BILL ANALYSIS
SB 114
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Date of Hearing: June 18, 2007
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Charles Calderon, Chair
SB 114 (Florez) - As Amended: March 7, 2007
2/3 vote. Urgency. Fiscal committee.
SENATE VOTE : 36 to 0
SUBJECT : Disaster relief
SUMMARY : Adds the severe freezing conditions that commenced
January 11, 2007, in the Counties of El Dorado, Fresno,
Imperial, Kern, Kings, Madera, Merced, Monterey, Riverside, San
Bernardino, San Diego, San Luis Obispo, Santa Barbara, Santa
Clara, Stanislaus, Tulare, Ventura, and Yuba (2007 Freeze) to
the list of disasters eligible for state reimbursement of local
property tax losses, beneficial homeowners' property tax
exemption treatment, and favorable treatment of excess disaster
losses. Specifically, this bill :
1)Provides a mechanism for reimbursing the specified counties
for property tax losses resulting from the reassessment of
properties damaged by the 2007 Freeze, that requires:
a) The auditors of the specified counties to certify
estimates of the total amounts by which property tax
revenues on both the regular secured and supplemental rolls
were reduced for the 2006-07 fiscal year (FY) as a result
of the 2007 Freeze.
b) The Director of Finance (DOF) to certify these amounts
to the State Controller within 30 days of verifying each
county's estimate, and requires the Controller to allocate
the certified amounts to the counties within 10 working
days after receiving DOF's certification.
c) Any county whose estimate is greater than that county's
actual property tax loss to return any excess reimbursement
to the Controller on or before June 30, 2008.
d) The Controller, in cases where a county's estimate is
less than that county's actual property tax loss, to remit
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the difference to that county.
2)Provides that any dwelling that qualified for a homeowners'
property tax exemption before January 11, 2007, that was
damaged or destroyed by the 2007 Freeze, and that has not
changed ownership since January 11, 2007, shall not be denied
a homeowners' exemption solely because that dwelling was
temporarily damaged or destroyed, or was being reconstructed
by the owner, or was temporarily uninhabited as a result of
restricted access.
3)Provides that any taxpayer's excess disaster loss resulting
from the 2007 Freeze shall be carried forward to each of the
five taxable years following the taxable year for which the
loss is claimed. However, if there is any excess disaster
loss remaining after this five-year period, then the
applicable percentage of that excess disaster loss shall be
carried forward to each of the next 10 taxable years.
4)Specifies that, if the Commission on State Mandates determines
that this bill contains costs mandated by the state, local
agencies and school districts will be reimbursed for those
costs.
5)Takes effect immediately as an urgency statute.
EXISTING LAW :
1)Property Tax Reassessment : Allows each county, by ordinance,
to provide for the reassessment of properties damaged by a
calamity, disaster, or misfortune. Taxpayers owning damaged
property must apply for a reassessment within the time period
specified in the applicable county's ordinance or within 12
months of the misfortune or calamity, whichever is later. The
application for reassessment must show the condition and value
of the property after the damage and the dollar value of the
damage. Once the property is reassessed, the taxpayer is
entitled to a refund of any excess property tax paid on the
property. If the affected property is subsequently repaired,
its value is subject to an upward reassessment by the county.
2)Homeowners' Exemption :
a) Exempts the first $7,000 of the full value of a dwelling
from property tax, when the dwelling is occupied by an
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owner as his or her principal residence. However, if a
property is no longer owner-occupied or is vacant on the
lien date (January 1), the property is not eligible for the
exemption for the succeeding tax year.
b) Provides certain disaster-related exceptions to the
general rule that a property must be owner-occupied on the
lien date to receive the homeowners' exemption. Under
these exceptions, properties that were eligible for the
homeowners' exemption immediately before the disaster, do
not change ownership after the disaster, and are vacant
solely because of damage incurred during the disaster,
continue to be eligible for the homeowners' exemption.
