BILL ANALYSIS                                                                                                                                                                                                    






           ----------------------------------------------------------------- 
          |SENATE RULES COMMITTEE            |                         SB 35|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |
           ----------------------------------------------------------------- 


                                   THIRD READING 


          Bill No:  SB 35
          Author:   Wolk (D)
          Amended:  3/4/15  
          Vote:     21  

          SENATE GOVERNANCE & FIN. COMMITTEE:  6-0, 2/25/15
          AYES:  Hertzberg, Nguyen, Bates, Beall, Hernandez, Pavley
          NO VOTE RECORDED:  Lara

          SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

           SUBJECT:   Income and corporation taxes:  deductions:  disaster  
                     relief


          SOURCE:    Author


          DIGEST:  This bill enacts disaster loss treatment and extends  
          the deadline for taxpayers affected by recent earthquakes to  
          carry back disaster losses to the 2013 tax year.


          ANALYSIS:   


          Existing federal and state law: 


          1)Allows taxpayers to apply losses to reduce taxable income from  
            other sources.  Disaster losses are the amounts not  
            compensated by insurance or other means that result from  
            fires, storms, floods or other natural events.  Disaster  








                                                                      SB 35  
                                                                    Page  2


            losses must exceed $100 per taxpayer and 10% of their adjusted  
            gross income for the year.  These limits don't apply to  
            business or income-producing property.  


          2)Provides that when the President declares a disaster, as he  
            did for the earthquake that affected Napa and Solano Counties  
            in August, 2014, the declaration triggers disaster loss  
            treatment automatically for federal and state purposes for  
            taxpayers in areas subject to the declarations.  When the  
            Governor declares, but the President does not, the Legislature  
            must affirmatively enact disaster loss treatment, as it did  
            most recently for fires in San Diego County in May, 2014 (AB  
            922, Maienschein, Chapter 352, Statutes of 2014).  


          3)Allows taxpayers to apply losses to income gained in the  
            future, called a "carry forward," or against past income,  
            called a "carry back."  To apply the loss in the previous  
            taxable year, state and federal law require the taxpayer to  
            amend their return by the next year's filing deadline, which  
            is generally April 15th.  


          This bill:


          1)Amends California's Personal Income Tax Law and Corporation  
            Tax Law to enact disaster loss treatment whenever taxpayers  
            incur losses in a city, county, or city and county, subject to  
            the Governor's declaration of emergency.  


          2)Extends the deadline for taxpayers affected by such disasters  
            to apply disaster losses for the taxable year immediately  
            preceding the taxable year in which the disaster occurred from  
            April 15th of the immediately following taxable year to the  
            extended due date for the immediately following taxable year.


          3)Provides that any other suspension, deferral, reduction, or  
            other diminishment of net operating losses generally shall not  
            affect SB 35's treatment of disaster losses.  








                                                                      SB 35  
                                                                    Page  3



          4)States legislative intent that the measure fulfills a  
            statewide public purpose, which is necessary to apply SB 35's  
            changes to the 2014 taxable year, which has already ended for  
            most taxpayers.  


          Background


          In August, 2014, a significant earthquake occurred southwest of  
          the City of Napa, causing significant damage to taxpayers in  
          Napa, Solano, and Sonoma Counties.  Because many taxpayers have  
          not yet determined the amount of uninsured losses the earthquake  
          created, the Legislature must extend the state deadline to allow  
          taxpayers more time to claim disaster losses on their 2013 tax  
          returns.  As introduced, the measure only applied to those  
          counties; however, when the measure was heard in the Committee  
          on Governance and Finance, the measure was amended to enact  
          disaster loss treatment and the extended deadline both for the  
          Napa earthquake and any future disaster declared by the  
          Governor.  Doing so negates the need for future  
          disaster-specific legislation.


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No


          SUPPORT:   (Verified4/8/15)


          California Professional Firefighters 
          California Taxpayers Association
          City of Napa 
          Counties of Napa, Solano, and Sonoma
          Family Winemakers of California
          Napa Valley Vintners


          OPPOSITION:   (Verified4/8/15)


          None received







                                                                      SB 35  
                                                                    Page  4




          ARGUMENTS IN SUPPORT:     Supporters note many taxpayers that  
          recently suffered from the August, 2014 Napa earthquake would  
          like to apply losses to their tax returns filed the previous  
          year, resulting in a tax refund which can immediately be used to  
          rebuild and recover from the earthquake.  The Legislature has  
          enacted identical treatment for almost every significant  
          disaster that has occurred in California for the last 25 years.   
          Additionally, the measure now applies these provisions to future  
          disasters, so affected taxpayers don't have to wait for the  
          Legislature to enact a bill to ensure they'll be afforded the  
          same disaster loss treatment and extended deadline.



          Prepared by:Colin Grinnell / GOV. & F. / (916) 651-4119
          4/8/15 15:13:13


                                   ****  END  ****