BILL ANALYSIS �
AB 1510
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Date of Hearing: May 21, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1510 (Nazarian) - As Amended: May 15, 2014
Policy Committee: Revenue &
Taxation Vote: 9-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill allows a tax credit under the personal income tax and
corporate tax laws, for tax years beginning on or after January
1, 2015 and before January 1, 2020, equal to 30% of a qualified
taxpayers costs incurred for seismic retrofit construction. In
summary, this bill:
1)Defines a "qualified taxpayer" as an owner of a qualified
building located in California; and allows a taxpayer that
owns a proportional share of a qualified building to claim the
credit based on the taxpayer's share of the costs incurred for
seismic retrofit construction.
2)Defines a "qualified building" as a building that has been
certified as an "at-risk property," which is further defined
as a building deemed hazardous and in danger of collapse in
the event of a catastrophic earthquake, by the local housing
authority for the area within which the building is located.
3)Defines "seismic retrofit construction" as changes or
additions to the structure of a qualified building to mitigate
seismic damage, including:
a) Anchoring the structure to the foundation; or repairing
or reinforcing the foundation to improve its integrity
against seismic damage.
b) Bracing cripple walls; bracing hot water heaters.
c) Installing automatic gas shutoff valves; anchoring fuel
storage.
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d) Installing an earthquake-resistant bracing system for
mobile homes that is certified by the California Department
of Housing and Community Development.
Excludes from the definition of "seismic retrofit
construction" activities performed solely to bring a qualified
building into compliance with standard local building codes.
4)Provides that, to be eligible for the credit, the following
must apply:
a) The qualified taxpayer must obtain certification from
the appropriate jurisdiction with authority for building
code enforcement, upon a review of the building, that the
building is an at-risk property.
b) The jurisdiction with authority for building code
enforcement in which a qualified building is located has
entered into an agreement with the state to provide
certifications and to not seek reimbursement for any costs
incurred in providing those certifications.
5)Requires the credit amount allowed to be claimed by a
qualified taxpayer at the rate of one-fifth of the credit
amount for the taxable year in which the credit is allocated,
and one-fifth of the credit amount for each of the subsequent
four taxable years.
6)Provides that the credit shall be in lieu of any other credit
or deduction the taxpayer may otherwise claim with respect to
the qualified costs.
FISCAL EFFECT
1)Potentially significant GF costs to Franchise Tax Board (FTB)
to administer the changes to forms and systems.
2)Estimated GF revenue decreases of $1.4 million, $5.2 million,
and $8.7 million in FY 2014-15, FY 2015-16, and FY 2016-17,
respectively.
COMMENTS
1) Purpose. According to the author, this measure will improve
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California's preparedness for earthquakes, saving taxpayers
money that would otherwise be required for disaster relief.
According to the Southern California Earthquake Center,
California has a 99.7% chance of having a magnitude 6.7 or
larger earthquake during the next 30 years, and the likelihood
of an even more powerful quake of magnitude 7.5 or greater in
the next 30 years is 46%.
Proponents of the bill argue the cost of retrofitting
buildings can be very expensive, and this bill will encourage
owners of older properties to upgrade safety features,
protecting both owners and tenants from future earthquakes.
2) Opposition. The California Tax Reform Association (CTRA)
notes that property owners are already strongly incentivized
to retrofit their buildings in order to preserve the value of
their investment. CTRA argues since an earthquake would
likely cause a total loss to property owner, there is no need
for an additional tax credit. Such credit would only reward
activity that would otherwise have been undertaken.
Analysis Prepared by : Joel Tashjian / APPR. / (916) 319-2081