3)Income Tax Losses :
a) Allows both individual and corporate taxpayers who
experience losses as a result of certain named disasters to
claim these losses either in the year in which the loss
occurred or in the preceding year. For state purposes,
this election may be made for any federally declared
disaster because California conforms to federal law. The
election is available for a Governor-only declared disaster
only if enabling state legislation is enacted.
b) Allows non-business taxpayers with casualty losses that
are not reimbursed by insurance and that exceed $100 plus
10% of the taxpayer's adjusted gross income (AGI) to claim
these losses as itemized deductions on their tax return.
Taxpayers may carry forward any unused disaster losses for
up to five years. Following the close of this five-year
period, taxpayers may carry forward 100% of any remaining
losses for up to 10 years. Corporate taxpayers with
casualty losses that are not reimbursed following the rules
for net operating losses (currently 100% of loss and 10
years) by insurance are not subject to the $100 plus 10% of
AGI threshold, but are subject to the same carry forward
rules that apply to individual taxpayers.
FISCAL EFFECT : The Board of Equalization (BOE) estimates
minimal administrative costs, and likely no cost to extend the
homeowners' exemption to homes that are uninhabitable on the
lien date. Additionally, BOE estimates minimal costs to the
state due to the state backfill of property tax revenue losses.
The Franchise Tax Board estimates insignificant income tax
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losses in FY 2006-07, and insignificant gains in FYs 2007-08 and
2008-09, due to accelerated claims on amended returns.
Proposition 98 Fiscal Effect : Minimal
COMMENTS :
1)The author states that:
On January 12, 2007 Governor Schwarzenegger proclaimed a
state of emergency for ten counties that [experienced]
severe freezing temperatures and damaged crops. Since
then, the list of counties has expanded to 18. Policy was
passed in 1991 and 1999 to provide relief for farmers and
based on the severe conditions under this year's freeze;
steps should be taken to help out once again.
SB 114 provides income and property tax relief for those
who suffered losses as a result of the January 2007
freeze.
Specifically, this bill extends the same disaster
assistance to individuals, businesses, and local
governments which suffered losses as a result of the
January 2007 freeze. Individual and business taxpayers
could carry forward 100% of excess losses for 5 years.
Local governments would be reimbursed for one year for the
property tax lost as a result of reduced assessments.
2)Proponents note that, "There are many interests competing for
an allocation of the state's scarce fiscal resources, but this
type of disaster assistance is critical to the recovery in
these areas." Proponents also state that, "SB 114 identifies
a specific revenue source, the Special Fund for Economic
Uncertainties, for reimbursement of property tax revenue loss,
as well as a defined procedure for certification of the loss
estimates and allocation of the funds to the affected
counties."
3)Disaster relief legislation similar to this measure is
commonly enacted by the Legislature shortly after natural
disasters. Other, similar legislation introduced in the
2005-06 legislative session includes AB 18 (La Malfa), Chapter
624, Statutes of 2005; AB 164 (Nava), Chapter 623, Statutes of
2005; and SB 457 (Kehoe), Chapter 622, Statutes of 2005.
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4)SB 38 (Battin), introduced in the current legislative session,
would make similar amendments to the Revenue and Taxation
Code, but is limited in scope to the October, 2006, wildfire
in Riverside County. SB 38 is being held at the Assembly
Desk.
5)AB 62 (Nava), introduced in the current legislative session,
would make similar amendments to the Revenue and Taxation Code
relating to the wildfires that occurred in Riverside and
Ventura Counties in September, October and December, 2006. AB
62 is currently pending in the Senate Revenue and Taxation
Committee.
6)Committee staff note that the list of counties named by the
Governor in his emergency proclamations is not identical to
the list of counties identified by the federal government.
For example, the federal government has named Los Angeles
County as having been adversely affected by the 2007 Freeze,
but Los Angeles County is not listed as one of the affected
counties in this bill. Conversely, the Governor has
identified the Counties of El Dorado, Santa Clara, and Yuba as
impacted, while the federal government apparently has not.
This may lead to disparate treatment of residents impacted by
the 2007 Freeze, depending on their county of residency.
REGISTERED SUPPORT / OPPOSITION :
Support
California Chamber of Commerce
California Farm Bureau Federation
California State Association of Counties
Kern County Board of Supervisors
Regional Council of Rural Counties
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The California Labor Federation, AFL-CIO
Opposition
None on file
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098