BILL ANALYSIS
SENATE REVENUE & TAXATION COMMITTEE
Senator Lois Wolk, Chair
AB 50 - Nava
Amended: June 24, 2009
Urgency
Hearing: July 9, 2009 Fiscal: Yes
SUMMARY: Adds to Disaster Provisions in the Personal Income
Tax Law, Corporation Tax Law, and Property Tax for
Santa Barbara County, and taxpayers in Santa Barbara
County affected by the 2008 wildfires; requires 75%
state reimbursement of Santa Barbara County disaster
costs.
INCOME AND CORPORATION TAXES :
EXISTING STATE AND FEDERAL LAW allows taxpayers to
deduct disaster losses in the year the loss occurs or in
the preceding year by filing an amended return. Disaster
losses result from fires, storms, floods or other natural
events proclaimed a disaster by the President or the
Governor. Disaster losses are the amounts not compensated
for by insurance or other means.
EXISTING FEDERAL LAW, which California conforms to,
only allows loss deductions for personal income taxes that
exceed $100 per taxpayer and 10% of their adjusted gross
income for the year.
EXISTING STATE LAW limits disaster losses for
corporate taxpayers to the amounts set by state law for net
operating losses - 55% for 2000 and 2001, 60% for 2002 and
2003, and 100% for 2004 and thereafter - and the
carry-forward to five years. State law allows a limited
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percentage to be carried forward up to 10 years
Starting with the forest fires in 1985, and
approximately 30 times thereafter for various disasters,
the Legislature enacted measures that allow a 100%
carry-forward of excess disaster losses for up to five
years and a carry-forward of the excess disaster losses
under the above percentages for up to an additional 10
years.
THIS BILL enacts identical allowances for taxpayers
with excess disaster losses in Santa Barbara County
resulting from wildfires commencing in November, 2008 or
May, 2009.
PROPERTY TAXES :
EXISTING LAW allows counties to adopt ordinances
allowing taxpayers to apply for a reassessment of property
destroyed or damaged by "a major misfortune or calamity" if
the Governor proclaims a disaster. Taxes that had
previously been paid are deemed "excess" as a result of a
downward reassessment and are refunded to the taxpayer.
County Assessors must defer the payment of property taxes
when they receive a timely filed application from an
affected taxpayer.
Beginning in 1990, the Legislature provided state
reimbursement of property tax revenue losses to local
governments resulting from the downward-reassessment of
damaged or destroyed properties for most disasters for one
year.
THIS BILL enacts identical provisions that require the
state to backfill first-year local revenue losses resulting
from the reassessment of property in Los Angeles, and
Ventura Counties resulting from wildfires in those counties
occurring in October and November of 2008 or May of 2009.
THIS BILL requires that Santa Barbara County certify
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to the Director of Finance an estimate of the amount of
reduced 2008-09 property tax revenues resulting from
reassessment by October 30, 2009. The Director of Finance
then verifies and certifies the revenue loss estimate to
the Controller, who then sends the certified amount to the
Santa Barbara County. Before October 30, 2010, the Santa
Barbara County Auditor must remit to the Controller any
overestimated balance. If the loss was underestimated, the
Controller must return the difference to the affected
county. For wildfires in May 2009, the measure requires
that Santa Barbara County certify to the Director of
Finance an estimate of the amount of reduced 2008-09
property tax revenues resulting from reassessment by June
30, 2010. The Director of Finance then verifies and
certifies the revenue loss estimate to the Controller, who
then sends the certified amount to the Santa Barbara
County. Before June 30, 2011, the Santa Barbara County
Auditor must remit to the Controller any overestimated
balance. If the loss was underestimated, the Controller
must return the difference to the affected county.
PROPERTY TAXES (HOMEOWNERS' EXEMPTION) :
EXISTING LAW provides a homeowners' exemption from
property taxes equal to $7,000 in assessed value (at a one
percent property tax rate, the exemption reduces property
taxes by roughly $70) for owner-occupied homes. Once
granted, homeowners' exemptions are generally permanent.
However, an Assessor may deny a homeowner's exemption if
the property becomes vacant or is under construction as of
the January 1st lien date.
THIS BILL provides that Assessors may not disqualify
an otherwise qualified residence for a homeowners'
exemption solely on the basis that the dwelling was
temporarily damaged, destroyed, under reconstruction by the
owner, or temporarily uninhabited as a result of restricted
access to the property due to the Santa Barbara County
wildfires in November of 2008 or May of 2009.
