BILL ANALYSIS �
AB 2004
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Date of Hearing: May 25, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2004 (Knight) - As Amended: May 16, 2012
Policy Committee: Revenue and
Taxation Vote: 8-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill excludes from gross income, combat-related special
compensation (CRSC) and concurrent retirement and disability pay
(CRDP), as defined, beginning on or after January 1, 2013.
FISCAL EFFECT
Annual loss of revenues to the General Fund is expected to be
approximately $35 million in the fiscal year (FY) 2013-14 and
$25 million in FY 2014-15.
COMMENTS
1)Author's Statement . The author states as more and more troops
return from combat, CRSC and CRDP payments, which are based
upon combat injuries sustained in battle, should not be
included in gross income for state taxes as they are exempt
for federal taxes. The author argues California's veterans
returning from hazardous missions overseas have selflessly put
themselves in harm's way, and deserve to fully take advantage
of the state and federal benefits they have earned.
2)Existing Tax Treatment of Military Compensation. This bill is
intended to create an exclusion from gross income for two
types of military retiree compensation: CRSC and CRDP
payments. CRSC compensation is paid for combat-related
injuries. According to the Franchise Tax Board, the CRSC
payment is considered disability compensation and is excluded
from gross income under both federal and state tax laws. In
contrast, CRDP payments are paid to a retired member of the
U.S. military for non-combat related injuries and are taxable
AB 2004
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under both federal and state law. Because CSRC payments are
already excluded from gross income, as a practical matter this
bill provides an exclusion from gross income only for CRDP
compensation received in taxable years beginning on or after
January 1, 2013.
3)Reduced Conformity to Federal Law . Generally, California
conforms to federal tax law. State conformity with federal
law promotes greater simplicity and eases administration of
complex tax laws. By providing an exclusion from gross income
for an additional income sources, this bill would bring
California further out of conformity with federal law.
4)Previous legislation. There have been a number of bills on
this general subject, among the most recent are:
SB 401 (Wolk), Chapter 14, Statutes of 2010, provided conformity
to federal law regarding the effective date of gross income
exclusions for combat-related injury pay and combat-related
disability pay.
AB 1077 (Anderson), of 2009, allowed an individual to exclude
from gross income, retirement pay and survivor annuities
received as a result of active service. AB 1077 was held
under submission in this Committee.
AB 2952 (Mountjoy), of 2004 exempted from income taxes the first
$50,000 of income of a surviving spouse of a member of the
Armed Forces who dies in a military combat or terrorist
action. AB 2952 failed passage in the Senate Revenue and
Taxation Committee.
SB 948 (Morrow), of 2003 exempted from inclusion in gross income
for four years, all income of a spouse of a member of the
Armed Forces who dies as a result of certain military-type
actions. SB 948 was held on the Suspense File of the Senate
Appropriations Committee.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081
AB 2004
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