 - $250]), while a taxpayer with
expenses that exceed $10,250 can take a maximum credit of
$5,000.
SB 251's credit is different than the federal one in two notable
ways: first, it's available to all businesses, not just those
meeting the definition of small business in federal law.
Second, if the taxpayer meets the definition of microbusiness,
he or she may increase the credit calculated using the above
formula by $5,000.
All taxpayers can carry over the credit for six years.
Additionally, FTB may prescribe any rules, guidelines, or
procedures necessary to implement the credit, which are exempt
from the Administrative Procedures Act. The measure sunsets the
credit on December 1, 2023. The bill contains legislative
findings and declarations to comply with SB 1335 (Leno, 2014).
II. Local Land Use Permitting. SB 251 requires local agencies
to:
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Expedite their review of an application for a project to
modify a public building if the building has been inspected
by a CASp and the CASp has completed a written inspection
report stating that the building currently complies with
all of the applicable construction-related standards.
Develop materials on the ADA, and to provide those
materials to project applicants, along with a notice
stating that approval of the permit does not mean that the
project complies with the ADA.
SB 251 states that these two requirements apply to all cities
and counties, including charter cities and counties. The bill
includes a legislative finding and declaration that the bill
addresses a matter of statewide concern because it pertains to
development permit applications.
III. Construction-Related Accessibility Standards Compliance
Act. SB 251 also amends the Construction-Related Accessibility
Standards Compliance Act to:
Import the definition of microbusiness into the Act, and
provides that a defendant meeting that definition shall not
be liable for statutory damages for more than one offense
if they corrected the violation before the lawsuit was
filed.
Provide that any business inspected by a CASp that
corrects a violation defined as a "minor matter" within 30
days of the service of summons and complaint asserting a
claim or receipt of written notice, shall not be liable for
a violation of a construction-related accessibility
standard. "Minor matters" only include violations for
interior and exterior signage, the color and condition of
parking lot paint striping, and truncated domes.
Provide that any business that corrects a violation
within 90 days of receiving a CASp inspection shall not be
liable for a violation of a construction-related
accessibility standard.
IV. Other provisions. SB 251 additionally:
Requires commercial property owners and lessors to state
on every lease form or renal agreement that both they and
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the tenant are responsible for compliance with ADA, and
that the terms of the lease or other contract must allocate
compliance responsibility between the two.
Requires an individual who wishes to become a CASp to
provide the State Architect with unspecified information
about the city or county in which they provide, or plan to
provide, service. The State Architect must post that
information on its website.
Directs the California Commission on Disability Access
to link to the State Architect's CASp website and provide
state agencies and local building departments with
educational materials explaining the ADA.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . According to the author, "Due to the
lack of education and resources, many businesses throughout
California are out of compliance with state and federal
disability access laws. This situation is preventing
Californians in the disability community from having access to
facilities and services. This bill will help ensure individuals
with disabilities have the opportunity to access facilities and
services in California. The bill also will ensure that business
owners and operators have the education and training necessary
to comply with federal and state disability access laws and
regulations. SB 251 also allows small businesses an opportunity
to identify and correct a narrow list of deficiencies in order
to provide full and fair access for all Californians. By
ensuring compliance with the law, the civil rights of the
disabled are protected and the ability to assist small business
owners to achieve compliance are accomplished.""
2. Sure, but will it work ? Tax benefits directed for specific
purposes do two things: First, they reward behavior that would
have occurred without the subsidy, so-called "deadweight loss."
Some firms will install disabled access improvements without a
tax credit, or in response to the federal credit. In these
instances, the state receives no marginal benefit, and transfers
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wealth from purposes it would otherwise spend money on for
government purposes to the firm. Second, the bill may lead to
more disabled access improvements in California that wouldn't
have occurred but for the credit; the financial incentive
provides enough of a marginal benefit for the taxpayer to
purchase disabled access improvements. A successful tax credit
leads to more improvements at the margin than its deadweight
loss, but no tax credit has yet conclusively demonstrated that
its benefits outweigh its costs. Firms may install disabled
access improvements to draw more customers, in response to the
risk of litigation, or simply because it's the right thing to
do. However, these improvements aren't cheap, and the credit
will help reduce the cost. The Committee may wish to consider
whether SB 251 will lead to additional disabled access
improvements necessary to justify its cost.
