BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 41
                                                                  Page  1

          Date of Hearing:   February 1, 2007

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mark Leno, Chair

                   SB 41 (Battin) - As Amended:  January 29, 2007 

          Policy Committee:                              Revenue and  
          Taxation     Vote:                            8-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:               

           SUMMARY  

          This bill conforms state law to recently enacted federal law  
          allowing an exempt organization to make payments to family  
          members of five firefighters who died as a result of the October  
          2006 Esperanza fire. As a tax levy this bill is effective  
          immediately. Specifically, this bill:

          1)Provides that payments made by certain tax exempt  
            organizations to any family member of a firefighter who died  
            as a result of the 2006 Esperanza fire be considered tax  
            exempt if made in good faith using a reasonable and objective  
            formula.    

          2)Applies only to payments made between October 26, 2006 and  
            June 1, 2007. 
           
           FISCAL EFFECT  

          These minor - and temporary - changes to ensure an entity's  
          tax-exempt status would result in an insignificant state revenue  
          loss. 
           
           COMMENTS  

           1)Rationale  .  The California tax code mirrors federal tax laws  
            that generally prohibit tax-exempt charitable organizations  
            from disbursing money to benefit individuals rather than  
            organizations. To protect the Central County United Way of  
            Hemet's tax-exempt non-profit status, state law must be  
            amended to enable the United Way to disburse money raised for  
            the families of the five firefighters killed in the Esperanza  








                                                                  SB 41
                                                                  Page  2

            fire. In December 2006, Congress passed legislation, similar  
            to SB 41, providing a temporary exemption for the Esperanza  
            fire. 

           2)Background  . On October 26, 2006, a fire in Esperanza killed  
            five U.S. Forest Service firefighters. The fire destroyed 34  
            homes and caused $10 million in damage. Some 5,000 persons  
            contributed about $1.3 million to help the deceased  
            firefighters' families. Though the Internal Revenue Service  
            allows money to be donated to individuals for documented  
            needs, such as rent and mortgage payments, once the fund  
            exceeded $500,000, the United Way found it exceeded documented  
            needs. 

           3)Identical legislation  , AB 108 (Benoit) passed the Assembly  
            76-0 January 18. Assemblymember Benoit indicates he will not  
            pursue AB 108 at this point. 

           Analysis Prepared by  :    Geoff Long / APPR. / (916) 319-2081