BILL ANALYSIS �
AB 2323
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ASSEMBLY THIRD READING
AB 2323 (Gorell)
As Amended May 15, 2014
Majority vote
REVENUE & TAXATION 6-1 APPROPRIATIONS 17-0
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|Ayes:|Bocanegra, Harkey, Beth |Ayes:|Gatto, Bigelow, |
| |Gaines, Mullin, Nestande, | |Bocanegra, Bradford, Ian |
| |Pan | |Calderon, Campos, |
| | | |Donnelly, Eggman, Gomez, |
| | | |Holden, Jones, Linder, |
| | | |Pan, Quirk, |
| | | |Ridley-Thomas, Wagner, |
| | | |Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Williams | | |
| | | | |
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SUMMARY : Excludes from gross income the value of any medal
given by the International Olympic Committee, and any prize
money or honoraria received from the United States Olympic
Committee (USOC) on account of the Olympic Games or the
Paralympic Games. Specifically, this bill :
1)Applies to taxable years beginning on or after January 1,
2014, and on or before December 31, 2021.
2)Sunsets automatically on January 1, 2022.
3)Takes immediate effect as a tax levy.
EXISTING FEDERAL LAW defines "gross income", except as otherwise
provided, as all income from whatever source derived.
EXISTING STATE LAW provides that Internal Revenue Code Section
61, relating to the definition of "gross income", shall apply,
except as specified.
1)Provides for various exclusions from gross income under the
Personal Income Tax Law.
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FISCAL EFFECT : According to the Assembly Appropriations
Committee, this bill will result in:
1)Insignificant costs to the Franchise Tax Board (FTB) to
implement the exclusion.
2)Estimated decreases to General Fund revenue of $8,000,
$50,000, and $30,000 in fiscal year (FY) 2014-15, FY 2015-16,
and FY 2016-17, respectively.
COMMENTS :
1)The author has provided the following statement in support of
this bill:
This bill would exempt California Olympians and
Paralympians from state taxes assessed on cash prizes
awarded by the USOC for their success in the Olympic
and Paralympic Games. The exemption does not include
sponsorship deals and other endorsement income.
Most countries compensate their Olympic and Paralympic
athletes, but athletes representing the United States
compete on a voluntary basis unless they win a medal.
Upon being welcomed home, American athletes who win
bronze, silver, or gold are subject to federal and
state taxes.
2)Assembly Revenue and Taxation Committee staff comments:
a) What's included? Under both federal and state law,
gross income generally includes all income from whatever
source derived. Thus, the FTB notes that gross income
includes prize awards, absent a specific exclusion.
California typically conforms to federal exclusions for
ease of administration. For example, in the last omnibus
conformity bill to be taken up by the Legislature,
California excluded from gross income grants for renewable
energy under the American Recovery and Reinvestment Tax Act
of 2009. [SB 401 (Wolk), Chapter 14, Statutes of 2010.]
This is not to suggest, however, that federal and state law
are in perfect accord. California law expressly excludes
from gross income some items that are included within the
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federal definition. For example, Government Code Section
8880.68 provides that no state or local taxes shall be
imposed on any prize awarded by the lottery. More
recently, the Legislature acted to exclude disaster relief
payments made to victims of the San Bruno gas pipeline
explosion [AB 50 (Hill), Chapter 18, Statutes of 2011].
b) What would this bill do? This bill would enact a new,
California-specific exclusion for awards and prize money
received in connection with the Olympic or Paralympic
Games. This bill is designed to provide modest tax relief
to successful athletes, many of whom have made enormous
personal sacrifices in pursuit of Olympic and Paralympic
success.
Unlike the athletes of numerous other nations, the USOC
notes that the nation's athletes receive no government
funding and, instead, rely on the generosity of the
American public and private sponsors for support. The USOC
does provide honoraria to medaling athletes. Specifically,
the author notes that athletes are generally awarded
$25,000 for a gold medal, $15,000 for a silver medal, and
$10,000 for a bronze medal. Under this bill, such awards
would not be subject to state taxation. Moreover, this
bill would also exclude from state taxation the value of
the actual gold, silver, and bronze medals as well.
c) A proud California tradition: California has a proud
Olympic history, having served as host of the Los Angeles
Olympic Games in 1932 and 1984, and the 1960 Olympic Winter
Games in Squaw Valley. In addition, California is home to
one of three national Olympic Training Centers. Finally,
the USOC notes that approximately 14% of all Olympic and
Paralympic athletes reside in California.
d) Reverse conformity: At the federal level, Senator John
Thune (R - South Dakota) introduced legislation (S.2026) on
February 12, 2014, to exclude from gross income the value
of any medal awarded by, or any prize money received from,
the USOC on account of competition in the Olympic or
Paralympic Games. On the day of its introduction, S.2026
was referred to the Senate Finance Committee, where it
appears no further action has been taken to date. While
the USOC contends that positive action on this bill would
send a strong message to Washington, D.C., Revenue and
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Taxation Committee staff questions whether it may be more
appropriate to await federal action and conform to the
precise exclusion language enacted by Congress.
e) But what about me? Successful Olympic athletes are by
no means the only individuals who receive a monetary award
on account of their laudable accomplishments. On November
27, 1895, Alfred Nobel signed a will stipulating that the
bulk of his estate should be invested into a fund, the
income from which would be distributed annually in the form
of prizes "to those who during the preceding year have
conferred the greatest benefit on mankind." Today, the
Nobel Prize is accompanied by a monetary award of roughly
$1.2 million. Nobel prizes are often awarded in
recognition of groundbreaking discoveries with far-reaching
implications for humanity as a whole. The state, however,
does not exclude such award payments from gross income.
Thus, the Revenue and Taxation Committee may wish to
consider the precedent this bill might set for award
payments, and whether it is equitable to treat such
payments in a dissimilar manner.
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098
FN: 0003558