3. More to know ? Last year, the Legislature enacted SB 1335
(Leno), which required introduced legislative bills enacting tax
credits to contain:
Specific goals, purposes, and objectives that the tax
credit will achieve.
Detailed performance indicators for the Legislature to
use when measuring whether the tax credit met its specific
goals, purposes, and objectives.
Data collection requirements to enable the Legislature
to determine whether the tax credit is meeting, failing to
meet, or exceeding its goals, purposes, and objectives.
The requirements shall include specific data and baseline
data to be collected and remitted in each year the credit
is effective, and the specific taxpayers, state agencies,
or other entities required to collect and remit data.
SB 251 enacts its tax credit without specifying these items,
compelling no reporting of information to determine whether the
measure is effective, although it does contain legislative
intent to do so. The Committee may wish to consider whether SB
251 should include provisions called for by SB 1335.
4. Microbusiness . SB 251's tax credit is increased by $5,000
for a microbusiness that pays for disabled access improvements;
however, the taxpayer is entitled to the increase regardless of
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the amount spent. For example, a microbusiness that spends $252
on disabled access improvements would generate a $5,001 credit
(50% times $2 [$252 - $250], plus $5,000). Additionally, the
measure imports the definition of microbusiness from the
Government Code, which includes affiliates, which is
inconsistent with the way FTB groups firms within commonly
controlled groups for tax purposes. The Committee may wish to
consider amending SB 251 to only allow the $5,000 increase for
microbusinesses incurring expenses above a specified amount, and
altering the microbusiness definition to ensure consistency with
current law.
5. Checklist . Eagle Lodge West is an annual gathering of
professional tax attorneys, FTB and Board of Equalization
attorneys and legislative tax staff intended to foster dialogue
and discussion on difficult tax issues. Last year, a part of
the conference drafted a checklist called "general
considerations for drafting credit statutes," which attempts to
focus on more technical aspects of tax credits important for
implementation and to prevent the need for subsequent clean-up
bills. While SB 251 includes many items on the checklist, the
measure doesn't speak to:
Requirement that the credit only be claimed on original
returns,
Documentation requirements,
Rules for passthrough entities such as limited liability
companies, S-Corps, and partnerships,
Denial of business expense deduction for the same costs
that generate the credit,
Ability to reduce regular tax below tentative minimum
tax,
Items that aren't on the checklist but could also help implement
the credit more cost-effectively would be to capping the credit
among taxpayers within the same commonly controlled group, and
disallowing the credit for installations for personal, not
business, use.
6. Unintended consequences. SB 251 creates an incentive for
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owners of businesses and public buildings to hire a CASp to
inspect their public spaces by promising speedier review of
their project applications. However, this incentive might have
several unintended consequences. First, it could make it harder
for local officials to balance important tradeoffs among permit
applications. Local building departments may have good reasons
for how they prioritize permit applications, such as a need to
address life safety issues. Pushing a project to the top of the
queue simply because the existing building meets accessibility
standards could override those decisions. Second, because SB
251 doesn't define how much faster a city or county must review
a qualifying application, it could expose cities and counties to
litigation for not moving fast enough. Without a more specific
definition, cities and counties don't know what bar they have to
meet in order to comply with the law.
