BILL ANALYSIS
AB 1766
Page 1
Date of Hearing: May 19, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1766 (Gaines) - As Amended: May 4, 2010
Policy Committee: Local
GovernmentVote:6-3
Revenue and Taxation 9-0
Urgency: Yes State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill adds the fire occurring in Placer County beginning on
August 30, 2009 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 fire.
2)Allows owners of homes destroyed by the fire to receive the
homeowners' property tax exemption while the homes are being
reconstructed.
3)Permits victims of the fire 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.
FISCAL EFFECT
1)The Board of Equalization estimates that GF expenditures for
reimbursing Placer County for property tax losses and
extending the homeowners exemption would be less than $143,000
in 2010-11 and declining amounts in subsequent years.
2)Income tax provisions will result in minor revenue losses,
likely less than $5,000 per year for the next several years.
COMMENTS
AB 1766
Page 2
1)Rationale . The wildfire that started near the City of Auburn
in Placer County on August 30, 2009 destroyed 41 homes and
resulted in property damage of over $10 million to residences
and commercial structures. This measure extends to the victims
of that wildfire 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
Placer County for the reduction in assessments resulting from
the fire.
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
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
AB 1766
Page 3
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 1662 (Portantino), AB 2665 (Chesbro),
and AB 2136 (V. Manuel Perez), also before this Committee,
provides similar disaster relief in connection with a variety
of state-declared disasters in 2009 and 2010.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081