BILL ANALYSIS
SB 114
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Date of Hearing: June 27, 2007
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Anna Marie Caballero, Chair
SB 114 (Florez) - As Amended: March 7, 2007
SENATE VOTE : 36-0
SUBJECT : Disaster relief
SUMMARY : Adds the severe freezing conditions that started on
January 11, 2007, in 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 counties 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 re imbursing 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 to certify these amounts to the
State Controller within 30 days of verifying each county's
estimate, and the Controller to allocate the certified
amounts to the counties within 10 working days after
receiving the Department of Finance's (DOF) 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; and
d) The Controller, in cases where a county's estimate is
less than that county's actual property tax loss, to remit
the difference to that county.
2)Provides that any dwelling that qualified for a homeowners'
property tax exemption before January 11, 2007, that was
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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.
4)Specifies that if any excess disaster loss remains after the
five taxable years following the taxable year for which the
loss is claimed, the applicable percentage of that excess
disaster loss shall be carried forward to each of the next 10
taxable years.
5)Takes effect immediately as an urgency statute.
EXISTING LAW :
1)Allows each county, by ordinance, to provide for the
reassessment of properties damaged by a calamity, disaster, or
misfortune.
2)Exempts the first $7,000 of the full value of a dwelling from
property tax when the dwelling is occupied by an owner as his
or her principal residence.
3)Specifies that if a property is no longer owner-occupied or is
vacant on the lien date (January 1), the property is not
eligible for the property tax exemption for the succeeding tax
year.
4)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, and that 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.
5)Allows both individual and corporate taxpayers who experience
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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.
6)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 a total revenue loss of
approximately $180,000 in FY 2006-07 FY and minor gains in FYs
2007-08 and 2008-09, due to accelerated claims on amended
returns.
COMMENTS :
1)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. SB 114 provides income and
property tax relief to individuals, businesses, and local
governments that suffered losses as a result of the freeze.
The bill allows individual and business taxpayers to carry
forward 100% of excess losses for five years, and allows the
state to reimburse local governments for one year for the
property tax lost as a result of reduced assessments.
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2)According to the supporters of SB 114, while there are many
interests competing for an allocation of the state's scarce
fiscal resources, this type of disaster assistance is critical
to recovery in these areas. They also note 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. 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.
4)SB 38 (Battin) would make similar amendments to the Revenue
and Taxation Code but is limited in scope to the October 2006
wildfire in Riverside County. The bill has been
double-referred to the Assembly Committees on Revenue and
Taxation and Local Government.
5)AB 62 (Nava) 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. The bill is currently pending in the Senate
Revenue and Taxation Committee.
6)This bill was heard by the Revenue and Taxation Committee on
June 19, 2007, and passed with a 9-0 vote.
REGISTERED SUPPORT / OPPOSITION :
Support
Board of Equalization
CA Chamber of Commerce
CA Farm Bureau Federation
CA Labor Federation
CA State Association of Counties
Kern County Board of Supervisors
Regional Council of Rural Counties
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Opposition
None on file
Analysis Prepared by : Anya Lawler / L. GOV. / (916) 319-3958