Assembly Standing Committee on Revenue and Taxation

Good afternoon and welcome to the final hearing of the Assembly Committee on Revenue and Taxation for Senate bills. As always, please make sure to submit position letters at least one week prior to the Committee hearing in order for them to be reflected in the bill's analysis.

Additionally, pursuant to our Committee rules, bills with fiscal impact of plus or -150,000 will not be eligible for a vote. Immediately after presentation, we will be dispensing with all bills on our suspense file today, including bills that are heard and moved to suspense during the first portion of today's hearing.

We will start hearing bills by taking up bills under regular order of business before we take up this file. Additionally, file item two, SB 588 by Senator Allen, has been pulled by the author. File items 5 and 6, SB 1527 and 1528, both by the Senate Committee on Revenue and Taxation, are proposed for consent. All right, why don't we go ahead and move to, as a Subcommitee to, do we have a quorum? Oh, my gosh. All right. Can we please establish a quorum?

[Roll Call]

File item number one is SB 542, Senator Dahle. You may begin whenever you are ready.

Good afternoon, Madam Chair and members. I want to thank you for giving me the opportunity to present SB 542, Dixie and Mill Fire settlement. I want to thank the committee for working with me on this bill, and I will be accepting the committee amendments. Victims of wildfire need to be properly compensated by the responsible party.

Currently, the settlement payments to fire victims are subject to income tax, meaning that the victims are nothing able to utilize the full settlement to rebuild their lives.

This bill would exclude the settlement payments awarded to the victims of the 2021 Dixie Fire and the 2022 Mill Fire from gross income, meaning those payments would not be subject to income taxes. Victims need as much help as they can give.

We can give them, and this bill would ensure that settlement payments they receive can go towards helping their recovery efforts. There have been many bills similar to this introduced in the last Legislature, providing similar tax exemptions.

This bill is another necessary step to ensure that fire victims receive the immediate financial assistance they need to for the wellbeing of the fire victims. I respectfully ask when aye vote.

All right, do we have witnesses in support?

I do not. Or if they're here, maybe I do.

Witnesses in the room? Yes.

Very short. Nothing substantive. Karen Lange, on behalf of the Butte County Board of Supervisors and support. Thank you so much.

Thank you. Any witnesses in opposition? Questions from the committee? Questions or comments? All right, and you've already agreed to the committee's amendments. Senator Dahle, would you like to close?

I would just say that we've done many of these bills in the past, and it's unfortunate that they actually have to pay the tax, then ask for a rebate from the tax.

So, it's a process that's very long and cumbersome, but this bill will definitely help those folks who have been impacted by wildfire and respectfully ask for an aye vote.

All right, thank you very much. And without objection, this bill will be moved to our suspense file. Thank you. All right, we are going to vote now on the consent calendar. All right, so that is a motion by Assemblymember Grayson and a second by Assemblymember Bains.

The consent proposed consent calendar consists of SB 1527 and 1528 by the Senate Committee on Revenue and Taxation. Can we please do?

On the consent calendar, SB 1527 and SB 1528. [Roll Call]. Four to zero. It's passed.

All right. That bill is out. Four to zero. We'll leave the roll open. And do we have notes for it. Okay. All right, I will be handing the gavel over to Vice Chair Ta.

All right, thank you so much, and Assemblymember, you may begin when ready.

All right. Good afternoon, Mister Vice Chair and members. First of all, pro Tem Mcguire would like to thank the committee staff for their work on SB 946. He will be accepting the committee's amendments.

946 is a commonsense piece of legislation that will help the Golden State's most vulnerable homeowners and communities take proactive measures to protect their homes from catastrophic wildfires. Tens of thousands of Californians have lost their homes and businesses to wildfires in the last nine years.

In 2019, the California Wildfire Mitigation program was created to assist homeowners in making fire resilient improvements to their homes. The program provides financial assistance in the form of grants up to $40,000 to support home hardening work for homeowners in high fire severity zones.

