BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 2323 HEARING: 6/18/14
AUTHOR: Gorell FISCAL: Yes
VERSION: 5/15/14 TAX LEVY: Yes
CONSULTANT: Bouaziz
INCOME EXCLUSION FOR OLYMPIC ATHLETES
Excludes from income the value of any prize or award won in
the Olympic Games or Paralympic Games.
Background and Existing Law
Generally, federal and state tax law provide that "income"
includes all income from any source, such as wages,
dividends, or capital gains, unless specifically excluded,
such as employer's health insurance contributions, and
insurance payments. California typically conforms to
federal law for exclusions to gross income for ease of
administration: in 2010, the state conformed to federal law
to exclude the American Recovery and Reinvestment Tax Act
of 2009 grants for renewable energy from gross income, and
specified discharges of qualified principal residence
indebtedness (SB 401, Wolk, 2010).
Income includes all gifts and prizes unless specifically
excluded, such as employee achievement awards, and any gift
or prize donated to charity. California also expressly
excludes from income some items that are includible as
income in federal tax, such as lottery winnings,
unemployment insurance, and a portion of social security
benefits.
Proposed Law
Assembly Bill 2323 excludes from 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 in athletic competition in the Olympic
Games or the Paralympic Games.
The measure applies to prizes and awards received on or
AB 2323 -- 05/15/14 -- Page 2
after January 1, 2014 and before December 31, 2021 and
remains in effect until January 1, 2022.
State Revenue Impact
According to the Franchise Tax Board (FTB), AB 2323 results
in revenue losses of $8,000 in 2014-15, $50,000 in 2015-16,
and $30,000 in 2016-17.
Comments
1. Purpose of the bill . According to the author, "This
bill exempts from income tax the value of any medals won by
Olympians at the Olympic Games or any cash awards provided
by the US Olympic Committee. This exemption does not
include sponsorship deals and other endorsement income.
Most countries pay their Olympic athletes, but athletes
representing the United States do so as volunteers unless
they win a medal, where after they are awarded a modest
honorarium from the US Olympic Committee, which receives
zero government funding. Upon being welcomed home,
American athletes who win a medal -- wearing the red,
white, and blue of our nation's Olympic uniform -- are
subject to federal and state taxes on their achievements.
These are achievements made on behalf of all Americans.
Some of our athletes enjoy financial success as a result of
their participation on Olympic Teams, but this isn't
universally true. Many make considerable financial
sacrifices to train for and participate in the Games,
leading modest lives and just making ends meet. After
competing, these athletes continue to invest in their
communities, often donating hundreds of hours for speaking,
mentoring, and volunteering engagements. Olympic gold
medalist Stephanie Trafton spends two days a week
volunteering at Sac State for the athletic program, while
raising her six month old daughter. She's just one example
of the many athletes who continue to give back, even after
the Olympics. Conforming legislation is currently pending
in Congress, and California is in a unique position to take
leadership in this effort. There are more Olympic and
Paralympic athletes here than any other state in the
nation. These athletes have dedicated their lives to their
AB 2323 -- 05/15/14 -- Page 3
craft and to representing our state and nation. Our
athletes receive no government backing, unlike those in
other countries. The least we as a state and as Americans
can do is give athletes a small break on the achievement
they earn for their enormous sacrifice. This bill has no
known opposition and is supported by the US Olympic
Committee, the Athletes' Advisory Council, the Association
of Regional Center Agencies, and a long list of athletes."
2. What about me? The Olympic Games are one of the world's
most enduring and popular traditions, and seek to bring
together representatives from all countries across the
globe in athletic competition. However, global
associations of all form and fashion hold competitions
every year to recognize the best among them, and award
fully taxable prizes: Nobel Prizes are awarded to
individuals in recognition of scientific and cultural
contributions to the world, the American Academy of Motion
Pictures Arts and Sciences recognizes excellence in
filmmak-ing by bestowing Academy Awards, and the Annual Air
Guitar World Champi-onships determine the world's best at
playing air guitar (with the motto "wars would end and all
the bad things would go away if everyone just played air
gui-tar.") These awards are won by dedicated, talented
individuals who work hard to become the best; however, AB
2323 excludes only prizes won by Olympic and Paralympic
Athletes from tax. Why should one set of successful
competitors be excluded from tax when others have to pay?
The Committee may wish to consider what policy rationale to
apply when distinguishing tax-free winnings from taxable
ones.
3. Reverse Nonconformity . California law does not
automatically conform to changes to federal tax law, except
under specified circumstances. Instead, the Legislature
must affirmatively conform to federal changes. Generally,
when the federal government changes its tax laws,
California catches up by enacting its own legislation the
following year to reduce differences between the two codes,
thereby easing the tax preparation burden on taxpayers, tax
preparers, and the Franchise Tax Board. AB 2323 seeks to
exclude prizes and awards won in the Olympic Games and the
Paralympic Games from income before Congress has acted,
upsetting the usual timing for conformity items, and
potentially confusing affected taxpayers by requiring them
to include their prizes and awards for federal purposes but
AB 2323 -- 05/15/14 -- Page 4
excluding them for state tax purposes. The Committee may
wish to consider deferring action on AB 2323 until and
unless Congress acts, after which it can conform to the
federal change.
4. Technical Amendments . FTB staff suggests the following
technical amendments:
On page 2, line 4, strikeout "on or"
On page 2, line 4, strikeout "December 31, 2021"
and insert: "January 1, 2022."
On page 2, line 12, strikeout "January 1" and
insert: "December 31, 2022,"
On page 2, line 14, strikeout "January 1" and
insert: "December 31, 2022,"
On page 2, strikeout lines 10 and 11 in their
entirety.
Assembly Actions
Assembly Revenue and Taxation6-1
Assembly Appropriations 17-0
Assembly Floor 56-7
Support and Opposition (06/12/14)
Support : Association of Regional Center Agencies; United
States Olympic Committee; Prout- LeVangie, Attorneys at
Law; United States Olympic Committee Athletes' Advisory
Council Leadership Team; 56 individuals.
Opposition : None received.