BILL ANALYSIS                                                                                                                                                                                                    Ó

          |SENATE RULES COMMITTEE            |                         SB 35|
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                                UNFINISHED BUSINESS 

          Bill No:  SB 35
          Author:   Wolk (D), et al.
          Amended:  6/16/15  
          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 

           SENATE FLOOR:  38-0, 4/9/15
           AYES:  Allen, Anderson, Bates, Beall, Block, Cannella, De León,  
            Fuller, Gaines, Galgiani, Hall, Hancock, Hernandez, Hertzberg,  
            Hill, Hueso, Huff, Jackson, Lara, Leno, Leyva, Liu, McGuire,  
            Mendoza, Mitchell, Monning, Moorlach, Morrell, Nguyen,  
            Nielsen, Pan, Pavley, Roth, Runner, Stone, Vidak, Wieckowski,  
           NO VOTE RECORDED:  Berryhill

           ASSEMBLY FLOOR:  79-0, 7/16/15 (Consent) - See last page for  

           SUBJECT:   Income and corporation taxes:  deductions:  disaster  

          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.

          Assembly Amendments insert a ten-year sunset provision, thereby  
          repealing the measure on December 1, 2024, and add legislative  


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          findings and declarations.   

          Existing federal and state law: 

          1)Allows taxpayers to apply losses, including disaster 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 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, commencing in the  
            2014 taxable year.  

          2)Extends the deadline for taxpayers affected by such disasters  
            to apply disaster losses to the taxable year immediately  
            preceding the taxable year in which the disaster occurred from  


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                                                                    Page  3

            April 15th of the immediately following taxable year to the  
            extended due date for the immediately following taxable year,  
            again commencing in the 2014 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.  

          4)Sunsets its provisions on December 1, 2024.

          5)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.  

          6)Makes legislative findings and declarations relating to  
            relating to the South Napa Earthquake in August, 2014, and the  
            measure's consistency with previous tax relief for taxpayers  
            affected by disasters.

          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:   (Verified8/11/15)


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

          OPPOSITION:   (Verified8/11/15)

          None received

          ARGUMENTS IN SUPPORT:     According to the author, "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  

          ASSEMBLY FLOOR:  79-0, 7/16/15
          AYES:  Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,  
            Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,  
            Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,  
            Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina  
            Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gray,  
            Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones,  
            Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,  
            Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,  
            Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea,  
            Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago,  
            Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,  
            Wilk, Williams, Wood, Atkins
          NO VOTE RECORDED:  Gordon


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           Prepared by:Colin Grinnell / GOV. & F. / (916) 651-4119
          8/13/15 13:04:16

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