The program prioritizes seniors, residents experiencing poverty, those with disabilities or language barriers, and those without a car. Unfortunately, these grants for residents are currently considered taxable under state law, which may deter homeowners from participating in the program or create an unexpected tax burden that they cannot pay.

This bill ensures that Californians who receive home hardening grants through the California wildfire mitigation program are not taxed on these grants. SB 946 will give these homeowners peace of mind when protecting their homes, making California as a whole safer against wildfires. With me today is Jonathan Clay. On behalf of the County of San Diego.

Thank you so much, and your primary witness may begin.

Great. Jonathan Clay here, as a supporter of SB 946. San Diego County is one of the six pilot counties implementing this program. And as we were rolling this out last year, we learned of the issues around low-income residents possibly being taxed for these improvements.

We also understood that that could prove to be an impediment for these folks wanting to participate in this program, because by the very nature of their economic status, they would likely not want to participate in this program and pay those tax consequences.

So, we've worked very closely with the committee staff of your committee on this to try and make sure that we're threading the needle appropriately on the language, provide this benefit. The last thing I'll just end on, one of the communities that is prioritized in San Diego nearly burned last summer during fire season.

And so, it's very important that we're able to roll this program out and get these low-income residents the support that they need. Thank you very much.

Thank you so much. Are there any witnesses in the room wishing to speak in support? Are there any witnesses in the room wishing to speak in opposition? All right. None. Any question or comment from committee member? I see none. So, Member Irwin, would you like to close?

Just respectfully ask for your aye vote.

Thank you so much. And without objection, this bill will be referred to our file.

Thank you. All right, we are on our last file, item number four, SB 1501. Senator Glazer, and you may begin whenever you're ready.

Thank you. Chair Irwin, I apologize for being late. The Senate was in session until just a few moments ago.

You are just on time for us. Okay.

All right. Members, AB 150 Small Business Relief Act is a unique thing; a tax that people want to pay. The act's elective tax is more successful than we initially thought, with nearly $20 billion in tax prepayments every year, which saves California taxpayers and small business millions, if not billions, in federal taxes.

However, with a few years of experience with implementation, we've learned some lessons, which is why I have introduced SB 1501. SB 1501 provides an avenue for these taxpayers to still elect into the Small Business Relief Act. This is a very complex statute, so I want to thank Chair Erwin.

Mister Ruff, thank you for your assistance in crafting this measure, along with Colin Grinnell on my Rev. & Tax staff.

And I'm happy to accept the proposed committee amendments. As amended, SB 1501 allows taxpayers who do not make a prepayment to pay elective tax but only receive 90% of the credit and must pay interest on the prepayment they should have made.

If a taxpayer pays the wrong amount, they reduce their credit by a percentage equal to the percentage the prepayment was underpaid plus interest. The measure should strike a balance to ensure that almost all taxpayers continue to make the full prepayment while leaving room for good faith mistakes.

I have Jason Fox with the California Society of Certified Public Accountants and so much smarter than me here to testify in support.

Jason Fox with the California Society of Certified Public Accountants. CALCPA members have been actively working with taxpayers of all sizes to assess and implement the PTET framework, which has provided substantial taxpayer relief without any discernible negative impact to state revenue.

One improvement area is the rigid June 15 deadline, as the center noted, for the required minimum estimated tax payment, which complicates the PTET election process. For many taxpayers, making an informed decision of this significance by June 15 can be challenging as they may not have a clear picture of their financial situation.

As a result, taxpayers often must make an uncertain guess related to the PTET. For taxpayers considering participation in the PTET, unforeseen changes later in the latter half of the tax year may affect the decision whether they participate in the PTET or not.

For taxpayers who do want to opt into the PTET, determining their minimum estimated tax or the minimum estimated payment can be challenging when working with incomplete information, since often their tax returns from the prior year are still not finalized by June.

