BILL ANALYSIS
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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 provides 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
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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
several other disaster relief bills - AB 50 (Nava), AB 1662
(Portantino), and AB 1690 (Chesbro) - 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
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of damaged or destroyed properties.
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. Senate Appropriations
Committee staff noted that based on approximately $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.
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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 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 five 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 tenth 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
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$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 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
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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)
**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 8/23/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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