BILL ANALYSIS �
AB 2175
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Date of Hearing: May 7, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 2175 (Daly) - As Amended: April 1, 2014
Policy Committee: Revenue &
Taxation Vote: 6-3
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill establishes the Renter's Tax Assistance Act to provide
assistance payments to eligible individuals who rent their
principal residences. In summary, this bill:
1)Allows a renter with gross household income, after certain
specified actual cash expenditures, of $42,588 or less to
receive assistance payments based on a percentage or multiple
of the applicable statutory property tax equivalent (SPTE).
2)Stipulates the percentage or multiple applied depends upon the
renter's total household income. Based on the current SPTE of
$250, actual assistance payments would range from $250.00 to
$347.50.
3)Requires the Franchise Tax Board (FTB) to adjust annually for
inflation the gross household income figures used to qualify
for the assistance.
4)Authorizes the FTB to prescribe by regulation the information
necessary to constitute a valid claim; establishes deadlines,
extensions, and procedures for renters filing claims.
FISCAL EFFECT
1)Significant costs, potentially in excess of $150,000 to GF,
for the FTB to develop new forms, instructions, procedures,
and systems programming required to handle a large number of
anticipated claimants.
2)Estimated GF revenue losses of $380 million, $800 million, and
AB 2175
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$900 million in each of FY 2014-15, FY 2015-16, and FY
2016-17, respectively.
COMMENTS
1) Purpose. According to the author, growing numbers of
low-income tenants have struggled to make ends meet as the
cost of living in California has increased. The author
asserts that homeowners in California receive significant
state and federal tax benefits, including the mortgage
interest deduction and homeowner's exemption, while renters do
not receive any comparable tax benefits. The author believes
it is reasonable to provide renters, who may not be able to
purchase a home, with tax relief as well.
2) HRA Program. The Homeowners and Renters Assistance (HRA)
program once provided a direct grant to qualifying seniors and
disabled individuals. The program was administered by the FTB
and allowed eligible homeowners and renters to receive partial
reimbursement of the previous fiscal year's property taxes on
a personal residence (such taxes being paid directly by
homeowners and indirectly by renters). Funding for the HRA
was suspended indefinitely in 2008.
The proposed rental assistance program is similar to the
defunded HRA program in several ways. The program provides
cash assistance to renters based on the renter's household
income, and calculates the assistance based on a similar
"property tax equivalent" formula. The proposed program will
also be administered by the FTB in a manner similar to the
HRA. However, while the original HRA program was created to
provide assistance to seniors and disabled individuals with
certain limited household income, the proposed assistance
program would be open to any eligible individual, regardless
of age or disability.
3) Renter's Credit. Current law allows eligible renters to
reduce their state income tax with a tax credit. Credit
eligibility is determined by the taxpayer's adjusted gross
income (AGI) and marital status, and the qualifying AGI level
is indexed annually to inflation. For the 2013 tax year, a
credit of $120 is allowed for married taxpayers filing joint
returns; heads of household and surviving spouses with an AGI
of $73,910 or less; and $60 for other individuals (single or
married filing separately) with an AGI of $36,955 or less.
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4) Other state and federal programs. The state and federal
government operate a number of housing and rental assistance
programs, including housing choice vouchers, Section 8
project-based rental assistance, and public housing, many of
which were adversely impacted by the federal sequester in
2013.
5) Effect on rental markets. The Committee may wish to consider
the effects rental subsidies may have on rental markets,
particularly a broad-based subsidy of the type proposed in
this bill. Providing a direct rental subsidy may cause
landlords to increase rents as their tenants are able to
afford an additional $250-350 rent per year, thereby shifting
the economic benefit of the subsidy from the renter to the
landlord. This may also have the effect of "crowding" the
segment of the rental market for renters near the income
qualification threshold, leading to greater competition, and
therefore increased rents, for those who earn just above the
qualifying income level as well.
Analysis Prepared by : Joel Tashjian / APPR. / (916) 319-2081