BILL ANALYSIS
AB 1782
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Date of Hearing: April 19, 2010
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Anthony J. Portantino, Chair
AB 1782 (Harkey) - As Amended: March 25, 2010
2/3 vote. Fiscal committee.
SUBJECT : Property taxes: disaster relief
SUMMARY : Provides automatic property tax relief following a
Governor-declared state of emergency. Specifically, this bill :
1)Provides a mechanism for automatically reimbursing eligible
counties for property tax losses resulting from the
reassessment of properties damaged by a Governor-declared
state of emergency. Specifically, provides that:
a) On or before the "certification date," the auditor of an
"eligible county" shall certify to the Director of Finance
an estimate of property tax losses "for the designated
period of time in which an emergency was declared . . . .";
b) After the county auditor has made this certification,
the Director of Finance shall, within 30 days of verifying
the auditor's estimate, certify this amount to the
Controller for allocation to the county; and,
c) On or before the "reimbursement date," the "eligible
county" shall compute and remit to the Controller for
deposit in the General Fund any excess reimbursement funds
exceeding the amount of actual property tax losses.
However, if actual property tax losses exceed the amount
initially allocated by the Controller, the Controller shall
allocate the amount of that excess to the county.
2)Provides that the "certification date" shall be established by
the Director of Finance as a reasonable amount of time after
the Governor-declared state of emergency by which a county
auditor may reasonably certify the estimate of property tax
losses.
3)Defines an "eligible county" as a county that meets both of
the following requirements:
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a) The county has been proclaimed by the Governor to be in
a state of emergency; and,
b) The county has adopted an ordinance providing property
tax relief for disaster victims in accordance with Revenue
and Taxation Code Section 170.
4)Provides that the "reimbursement date" shall be established by
the Controller as a reasonable amount of time after the
allocation of funds by which a county may reasonably compute
the amount of any excess funds received.
5)Provides that moneys in the Special Fund for Economic
Uncertainties shall be continuously appropriated without
regard to fiscal year (FY) to the Director of Finance for
making the property tax reimbursement allocations to counties.
6)Provides that any dwelling that qualified for a homeowners'
property tax exemption and that was damaged or destroyed by a
natural disaster in an area the Governor declares to be in a
state of emergency "during a specified period of time," and
that has not changed ownership since the commencement date of
the disaster, shall not be denied an exemption solely because
the dwelling was temporarily damaged or destroyed or was being
reconstructed by the owner, or was temporarily uninhabited as
a result of restricted access.
7)Declares legislative intent to provide, in the annual Budget
Act, those additional reimbursements to local governments that
may be constitutionally required as a result of the
homeowners' property tax exemption provisions of this bill.
8)Provides that if the Commission on State Mandates determines
that this bill contains costs mandated by the state,
reimbursement to local agencies and school districts shall be
made pursuant to existing law.
EXISTING LAW :
1)Property Tax Reassessment : Allows each county, by ordinance,
to provide for the reassessment of properties damaged by a
calamity, disaster, or misfortune. Taxpayers owning damaged
property must apply for a reassessment within the time period
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specified in the applicable county's ordinance or within 12
months of the misfortune or calamity, whichever is later. The
application for reassessment must show the condition and value
of the property after the damage and the dollar value of the
damage. Once the property is reassessed, the taxpayer is
entitled to a refund of any excess property tax paid on the
property. If the affected property is subsequently repaired,
its value is subject to an upward reassessment by the county.
1)Homeowners' Exemption :
a) Exempts the first $7,000 of the full value of a dwelling
from property tax, when the dwelling is occupied by an
owner as his/her principal residence. However, if a
property is no longer owner-occupied or is vacant on the
lien date (January 1), the property is not eligible for the
exemption for the succeeding tax year.
b) Provides specific disaster-related exceptions to the
general rule that a property must be owner-occupied on the
lien date to receive the homeowners' exemption. Under
these exceptions, properties that were eligible for the
homeowners' exemption immediately before the disaster, do
not change ownership after the disaster, and are vacant
solely because of damage incurred during the disaster,
continue to be eligible for the homeowners' exemption.
FISCAL EFFECT : The Board of Equalization estimates that this
bill would not directly impact revenues. The amount of revenue
loss will depend on the number and magnitude of future
disasters.
COMMENTS :
1)The author states, "The Legislature is called upon to enact
disaster tax relief to address specific Governor declared
disasters each year. This legislation costs thousands of
dollars. This bill would make it so that any county affected
by a Governor declared state of emergency would automatically
receive reimbursement for property tax losses." The author
goes on to state, "AB 1782 streamlines the disaster tax relief
process. Instead of submitting costly bills for each county
and disaster, any county that was affected by a Governor
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declared state of emergency will automatically receive
reimbursement for property tax losses."
2)Proponents state, "Current law already allows for the
provisions of AB 1782, so it is not breaking new policy
ground; however, a new piece of legislation after each
disaster is required to implement them. Implementation of
these actions automatically after a disaster shows a strong
dedication to government streamlining and a clear
understanding of the need to bring disaster relief to a region
as quickly as possible."
