BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 2136|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 2136
Author: V. Manuel Perez (D) & Salas (D), et al
Amended: 8/20/10 in Senate
Vote: 27 - Urgency
SENATE REVENUE & TAXATION COMMITTEE : 3-0, 6/23/10
AYES: Wolk, Alquist, Padilla
NO VOTE RECORDED: Walters, Ashburn
SENATE APPROPRIATIONS COMMITTEE : 11-0, 8/12/10
AYES: Kehoe, Ashburn, Alquist, Corbett, Emmerson, Leno,
Price, Walters, Wolk, Wyland, Yee
ASSEMBLY FLOOR : 69-0, 5/24/10 - See last page for vote
SUBJECT : Disaster relief
SOURCE : Author
DIGEST : This bill, an urgency measure, would provide the
following relief related to the earthquake that occurred in
Imperial County on April 4, 2010: (1) disaster-related
fiscal assistance and tax relief to affected persons and
jurisdictions for losses sustained as a result of the
Imperial County earthquake, as specified, (2) acceleration
of loan forgiveness terms for any loans issued for the
rehabilitation, reconstruction, or replacement of lower
income owner-occupied manufactured homes under the CalHome
program following the Imperial County earthquake.
CONTINUED
AB 2136
Page
2
Senate Floor Amendments of 8/20/10 eliminate conflicts with
other disaster relief bills. The amendments move the
protections against an assessor revoking a homeowners'
exemption for disaster-affected properties and allowance of
excess disaster losses for personal income and corporate
taxpayers out of the foundational code sections (R&T
Sections 218, 17207, and 24347.5, respectively) into new,
nearby code sections (R&T 218.3, 17207.3, and 24347.8) to
ensure that other disaster relief bills subsequently
enacted do not inadvertently chapter-out this bill's
additions. The Legislature is currently considering five
other disaster relief bills, so more typical chaptering
out, contingent enactment language adding the provisions of
each of the other bills into this bill will result in an
unwieldy bill.
ANALYSIS : On April 4, 2010, a magnitude 7.2 earthquake
struck Baja California, Mexico, approximately 40 miles
south of the United States border. The earthquake was
widely felt in southern California, particularly in
Imperial County, and damaged or destroyed numerous homes,
businesses, schools, water treatment and storage
facilities, and other public facilities. On April 5, 2010,
Governor Arnold Schwarzenegger proclaimed a state of
emergency in Imperial County. President Obama issued a
major disaster declaration related to the impact from the
earthquake in Imperial County on May 7, 2010. The federal
declaration provides federal funding on a cost-sharing
basis for emergency work and the repair or replacement of
public facilities damaged by the earthquake, but does not
provide assistance for individuals.
I 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 2136
Page
3
This bill provides for state reimbursement to backfill any
local government property tax revenue losses from
assessment reductions in Imperial County as a result of the
April 4, 2010 earthquake. The state holds local
governments harmless for disaster-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 note that based on about $7
million in total projected reductions in assessed value of
commercial or residential property reported by county
officials, this bill will result in state allocations of
approximately $78,000 to local jurisdictions in Imperial
County, they also note 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.
II. 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.
This bill provides 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 April 2010
earthquake in Imperial 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. According to the Imperial County Assessor's
Office, there were no residential properties completely
destroyed as a result of this earthquake. The Board of
Equalization notes that a temporary absence from a damaged
home would not result in the homeowner's loss of the
exemption, so there should be no revenue loss as a result
of this provision.
III. Carry Forward of Casualty Loss Deduction . Current
law allows nonbusiness taxpayers to deduct uninsured
losses, less $100, to the extent the loss exceeds 10
percent of adjusted gross income. Business taxpayers may
AB 2136
Page
4
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 percent of their excess losses for 5 years, and
a portion of losses for another 10 years.
This bill allows the special disaster loss carryover
treatment for losses sustained as a result of the April
2010 earthquake in Imperial County. The Franchise Tax
Board (FTB) estimates a total revenue loss of approximately
$7,000 in 2009-10 due to losses sustained in those
counties. 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.
CalHome Program . The CalHome Program is administered by
the Department of Housing and Community Development (HCD)
and provides Proposition 1C general obligation bond funds
as forgivable loans to enable low and very low income
households to become or remain homeowners. Existing law
requires the loans to be repaid in 20 years, with 10
percent of the principal to be forgiven annually for each
additional year beyond the 10th year that the home is owned
and continuously occupied by the borrower. On May 6, 2010,
HCD issued a notice of funding available (NOFA) that makes
$10 million in Proposition 1C bond funds available from the
CalHome Program for loans related to the rehabilitation or
reconstruction of lower-income owner-occupied homes (both
conventional and manufactured homes) damaged by the
earthquake. To date, HCD has awarded $1.5 million to
Imperial County for loans to 36 households, $1.32 million
to the City of Calexico for loans to 26 households, and
$1.5 million to the City of El Centro for 26 households.
HCD indicates that all of the awards to date would be used
to assist owners of manufactured homes that are currently
uninhabitable due to damage from the earthquake. Most of
AB 2136
Page
5
these manufactured homes are near the end of their useful
life.
This bill specifies that any loans provided pursuant to the
CalHome Program Disaster Assistance for Imperial County for
rehabilitation, reconstruction, or replacement of lower
income owner-occupied manufactured homes will be repaid in
10 years, with 20 percent of the principal forgiven
annually for each year beyond the fifth year the home is
owned and occupied by the borrower. This provision
accelerates the revenue losses associated with any loans
provided for manufactured homes damaged by the Imperial
County earthquake and reduce the owner-occupancy
requirements by ten years
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee analysis:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12
2012-13 Fund
Property tax reimbursement $78
General*
Homeowner's exemption negligible
costs, if any General
Disaster loss carry forward $7 (FY 2009-10)
General
CalHome loan forgiveness acceleration of up
to $10 Bond**
million in revenue
losses
by ten years, beginning in 2015.
*Special Fund For Economic Uncertainties (NOTE: existing
law continuously appropriates moneys from this fund for
disaster-related allocations, so adding an allocation for
the disasters specified in the bill constitutes an
appropriation)
AB 2136
Page
6
** Self-Help Housing Fund
SUPPORT : (Verified 8/20/10)
Board of Supervisors of the County of Imperial
California State Association of Counties
California State Legislature Rural Caucus
City of El Centro
Regional Council of Rural Counties
Regional Council of Southern California Association of
Governments
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,
Bradford, Brownley, Buchanan, Caballero, Charles
Calderon, Carter, Chesbro, Conway, Cook, Coto, Davis, De
La Torre, De Leon, DeVore, Emmerson, Eng, Feuer,
Fletcher, Fong, Fuentes, Fuller, Furutani, Gaines,
Galgiani, Garrick, Gilmore, Hagman, Harkey, Hayashi,
Hill, Huber, Huffman, Jeffries, Jones, Lieu, Logue,
Bonnie Lowenthal, Mendoza, Miller, Monning, Nestande,
Niello, Nielsen, Norby, V. Manuel Perez, Portantino,
Ruskin, Salas, Silva, Skinner, Smyth, Solorio, Audra
Strickland, Swanson, Torlakson, Torres, Torrico, Tran,
Yamada
NO VOTE RECORDED: Bass, Evans, Hall, Hernandez, Knight,
Ma, Nava, Saldana, Villines, John A. Perez, Vacancy
DLW:do 8/20/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****