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California Disaster Assistance Act (CDAA)
Existing law, the CDAA, provides that the state must
pay 5% of the non-federal share of eligible costs for any
state-declared emergency. For some statutorily specified
disasters the state is required to pay 100 percent of the
non-federal cost.
THIS BILL adds the Southern California wildfires
commencing on or about October 20, 2007 to the list of
incidents for which the state provides 75% reimbursement.
Existing law allows the Legislature to provide for a
state share of local costs that exceeds 75% of total state
eligible costs if the city, county, or city and county has
adopted a local hazard mitigation plan in accordance with
the federal Disaster Mitigation Act (DMA) of 2000. Existing
law prohibits the state share of reimbursement for local
costs due to a disaster from exceeding 75% of total state
eligible costs, unless the local agency is located within a
city or county that has adopted a local HMP in
accordance with the federal DMA as part of the safety
element. Existing law requires the HMP to include:
An initial earthquake performance
evaluation of public facilities that provide
essential services, shelter, and critical
government functions.
An inventory of private facilities that
are potentially hazardous, including, but not
limited to, multiunit, soft story, concrete
tilt-up, and concrete frame buildings.
A plan to reduce the potential risk from
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private and governmental facilities in the event
of a disaster.
THIS BILL deletes the required contents of the HMP.
FISCAL EFFECT:
Franchise Tax Board estimates income tax revenue
losses of $6,000 in 2008-09, and gains of $4,000 in 2009-10
and $2,000 2010-11, due to accelerated claims on amended
returns, as result of disaster loss treatment.
Board of Equalization estimates a state revenue loss
of approximately $26,384 annually due to homeowners'
exemption provisions, and a $2,811,195 subvention in
2009-10 for first-year backfill of downwardly-reassessed
property.
COMMENTS:
A. Purpose of the Bill
According to the Author, "AB 50 will provide disaster
relief assistance to the affected counties and victims of
the 2008 Tea Fire and the 2009 Jesusita Fire in Santa
Barbara and all the wildfire disasters that received an
administrative emergency proclamation across the state in
2007. Counties in which homes were lost in the fires will
suffer a loss in property taxes due to reassessed values.
AB 50 provides that the state will reimburse these counties
for their losses due to the reassessment of property that
was damaged as a result of these wildfires. In addition,
homeowners are not eligible for homeowner tax exemptions
unless they live in the property. AB 50 requires that a
homeowner not be denied his or her homeowners' property tax
exemption solely on the basis that the owner was not
residing in the dwelling while it was temporarily damaged
or destroyed if it was being reconstructed as a result of
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these disasters. Finally AB 50 will align the State
requirements for Hazard Mitigation Plans with federal
guidelines."
B. A Better Way
Through last year, the Legislature has amended Revenue
and Taxation Code 218 fourteen times for separate
disasters to ensure that Assessors may not deny homeowners'
exemptions for disaster-related reasons, added 33 code
sections to allow for excess disaster losses for both the
Personal Income Tax Law and the Corporation Tax Law, and
enacted 90 sections providing for the first year backfill
of local property tax losses resulting from disaster
reassessments. The Legislature always litters the code
with these provisions when disaster strikes, so why not
enact a statute which triggers these tax benefits whenever
the Governor declares a disaster?
However, efforts to mandate consistency have stalled.
In 2005-06, AB 3039 (Houston) and SB 1607 (Machado)
attempted to change this statute to provide statewide
protection, thereby ensuring that future disaster-specific
measures were not necessary. The Assembly Revenue and
Taxation Committee held AB 3039, and deleted the relevant
provision from SB 1607, which was subsequently enacted.
Additionally, the Governor directed the Office of Emergency
Services and the Office of Planning and Research to work
with the Legislature to enact standard purpose legislation
when he signed a disaster-specific bill (AB 18, La Malfa,
2005). The Legislature has previously enacted statewide
legislation in response to a flurry of local
jurisdiction-specific bills, notably in the areas of
transaction and use taxes (SB 566, Scott, 2003), and
disputes over property tax allocation errors (AB 169,
Wiggins, 2001).
C. When Disaster Strikes
The Committee will also hear AB 15 (Fuentes) and AB 79
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(Duvall) at its June 24, 2009 hearing, which enacts
disaster tax relief provisions for wildfires in October and
November of 2008 in Los Angeles, Orange, Riverside, San
Bernardino, and Ventura Counties.
Support and Opposition
Support:County of San Diego; County of Santa Barbara
Oppose:None received.
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Consultant: Colin Grinnell