BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1766 (Gaines)
Hearing Date: 07/15/2010 Amended: 05/04/2010
Consultant: Mark McKenzie Policy Vote: Rev&Tax 3-0
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BILL SUMMARY: AB 1766, 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 Placer County in 2009.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Property tax reimbursement $140 General*
Homeowner's exemption $3 annually until homes are
rebuiltGeneral
Disaster loss carryover$8 (FY 2009-10) 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: This bill meets the criteria for referral to the
Suspense File.
On August 30, 2009, Governor Arnold Schwarzenegger proclaimed a
state of emergency declaring the wildfires that occurred in
Placer County (49 Fire) to be a state disaster. President Obama
did not declare a federal disaster related to this wildfire.
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 1766 would provide for state reimbursement to backfill any
local government property tax revenue losses from assessment
reductions in Placer County as a result of wildfire that
commenced on August 30, 2009. 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 total projected reductions in assessed
value reported by county officials, this bill would result in
state allocations of approximately $140,000 to local
jurisdictions in Placer County.
Page 2
AB 1766 (Gaines)
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. Staff suggests an amendment to condition
reimbursements to local governments for losses from assessment
reductions resulting from fire disasters that occur after
January 1, 2011 upon a county demonstrating the following: (1)
provision of adequate structural fire protection services in
state responsibility areas; (2) compliance with existing fire
prevention requirements in very high fire hazard severity zones;
and (3) the county has a fire risk reduction public education
program if it has land designated as a very high fire hazard
severity zone within its jurisdiction. This provision would
only apply to future fire disasters, but Placer County may
already meet these requirements.
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 1766 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 2009 wildfire in Placer
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 estimates
that this provision would likely result in a minor revenue loss
of approximately $3,000 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.
AB 1766 would apply the special disaster loss carryover
treatment for losses sustained as a result of the 2009 wildfire
in Placer County. The Franchise Tax Board (FTB) estimates a
total revenue loss of approximately $8,000 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 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.