BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 35|
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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.
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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
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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
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