BILL ANALYSIS �
AB 922
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 922 (Maienschein)
As Amended June 25, 2014
Majority vote. Tax levy
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|ASSEMBLY: | |(May 29, 2013) |SENATE: |36-0 |(August 11, 2014) |
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(vote not relevant)
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|COMMITTEE VOTE: |8-0 |(August 27, 2014) |RECOMMENDATION: |concur |
|(Rev. and Tax.) | | | | |
| | | | | |
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Original Committee Reference: U. & C.
SUMMARY : Extends specified disaster loss treatment to losses
sustained in the County of San Diego as a result of the wildfires
that occurred in May 2014.
The Senate amendments delete the Assembly version of this bill, and
instead:
1)Provide that Internal Revenue Code (IRC) Section 165(i) shall
apply to any losses sustained in the County of San Diego as a
result of the wildfires that occurred in May 2014.
2)Provide that, for the losses specified above, 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 for the taxable
year in which the disaster occurred.
3)Provide that, unless specifically provided otherwise, 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 a loss described above.
4)Contain a legislative finding that this bill fulfills a statewide
purpose.
5)Provide that this bill shall take immediate effect as a tax levy.
AB 922
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EXISTING LAW :
1)Provides for a deduction and the carryover to specified taxable
years of specified losses sustained as a result of certain
disasters occurring in California in an area determined by the
United States President to warrant specified federal assistance
or proclaimed by the Governor to be in a state of emergency.
2)Allows a taxpayer to elect to deduct those disaster losses on the
return for the taxable year preceding the taxable year in which
the disaster occurred.
AS PASSED BY THE ASSEMBLY , this bill required the California Public
Utilities Commission to authorize an electrical or gas corporation
to verify, by the submission of proof of income, the continuing
eligibility of a participant in the California Alternate Rates for
Energy (CARE) program regardless of the means by which the
participant was first enrolled in the CARE program.
FISCAL EFFECT : The Franchise Tax Board estimates that this bill
will reduce General Fund revenues by $7,000 in fiscal year (FY)
2013-14, by $3,000 in FY 2014-15, and by $3,000 in FY 2015-16.
COMMENTS : The author has provided the following statement in
support of this bill:
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
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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.
Assembly Revenue and Taxation Committee comments:
The San Diego wildfires: On May 13, 2014, wildfires broke out in
the County of San Diego, eventually burning several thousand acres.
These fires destroyed structures, including homes, and damaged
critical infrastructure, necessitating the evacuation of thousands
of residents. Thus, on
May 14, 2014, Governor Brown issued a state of emergency
proclamation for the County of San Diego.
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 declared to be a disaster by the President of the United
States.
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 impacted taxpayers to elect
to deduct disaster losses on the return for the prior taxable year.
AB 922
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This bill: This bill would apply the provisions of IRC Section
165(i) to losses sustained in the County of San Diego as a result
of the May 2014 wildfires. IRC Section 165(i), in turn, provides
that any loss attributable to a federally declared disaster may, at
the taxpayer's election, be taken into account for the taxable year
immediately preceding the taxable year in which the disaster
occurred. As the author notes, this would allow for expedited
refund payments to impacted taxpayers. This bill further specifies
that this election may be made on a return or amended return filed
on or before the due date of the return for the taxable year in
which the disaster occurred. These provisions would apply to
taxpayers under both the Personal Income Tax Law and the
Corporation Tax Law.
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098
FN: 0005532