BILL ANALYSIS
AB 1662
Page 1
Date of Hearing: April 28, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1662 (Portantino) - As Amended: April 7, 2010
Policy Committee: Local
GovernmentVote:8-0
Revenue and Taxation 9-0
Urgency: Yes State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill adds the wildfires that occurred in the counties of
Los Angeles and Monterey in 2009 and the severe winter storms
that occurred in the Counties of Calaveras, Imperial, Los
Angeles, Orange, Riverside, San Bernardino, San Francisco, and
Siskiyou in 2010 to the list of disasters eligible for special
tax treatment. Specifically, this bill:
1)Provides that the state will reimburse the local governments
for property tax losses resulting from downward assessments of
property damaged by the fires and storms.
2)Allows owners of homes destroyed by the fires and storms to
receive the homeowners' property tax exemption while the homes
are being reconstructed.
3)Permits victims of the wildfires to carry back casualty losses
and use them as income tax deductions in the year preceding
the disaster (in this case 2007) and then carry forward any
remaining losses for up to 15 years. These provisions apply to
uninsured losses in excess of 10 % of the taxpayers' income.
4)Codifies provisions included in agreements between California
and the United States for federal financial assistance.
FISCAL EFFECT
1)The Board of Equalization estimates that GF expenditures for
reimbursing the counties' property tax losses and extending
the homeowners exemption would be less than $500,000 in
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2010-11 and declining amounts in subsequent years.
2)Income tax provisions will result in minor revenue losses,
likely less than $10,000 per year for the next several years.
COMMENTS
1)Rationale . This measure extends to victims of the 2009
wildfires in Los Angeles and Monterey, and 2010 winter storms
in Calaveras, Imperial, Los Angeles, Orange, Riverside, San
Bernardino, San Francisco, and Siskiyou the tax relief that
has traditionally been provided to victims of natural
disasters in California.
2)Background - property tax assessments. State law authorizes
local governments to reduce property taxes following a
disaster. Under these provisions, assessors may reduce the
assessed property value in proportion to the loss in market
value. The property retains its lower assessed value until it
is reconstructed or otherwise restored. Historically,
legislation has been passed in which the state reimburses
counties for the revenue reductions associated with the
downward assessments. This bill provides the reimbursements to
the specified counties affected by the 2009 wildfires and 2010
winter storms.
3)Background - homeowners' exemption. The California
Constitution exempts from property taxes the first $7,000 of
the value of a dwelling when occupied by an owner as his or
her principal residence. The state reimburses local
governments for the property taxes they cannot collect because
of this homeowners' exemption. Under the Revenue and Taxation
Code, property which becomes vacant, is destroyed, or is no
longer owner-occupied on the lien date (January 1) is
generally not eligible for the exemption in the upcoming year.
(The Board of Equalization staff has opined that a temporary
absence from a dwelling damaged in a natural disaster will not
result in the loss of the exemption. Thus, only owners of
homes destroyed by the fires will lose the exemption under
existing law.) This bill allows the exemption for homes that
have been destroyed while they are being reconstructed.
4)Background - casualty losses. Under federal and state income
tax law, individuals filing income taxes can deduct casualty
losses in excess of 10 % of their adjusted gross income plus
$100 in the year in which the loss occurs. Any losses not
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deducted in the year in which they occur can then be carried
forward and deducted against income for up to five years into
the future. For federally declared disasters, the taxpayer may
either take the deduction on the current year return or may
file an amended return for the prior year. Any unused losses
may then be carried forward for up to 15 years. The prior-year
and up-to 15 year carry forward provisions are not available
for a governor-only declared disaster on either federal or
state returns. However, the special tax treatment is available
on California's state income tax return if enabling state
legislation is enacted.
5)Related legislation. AB 1690 (Chesbro) provides disaster
assistance for losses sustained as a result of the earthquake
that struck Humboldt County in January 2010. That bill is
currently before the Revenue and Taxation Committee. AB 1782
(Harkey), also before this committee, provides automatic
property tax disaster relief to counties affected by
governor-declared disasters.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081