BILL ANALYSIS �
AB 2332
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Date of Hearing: May 7, 2012
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Henry T. Perea, Chair
AB 2332 (Monning) - As Amended: April 12, 2012
Majority vote. Tax levy. Fiscal committee.
SUBJECT : Income taxes: deductions: disaster losses: County
of Santa Cruz
SUMMARY : Provides that any losses sustained in the County of
Santa Cruz as a result of the severe storms that occurred in
March 2011 (2011 Storms) may, at the taxpayer's election, be
taken into account for the taxable year immediately preceding
the taxable year in which the disaster occurred. Specifically,
this bill :
1)Provides that Internal Revenue Code (IRC) Section 165(i) shall
apply to any losses sustained in the County of Santa Cruz as a
result of the 2011 Storms.
2)Provides that the election under IRC Section 165(i) may be
made on a return or amended return filed on or before the due
date of the return, determined with regard to extension, for
the taxable year in which the disaster occurred.
3)Provides that, unless otherwise specified, any law that
suspends, defers, reduces, or otherwise diminishes the
deduction of a net operating loss (NOL) shall not apply to a
NOL attributable to losses described above.
4)Takes immediate effect as a tax levy.
EXISTING LAW :
1)Allows individual and corporate taxpayers to utilize NOLs to
offset their tax liabilities. For NOLs incurred in taxable
years beginning on or after January 1, 2008, existing law
provides a carryover period of 20 years.
2)Allows NOLs attributable to taxable years beginning on or
after January 1, 2013, to be carrybacks to each of the
preceding two taxable years, as provided.
AB 2332
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3)Disallows the deduction for NOLs and NOL carryovers in the
2008 to 2011 taxable years for specified taxpayers.
FISCAL EFFECT : The Franchise Tax Board estimates that this bill
would reduce General Fund (GF) revenues by $2,000 in fiscal year
(FY) 2011-12, and would increase GF revenues by $1,000 in both
FY 2012-13 and FY 2013-14.
COMMENTS :
1)The author has provided the following statement in support of
this bill:
Between March 15 and 27, 2011, California was struck by a
devastating storm, destroying and damaging public
facilities and private property throughout the state.
Santa Cruz County sustained $15 million in damage, 30
percent of the statewide total. In order to provide timely
relief for those who have sustained damage or loss as a
result �of] the severe March 2011 Storm, it is necessary
that AB 2332 take effect immediately.
2)Committee Staff Comments
a) The 2011 Storms : In March 2011, the County of Santa
Cruz was struck by a severe storm that brought heavy rain,
high winds, and flooding, damaging or destroying both
public facilities and private property throughout the
county. The county sustained roughly $15 million in
damage.
In April 2011, Governor Brown issued an Emergency
Proclamation for this storm and asked the federal
government to declare the event a major disaster.
California's request to the Federal Emergency Management
Agency was denied, along with the state's subsequent appeal
of this decision.
b) Casualty losses vs. disaster losses : Under both federal
and state law, a casualty loss is defined as the damage,
destruction, or loss of property resulting from an
identifiable event that is sudden, unexpected, or usual. A
disaster loss, on the other hand, occurs when business or
personal property is partially or completely destroyed by a
fire, storm, flood, or other natural event in an area
AB 2332
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declared to be a disaster by the President of the United
States.
Individuals with non-business casualty or disaster losses
that are unreimbursed may deduct such losses to the extent
that each loss exceeds $100 and aggregate net losses for
the taxable year exceed 10% of adjusted gross income. To
the extent that a casualty or disaster loss contributes to
a NOL, that loss is allowed a 20 year carry forward
treatment. In other words, 100% of the NOL may be carried
over for up to 20 taxable years.
c) Special tax treatment provided automatically for
disaster losses : In the case of disaster losses, a
taxpayer may elect to file an amended return to deduct the
loss in the taxable year prior to the taxable year in which
the disaster loss actually occurred, resulting in an
expedited refund. This election may be made for any
Presidentially-declared disaster prior to passage of any
state legislation allowing this treatment because
California conforms to federal disaster tax law treatment.
The election is not available, however, for a
"Governor-only" declared disaster, unless special state
legislation is enacted.
For disasters that were the subject of a Governor's
proclamation, but not the subject of a Presidential
disaster declaration, enactment of state law identifying a
specific event as a disaster for state tax law purposes
authorizes effected taxpayers to elect to deduct disaster
losses on the return for the prior taxable year.
d) What would this bill do? : This bill would allow
taxpayers who suffered losses as a result of the 2011
Storms to elect to file an amended return for the prior
taxable year. Thus, taxpayers would be able to claim the
disaster losses earlier than otherwise permitted, resulting
in an expedited refund. Specifically, a taxpayer would
have until the extended due date for the 2011 taxable
year's return to elect to file an amended return for the
prior taxable year to deduct the disaster losses in the
prior year. This bill would also provide limited
protection from future NOL suspension legislation for
losses sustained in the 2011 Storms.
AB 2332
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REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098