3)Committee Staff Comments
a) Disaster Relief Legislation : Following a
Governor-declared state of emergency, standard disaster
relief legislation is often enacted to provide for full
state reimbursement of local property tax losses,
beneficial homeowners' property tax exemption treatment,
and special "carryforward" treatment of excess disaster
losses.
b) Often, But Not Always : Last year, the Legislature
passed and the Governor signed into law AB 1568 (Salas),
Chapter 299, Statutes of 2009. AB 1568 was designed to
provide tax relief to those impacted by the wildfires that
occurred in Southern California in late 2008 and early
2009. The bill was similar to other disaster relief bills
routinely passed in the wake of natural disasters, save for
one key difference. As noted above, disaster relief
legislation typically includes a mechanism for reimbursing
counties for property tax losses resulting from the
reassessment of damaged properties. AB 1568, however,
contained no such language, and included only those
provisions related to beneficial homeowners' property tax
exemption treatment and special carryforward rules for
excess disaster losses. Ostensibly, the Legislature did
not provide property tax reimbursement for these disasters
due to the state's fiscal situation. While AB 1782 would
streamline the process for providing tax relief to disaster
stricken areas, thereby eliminating the need to enact new
legislation on a routine basis, it would also effectively
remove the Legislature's discretion concerning the scope of
relief provided in connection with any given disaster.
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c) Prior Streamlining Effort : In October 2005, Governor
Schwarzenegger, in his signing messages to three disaster
relief bills, directed his Office of Planning and Research
(OPR) to work with the Legislature to streamline the
process by which local governments and individuals receive
property tax relief after a natural disaster. AB 3039
(Houston), of the 2005-06 legislative session, represented
OPR's proposal and contained provisions nearly identical to
this bill. AB 3039 received no opposition votes in either
this Committee or the Assembly Local Government Committee,
but was held in the Assembly Appropriations Committee.
d) What is the Intended Scope of this Bill's Property Tax
Reimbursement? : Standard disaster relief legislation
typically reimburses disaster-stricken counties for
property tax losses sustained in the same FY in which the
disaster occurred. This bill, by contrast, directs county
auditors to certify an estimate of property tax losses "for
the designated period of time in which an emergency was
declared . . . ." It is unclear to Committee staff what is
meant by this language. Would the state backfill of
property tax losses still be limited to losses incurred
during a single FY, or would the state be required to
reimburse counties for losses incurred over a longer period
of time? To this end, what is meant by the term
"designated period of time"? While disaster proclamations
routinely make reference to the date a disaster occurred or
began, disaster proclamations typically do not designate a
"period of time" for their operation. The author may wish
to amend this language to clarify that the backfill will be
limited to losses sustained in a single FY, as designated
by the Director of Finance, in accordance with standard
disaster relief practice. (The designation of the current
FY has generally not been an issue. However, in 2007,
wildfires broke out in El Dorado County on June 24, only a
few days before the end of the FY. This essentially
resulted in no reimbursement to the county. Consequently,
the FY for relief was changed to the next FY via follow-up
legislation.)
e) What About Special Disaster Loss Treatment under the
State's Income Tax Laws? : As noted above, standard
disaster relief legislation typically includes language
providing special disaster loss treatment under the state's
income tax laws. Specifically, these provisions allow 100%
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of the excess disaster loss to be carried over for up to 15
taxable years. Also, these provisions allow taxpayers to
claim their losses either in the year in which the loss
occurred or in the preceding year. AB 1782, however, does
not contain these income tax provisions. The author may
wish to amend this bill to include these provisions.
Otherwise, the Legislature will likely still have to
introduce special disaster-specific bills in the future.
f) Related Bills in the Current Legislative Session :
i) AB 1662 (Portantino) adds the wildfires that
occurred in Los Angeles County in 2009 and the subsequent
winter storms to the list of disasters eligible for full
state reimbursement of local property tax losses,
beneficial homeowners' property tax exemption treatment,
and special "carryforward" treatment of excess disaster
losses. AB 1662 passed out of the Assembly Local
Government Committee by a vote of 8 to 0 on April 14,
2010, and will be heard in this Committee on April 19,
2010.
ii) AB 1690 (Chesbro) adds the earthquake that occurred
in Humboldt County on January 9, 2010 to the list of
disasters eligible for full state reimbursement of local
property tax losses, beneficial homeowners' property tax
exemption treatment, and special "carryforward" treatment
of excess disaster losses. AB 1690 is scheduled to be
heard in the Assembly Local Government Committee on April
14, 2010.
iii) SB 1430 (Walters) increases the homeowners' property
tax exemption from $7,000 to $27,000 for assessees who
are 62 years of age or older. SB 1430 has been referred
to the Senate Committee on Revenue and Taxation.
iv) SB 1494 (Senate Revenue and Taxation Committee),
among other things, clarifies that a dwelling that is
damaged in a misfortune or calamity is not disqualified
from receiving the homeowners' property tax exemption, if
certain conditions are met. SB 1494 has been referred to
the Senate Revenue and Taxation Committee.
v) Should these bills all continue to progress through
the Legislature, appropriate amendments should be taken
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to prevent chaptering out issues.
g) Double-Referral : This bill has been double-referred
with the Assembly Local Government Committee, where it will
be heard if it passes out of this Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
California State Association of Counties
Orange County Board of Supervisors
Regional Council of Rural Counties
Opposition
None on file
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098