BILL ANALYSIS �
AB 1428
Page A
Date of Hearing: May 16, 2011
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Henry T. Perea, Chair
AB 1428 (Chesbro) - As Introduced: March 25, 2011
2/3 vote. Urgency. Fiscal committee.
SUBJECT : Disaster relief: tsunami: Counties of Del Norte and
Mendocino
SUMMARY : Allows special tax treatment, known as "disaster loss
treatment," for losses sustained in the Counties of Del Norte
and Mendocino as a result of the tsunami that occurred in March
2011. Specifically, this bill :
1)Allows any excess disaster losses to be carried forward to
each of the five taxable years following the taxable year for
which the loss is claimed. However, if there is any excess
disaster loss remaining after this five-year period, then the
applicable percentage (currently 100%) of that excess disaster
loss shall be carried forward to each of the next 10 taxable
years.
2)Allows affected taxpayers to file an amended return to deduct
disaster losses in the taxable year prior to the loss to
receive an expedited refund.
3)Takes immediate effect as an urgency measure.
EXISTING LAW :
1)Defines a casualty loss as the damage, destruction, or loss of
property resulting from an identifiable event that is sudden,
unexpected, or unusual. A disaster loss occurs when business
or personal property is completely or partially destroyed as a
result of a fire, storm, flood, or other natural event in an
area declared a disaster by the President of the United
States.
2)Allows an individual taxpayer with a non-business
casualty/disaster loss that is not reimbursed by insurance to
deduct such losses to the extent that each loss exceeds $100
and aggregate net losses for the taxable year exceed 10% of
AB 1428
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adjusted gross income. With respect to disaster losses, a
taxpayer can elect to file an amended return to deduct a
disaster loss in the taxable year prior to the loss to receive
an expedited refund. However, this election only applies to
disaster losses connected to a Presidentially-declared
disaster area.<1>
3)Identifies specific disasters for which excess disaster losses
are allowed special "carry forward" treatment. Specifically,
100% of the excess disaster loss may be carried over for up to
fifteen taxable years.
FISCAL EFFECT : The Franchise Tax Board (FTB) estimates revenue
losses of $500 in fiscal year (FY) 2010-11, $250 in FY 2011-12,
and $250 in FY 2012-13.
COMMENTS :
1)The author has provided the following statement in support of
this bill:
AB 1428 . . . would provide relief for all the individuals
and companies that were negatively affected by the Tsunami
that occurred March 10th as a result of the 9.0 earthquake.
This measure would help relieve some of the pressure and
allow those who were affected to carry over losses beyond
what they could deduct in a given year.
2)This bill is sponsored by the Del Norte County Board of
Supervisors, which notes:
The tsunami that occurred as a result from the 9.0
magnitude earthquake that struck Japan on March 11, 2011
caused a loss of life and significant damage and property
loss to taxpayers in our county. The disaster is likely to
have �a] significant impact on the economy of Del Norte
County because Crescent City's fishing industry directly
employs about 300 people. Damage estimates in the Crescent
City harbor alone quote between $20 million and $25
million.
3)Proponents state, "This bill would provide critical assistance
to the property owners most severely impacted by this
---------------------------
<1> The election is not available for a Governor-only declared
disaster until enabling state legislation has been enacted.
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unprecedented natural disaster, by providing affected
taxpayers financial assistance and tax relief allowing them to
maintain essential basic service and repair damage to, and
restore, their homes and businesses."
4)Committee Staff Notes:
a) A state of emergency : On March 11, 2011, a roughly 8.9
magnitude earthquake struck Honshu, Japan. The resulting
tsunami inundated California beaches, ports, and harbors,
destroying public and private property and threatening
numerous structures. The tsunami also caused the
evacuation of residents and the opening of emergency
shelters. As a result, Governor Brown proclaimed a state
of emergency, the very same day, covering the Counties of
Del Norte, Humboldt, San Mateo, and Santa Cruz. Five days
later, on March 16, 2011, Governor Brown issued an
additional emergency proclamation for Mendocino and San
Luis Obispo Counties.
b) Standard disaster relief legislation : The Legislature
has routinely passed standard tax relief legislation
following Governor-declared states of emergency. These
bills have typically included excess disaster loss
provisions like those contained in this bill, as well as
provisions compensating counties for property tax losses
resulting from assessment reductions. AB 1428 contains
only the standard excess disaster loss provisions, and
applies only to losses sustained in the Counties of Del
Norte and Mendocino.
c) Feds to the rescue : Following this bill's introduction,
President Obama declared a state of emergency, which
covered only Del Norte and Santa Cruz Counties. As such,
the FTB notes, "There is no revenue impact for losses
sustained in Del Norte County because the President has
declared the county as a tsunami disaster. Existing state
law automatically extends the special tax treatment of
losses under presidentially declared disasters." As such,
the author has expressed a desire to amend this bill to
apply only to Mendocino County.
REGISTERED SUPPORT / OPPOSITION :
AB 1428
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Support
Del Norte County Board of Supervisors (sponsor)
Mendocino County Board of Supervisors
Opposition
None on file
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098