BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 1428 HEARING: 6/29/11
AUTHOR: Chesbro FISCAL: Yes
VERSION: 3/25/11 TAX LEVY: No
CONSULTANT: Grinnell
DISASTER RELIEF (URGENCY)
Applies excess disaster losses for tsunami victims in
Mendocino County
Background and Existing Law
Disaster losses result from fires, storms, floods or other
natural events proclaimed a disaster by the President.
Disaster losses are the amounts not compensated for by
insurance or other means. Federal law, which California
conforms to, only allows disaster loss deductions for
personal income taxes that exceed $100 per taxpayer and 10%
of their adjusted gross income for the year. Current state
and federal allows taxpayers to deduct them in the year the
loss occurs or in the preceding year by filing an amended
return, but only when the President declares a disaster.
Starting with the forest fires in 1985, and approximately
48 times thereafter for various disasters, the Legislature
enacted measures that disconnect the above limitations,
providing treatment identical to Presidentially declared
disasters by allowing affected taxpayer to file amended
returns. The bills also allow a 100% carry-forward of
excess disaster losses for fifteen years.
Proposed Law
Assembly Bill 1428 applies excess disaster loss treatment
to victims in Mendocino County of the March, 2011 tsunami.
Taxpayers can carry forward 100% of losses for 15 years,
and claim losses on amended returns.
State Revenue Impact
AB 1428 -- 5/24/11 -- Page 2
Franchise Tax Board (FTB) estimates revenue losses of
$500,000 in 2010-11, and revenue gains of $250,000 in
2011-12 and 2012-13.
Comments
1. Purpose of the bill . According to the author, "AB 1428
provides relief for 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. Relieving the Disaster of Disaster Relief . The
Legislature has amended the Revenue and Taxation Code an
untold number of times for separate disasters to ensure
that Assessors may not deny homeowners' exemptions for
disaster-related reasons, to allow for excess disaster
losses for both the Personal Income Tax Law and the
Corporation Tax Law, and provide for the first year
backfill of local property tax losses and procedures
therein resulting from disaster reassessments. The
Legislature always litters the code with these provisions
when disaster strikes, so why not enact a statute which
triggers these tax benefits whenever the Governor declares
a disaster?
Until last year, efforts to mandate consistency have
stalled. In 2005-06, AB 3039 (Houston) and SB 1607
(Machado) attempted to change this statute to provide
statewide protection, thereby ensuring that future
disaster-specific measures were not necessary. The
Assembly Revenue and Taxation Committee held AB 3039, and
deleted the relevant provision from SB 1607, which was
subsequently enacted. Additionally, the Governor directed
the Office of Emergency Services and the Office of Planning
and Research to work with the Legislature to enact standard
purpose legislation when he signed a disaster-specific bill
(AB 18, La Malfa, 2005). The Legislature has previously
enacted statewide legislation in response to a flurry of
local jurisdiction-specific bills, notably in the areas of
transaction and use taxes (SB 566, Scott, 2003), and
disputes over property tax allocation errors (AB 169,
AB 1428 -- 5/24/11 -- Page 3
Wiggins, 2001). Thankfully, last year the Legislature
enacted SB 1494 (Committee on Revenue and Taxation) which
automatically enacts the preclusion of assessors revoking a
homeowners' exemption for disaster-affected property,
bringing at least more brevity to these annual rituals.
3. The magic touch . As introduced, AB 1428 applied to
both Del Norte and Mendocino County. However, on March
16th, 2011, President Obama declared Del Norte County a
federal disaster area, automatically triggering excess
disaster losses for taxpayers in Del Norte County by virtue
of state law's conformity to federal. Because of the
declaration, the Legislature need only enact a specific
statute for Mendocino County taxpayers.
4. Urgency . AB 1428 takes effect immediately as an
urgency statute.
Assembly Actions
Assembly Revenue and Taxation 8-0
Assembly Appropriations 17-0
Assembly Floor 76-0
Support and Opposition (6/23/11)
Support : Del Norte County Board of Supervisors (sponsor);
Mendocino County Board of Supervisors.
Opposition : Unknown.