So even taxpayers who do believe that they have made a correct estimated payment may find themselves a situation where a change in their tax position means that the PTET estimated payment no longer meets the minimum requirement and therefore prevent it from participating in the PTET and the tax relief it provides, SB 1501 is a practical approach that would address this issue, add some flexibility to the PTET framework, ensuring taxpayers can access the full access and fully realize the intended benefits of the PTET framework.

With that, we urge support of SB 1501 and looking forward to working with the Legislature and other stakeholders as this bill moves forward.

Thank you.

Are you the second witness? No? Oh, okay. So, witnesses - other witnesses in support?

Appreciate that. Chair, Pat Joyce on behalf of the National Accounting Firms, thank you, Senator Glazer, for bringing this bill forward. I want to acknowledge the amendments and the committee analysis. We think it's a smart approach to apply less severe penalty to those taxpayers that might just miscalculate a payment on June 15. So, appreciate that direction and appreciate your support.

Thank you.

Thank you. Any other witnesses in support? Witnesses in opposition? Any comments from the committee? Senator Glazer, would you like to close?

Thank you for your consideration. Respectfully ask your I vote today.

All right. And without objection, this bill will be refer to our suspense file.

Thank you.

We are just waiting for one Member. Before we start suspense, but just to clarify the consent calendar, the motion is do pass to appropriations. And we will add on people that missed that vote.

[Roll Call]

All right. We are going to go ahead and add you on consent. Assemblymember Ravis.

[Roll Call]

All right. Now we are going to be moving to our suspense file. We're going to be taking up our bills in file order. So anything before we get started? Are we good?

Just a motion. All right.

First, we have item number one, SB five by Assemblymember Dahle. Chair is recommending an aye vote and the motion is do pass, amended to appropriations. The amendments impose a five year sunset. We have a motion by Assemblymember Gibson. A second by Assemblymember Ta. Ms. Highland, please call the roll.

SB 542. The motion is do pass as amended to appropriations. [Roll Call] Passes six to zero.

That bill is out, six to zero. Next is file item three, SB 946, by Senate pro tem McGuire. The chair is recommending an aye vote. The motion is do pass as amended to appropriations. The amendments are technical and described in page six of the analysis.

We have a motion by Assemblymember Gibson, a second by Assemblymember Bains. Miss Highland, please call the roll.

On item three, SB 946. The motion is do pass as amended to appropriations. [Roll Call]

That bill is out six to zero. Next is file item four by Senator Glazier. The chair is recommending an aye vote and motion is do passes amendment to appropriations. The amendments are outlined in comment F of the Committee analysis. We have a motion by Assemblymember Gibson, a second by Assemblymember Ta.

Miss Highland, please call the roll on.

Item number four, SB 1501. The motion is do pass as amended to appropriations. [Roll Call]

That's it. SB 1501 is out with a 6-0 vote. Along now, so everybody can follow along. We're taking up bills that were referred to our suspense file at a previous hearing. File item seven is SB 230, Seyarto. Senator Seyarto's bill is held in Committee. Next up is item number eight, SB 1004, by Senator Wilk.

The chair is recommending an aye. The motion is do pass to appropriations. We have a motion by Assemblymember Gibson, a second by Assemblymember Grayson. Miss Highland, please call the roll on.

Item number eight, SB 1004. The motion is do pass to appropriations. [Roll Call]

That Bill is out 6-0. Finally, the last item on our suspense file is file item nine, SB 1261, by Senator Alvarado-Gil. Chair is recommending an aye vote, and the motion is do pass to appropriations to. We have a motion by Assemblymember Gibbs and a second by Assemblymember Bains. Ms. Highland, please call the roll.

On item number nine, SB 1261. The motion is do pass to appropriations. [Roll Call]

That Bill is out 6-0. Having completed all business on our agenda, I want to thank the Committee Members. Goodbye, Committee Members, Committee staff sergeants, and everybody else who engaged with our Committee this year. This Committee is adjourned.