BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 922 HEARING: 6/18/14
AUTHOR: Maienschein FISCAL: Yes
VERSION: 5/29/14 TAX LEVY: Yes
CONSULTANT: Grinnell
DISASTER RELIEF: COUNTY OF SAN DIEGO
Enacts disaster loss treatment for victims of fires in San
Diego County.
Background and Existing Law
Disaster losses are the amounts not compensated by
insurance or other means that result from fires, storms,
floods or other natural events proclaimed a disaster by the
President. Federal law, which California conforms to,
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 law
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
50 times thereafter for various disasters, the Legislature
enacted measures that provide treatment identical to
Presidentially declared disasters by allowing affected
taxpayer to file amended returns, carry-forward 100% of
excess disaster losses for fifteen years, and apply losses
in the previous taxable year before applying them to taxes
in the current taxable year.
Proposed Law
Assembly Bill 922 allows taxpayers affected by wildfires
occurring in the County of San Diego in 2014 who incurred
losses during the state of emergency declared by the
Governor to carry back those losses to the 2013 taxable
year, and to carry them forward for 15 years. The measure
also allows affected taxpayers to file an amended return on
or before the extended due dates for the 2014 taxable year.
AB 922 - 5/29/14 -- Page 2
State Revenue Impact
Franchise Tax Board estimates losses of $7,000 in the
2014-15 taxable years, and revenue gains of $3,000 in the
2015-16 and 2016-17 taxable year, assuming amendments in
Comment #3 are adopted.
Comments
1. Purpose of the bill . According to the author, "May 5,
2014 marks the beginning of what could possibly be one of
the most devastating fire seasons in San Diego County. In
nearly three weeks, roughly 29,000 acres burned across the
county from 19 separate fires. Conditions were intensified
by high temperatures and the Santa Ana winds. It has been
estimated that these fires have cost nearly $30 million in
damage and destruction to personal and private property and
another $30 million to fight the fires. Homes, schools and
businesses experienced evacuation, and residents had their
lives turned upside down. On May 15, 2014 Governor Brown
declared a State of Emergency in San Diego County in
response to the disastrous string of fires that ripped
through the county. AB 922 will allow residents of San
Diego County that suffered losses to their homes and
businesses during the wildfires of May 2014 to elect to
claim a deduction for those losses on the previous year's
tax return by filing an amended return of that year's taxes
resulting in an expedited payment for their losses. In
addition, any losses in excess of the limits of that
taxable year can be carried forward for a maximum of the
following 20 years as loss deductions up to 100% of the
disaster losses reported during the San Diego County fires
started in May of 2014. AB 922 will help those individuals
who have suffered a great loss during this state declared
disaster to get back on their feet. It will help to ease
the pain felt by those who have lost more than the state
can ever replace and at least offer a small comfort."
2. When disaster strikes . Excess disaster loss treatment
allows taxpayers to deduct disaster losses in the year the
loss occurs or in the preceding year by filing an amended
return. However, legislation enacting disaster loss
treatment for affected taxpayers will soon be unnecessary,
as the Legislature has provided superior treatment for all
taxpayers incurring business losses. In 2008, the
AB 922 - 5/29/14 -- Page 3
Legislature allowed all taxpayers to carry forward net
operating losses (NOLs) for 20 years, and to carry back
losses for two years, regardless of whether they were
affected by disasters (AB 1452, Committee on Budget, 2008).
With carry backs, taxpayers may amend returns in the past
two taxable years to apply losses from the current taxable
year, generating a refund of previous taxes paid. AB 1452
provided for two-year carrybacks according to the following
restrictions:
For NOLs generated in the 2011 taxable year,
taxpayers may carry back 50% of the loss to the 2009
and 2010 taxable years.
For NOLs generated in the 2012 taxable year,
taxpayers may carry back, 75% of the loss to the 2010
and 2011 taxable years.
For NOLs generated in the 2013 taxable year and
thereafter, taxpayers may carry back 100% of the loss
to the 2011 taxable year and thereafter.
The Legislature delayed the effective date for carry backs
for two years when it suspended all net operating losses
for the 2010 and 2011 taxable years (SB 858, Committee on
Budget, 2010). Taxpayers can start carrying back losses in
the 2013 taxable year, but only 50% of them. However,
because taxpayers are limited to 75% in 2014, specific
legislation is needed to allow them to apply them for
disasters that occurred this year. Additionally, special
legislation is needed to allow disaster affected taxpayers
a six month extension to do so.
3. Technicals . AB 922 contains two sections that enact
fifteen year disaster loss carry-forwards, which are
already superseded by existing law's 20-year carry forward
for all losses. FTB and Committee staff recommend removing
them.
Assembly Actions
Not relevant to this version of the bill.
Support and Opposition (06/12/14)
Support : None received.
AB 922 - 5/29/14 -- Page 4
Opposition : None received.