7. Intent of the measure . SB 251 might not help a business that
is concerned about having an accessibility violation come into
compliance more quickly. This is because businesses that do not
meet the applicable accessibility standards are ineligible for
the expedited review provided by SB 251. Instead, there may be
other ways to achieve the goal of improving access for persons
with disabilities while giving businesses time to comply with
the law. The Committee may wish to consider amending SB 251 to
remove this provision and instead extend the period a business
has to correct an accessibility violation if the business owner
(1) has a CASp review their plans to ensure that the proposed
project will meet all applicable standards, and (2) can
demonstrate that any delay in correcting the violation is due to
an inability to receive a needed permit in a timely fashion.
8. Let's get specific. SB 251 is unclear about what specific
information that it requires CASp applicants to provide to the
State Architect about the cities and counties that they serve.
The State Architect already maintains a website that lists CASPs
and includes a field where a CASp can list their service area.
However, because this field is optional, many CASps do not
currently provide that information. The Committee may wish to
amend SB 251 to clarify what information is required by
specifying that CASp applicants must identify the cities or
counties in which they provide service. This would make it
easier for businesses to find and hire CASps that serve their
area.
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9. A material world. Since the Commission on Disability Access
already develops materials relating to the ADA under current
law, SB 251's requirement for local agencies to also develop
materials could result in duplication of effort. The Committee
may wish to amend SB 251 to explicitly allow local agencies to
satisfy this requirement by providing permit applicants with the
materials developed by the commission.
10. Related legislation. Some parts of AB 1342 (Steinorth)
overlap with SB 251. Specifically, AB 1342 and SB 251 include
identical amendments to the Government Code that require: (1)
CASp applicants to provide information to the State Architect,
and (2) the California Commission on Disability Access to make
educational materials available to relevant state and local
agencies. The Assembly Judiciary Committee heard AB 1342 on
April 27, 2015, where it passed with a 10-0 vote. It's
currently pending in the Assembly Appropriations Committee.
11. Mandate. The California Constitution generally requires the
state to reimburse local agencies for their costs when the state
imposes new programs or additional duties on them. According to
the Legislative Counsel's Office, SB 251 creates a new
state-mandated local program because local agencies will have to
provide increased services when reviewing applications for
certain development projects. SB 251 says that if the
Commission on State Mandates determines that it creates a
state-mandated local program, the state must reimburse local
agencies by following the existing statutory process for mandate
claims.
12. Incoming ! The Senate Committee on Judiciary will hear SB
251 on Tuesday, May 12th, 2015.
Support and
Opposition (5/8/15)
Support : California Chamber of Commerce; Apartment Association
of Orange County; Associated Builders and Contractors of
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California; CalAsian Chamber of Commerce; California Ambulance
Association; California Association of Bed and Breakfast Inns;
California Business Properties Association; California Citizens
Against Lawsuit Abuse; California Grocers Association;
California Hotel and Lodging Association; California
Manufacturers and Technology Association; California Retailers
Association; Camarillo Chamber of Commerce; Chamber of Commerce
Alliance of Ventura and Santa Barbara Counties; Chamber of
Commerce Mountain View; Civil Justice Association of California;
Consumer Attorneys of California (in concept); Culver City
Chamber of Commerce; East Bay Rental Housing Association;
Fairfield-Suisun Chamber of Commerce; Family Business
Association; Fullerton Chamber of Commerce; Greater Bakersfield
Chamber of Commerce; National Association of Theatre Owners of
California/Nevada; National Federation of Independent Business;
Nor Cal Rental Housing Association; North Valley Property Owners
Association; Orange County Business Council; Oxnard Chamber of
Commerce; Rancho Cordova Chamber of Commerce; Redondo Beach
Changer of Commerce and Visitors Bureau; San Jose Silicon Valley
Chamber of Commerce; Santa Maria Valley Chamber of Commerce
Visitors and Convention Bureau; Simi Valley Chamber of Commerce
and Visitors Bureau; South Bay Association of Chamber of
Commerce; South Lake Tahoe Chamber of Commerce; Southwest
California Legislative Council.
Opposition : American Civil Liberties Union of California,
Disability Rights California, United African-Asian Abilities
Club.
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