BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1690 (Chesbro)
Hearing Date: 08/12/2010 Amended: As Introduced
Consultant: Mark McKenzie Policy Vote: Rev&Tax 3-0
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BILL SUMMARY: AB 1690, an urgency measure, would provide
disaster-related fiscal assistance and tax relief to affected
persons and jurisdictions for losses sustained as a result of
earthquake that occurred in Humboldt County on January 9, 2010.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Property tax reimbursement $125 General*
Homeowner's exemption negligible revenue loss General
Disaster loss carry forward $100 (FY 2009-10), offset in
future years General
(see staff comments)
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*Special Fund For Economic Uncertainties (NOTE: existing law
continuously appropriates moneys from this fund for
disaster-related allocations, so adding an allocation for the
disaster specified in the bill constitutes an appropriation)
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STAFF COMMENTS: SUSPENSE FILE.
On January 12, 2010, Governor Arnold Schwarzenegger proclaimed a
state of emergency in Humboldt County, declaring a state
emergency due to a 6.5 magnitude earthquake that occurred on
January 9, 2010. President Obama did not declare a federal
disaster related to this earthquake.
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 some
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 1690 would provide for state reimbursement to backfill any
local government property tax revenue losses from assessment
reductions in Humboldt County as a result of the earthquake that
occurred on January 9, 2010. The state would hold local
governments harmless for wildfire-related 2009-10 property tax
losses, based initially on an estimate of loss, followed by a
corrective adjustment based on the actual property tax loss.
Staff notes that based on about $12 million in total projected
reductions in assessed value reported by county officials, this
bill would result in state allocations of approximately $125,280
to local jurisdictions in Humboldt County.
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AB 1690 (Chesbro)
Staff notes that any allocations from the Special Fund for
Economic Uncertainties have a direct impact on the budget
deficit, which is currently projected to be over $19 billion for
the budget year.
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 1690 would provide that any dwelling that qualified for the
exemption prior to the Governor's disaster proclamation that was
damaged or destroyed as a result of the January 2010 earthquake
in Humboldt County 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
notes that only one home was totally destroyed, resulting in a
continued subvention of about $70, and that a temporary absence
from a damaged home would not result in the homeowner's loss of
the exemption.
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.
AB 1690 would apply the special disaster loss carry forward
treatment for losses sustained as a result of the January 2010
earthquake in Humboldt County. The Franchise Tax Board (FTB)
estimates a total revenue loss of approximately $100,000 in
2009-10 due to losses sustained in that 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 an equivalent 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.