BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
15 (Fuentes)
Hearing Date: 08/27/2009 Amended: 05/21/2009
Consultant: Mark McKenzie Policy Vote: Rev&Tax 8-0
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BILL SUMMARY: AB 15, an urgency measure, would provide
disaster-related fiscal assistance and tax relief to affected
persons and jurisdictions for losses sustained as a result of
wildfires that occurred in Ventura and Los Angeles Counties in
2008.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Property tax reimbursement $264 Special*
Homeowner's exemption $36 annually until homes are
rebuiltGeneral
Disaster loss carryover$6 (FY 2008-09) for Los Angeles
Co.General
(see staff comments)
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*Special Fund For Economic Uncertainties (NOTE: this fund is
continuously appropriated, so requiring an allocation for this
purpose constitutes an appropriation)
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STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
On October 13, 2008, Governor Arnold Schwarzenegger proclaimed a
state of emergency, declaring the wildfires that occurred in Los
Angeles and Ventura Counties to be a state disaster. On
November 15, 2008, the Governor proclaimed another state of
emergency with respect to the Los Angeles County wildfires. In
addition, on November 18, 2008, President George W. Bush
declared the Los Angeles, Orange, Riverside, and Santa Barbara
County wildfires a federal disaster. The October 2008
wildfires in Los Angeles and Ventura Counties were not declared
a federal disaster.
Property Tax Reimbursement
Current law provides for a downward reassessment of properties
affected by a disaster. Taxpayers are entitled to a refund of
any "excess" property tax paid on the property. Taxpayers whose
property is damaged are also allowed to defer payment of the
next installment of property taxes pending receipt of a
corrected tax bill for the reassessed property. For previous
disasters, the Legislature has acted to provide one-year state
reimbursement of property tax losses to local governments
resulting from reductions in assessed values of damaged or
destroyed properties.
AB 15 would provide for state reimbursement to backfill any
local government property tax revenue losses from assessment
reductions in Los Angeles and Ventura Counties as a result of
wildfires that commenced in October and November of 2008. The
state would hold local governments harmless for wildfire-related
2008-09 property tax losses,
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AB 15 (Fuentes)
based initially on an estimate of loss, followed by a corrective
adjustment based on the actual property tax loss. Staff notes
that based on total projected reductions in assessed value
reported by county officials, this bill would result in state
allocations to Los Angeles County of approximately $263,552.
Ventura County reported no losses from the fires.
Homeowners' Exemption
Current law exempts from the property tax the first $7,000 of
the assessed value of an owner-occupied principal place of
residence. However, properties that become vacant or are under
construction on the January 1 lien date are not eligible for
this homeowners' exemption for the upcoming tax year. Local
jurisdictions are reimbursed by the state for property tax
losses due to the homeowners' exemption.
AB 15 would provide that any dwelling that qualified for the
exemption prior to the Governor's disaster proclamations that
was damaged or destroyed as a result of the 2008 wildfires in
Los Angeles and Ventura Counties may not be denied the exemption
solely on the basis that the dwelling was temporarily damaged or
destroyed or was being reconstructed by the owner. The Board of
Equalization estimates that this provision would likely result
in a minor revenue loss of approximately $35,545 ongoing, but
this amount would decline over time as homes are rebuilt and
occupied.
Carry Forward of Casualty Loss Deduction
Current law allows nonbusiness taxpayers to deduct uninsured
losses, less $100, to the extent the loss exceeds 10% of
adjusted gross income. Business taxpayers may deduct losses
against income; a portion of losses may be carried forward to
offset future years' tax liabilities for up to 10 years.
Taxpayers may either claim the losses as an itemized deduction
in the year the loss occurs, or in the preceding year by filing
an amended return for the prior year. For previous disasters,
legislation has allowed both business and non business taxpayers
to carry forward 100% of their excess losses for 5 years, and a
portion of losses for another 10 years.
This bill would apply the special disaster loss carryover
treatment for losses sustained as a result of the 2008 wildfires
in Los Angeles and Ventura Counties. The Franchise Tax Board
(FTB) estimates a total revenue loss of approximately $6,000 in
2008-09 due to losses sustained in Los Angeles County. To the
extent that these deductions would have been claimed in later
years had they not been taken on an amended tax returns for the
previous tax year, there is a minor revenue gain in those later
years. Taxpayers that choose to file an amended return to
report the casualty loss immediately will have a higher tax
liability in subsequent tax years. FTB estimates revenue losses
in Ventura County to be negligible.
PROPOSED AMENDMENTS would require counties, as a condition of
eligibility for reimbursement of property tax losses associated
with downward reassessments of properties affected by a fire
disaster occurring after January 1, 2010, to demonstrate that
the county: (1) provides adequate structural fire protection for
each state responsibility area in its jurisdiction; (2) was in
compliance with specified requirements to take preventive
measures in very high fire hazard severity zones; and (3) has
implemented a fire risk reduction public education program.