Senate Standing Committee on Revenue and Taxation

The Committee on Taxation and Revenue, Revenue and Taxation will come to order. Before we begin, I have a couple of announcements. We have four bills on today's agenda, two bills proposed for consent. These are item number two, SB 56, by Senator Seyarto, and item number three, SB 87, also by Senator Seyarto.

As this is our first hearing of the two year session, we will begin by adopting the committee rules before moving to the rest of the morning's agenda. And just as a heads up, this is my first time chairing a committee hearing in the State Senate, so bear with me. If I make mistakes, we'll try and keep those to a minimum and correct them as they come along. So first we need to establish a quorum. Secretary, please call the roll.

[Roll Call]

We have a quorum. I will now entertain a motion to adopt the committee rules. Senator Umberg has moved. Committee Assistant, please call the roll.

Motion is to adopt the committee rules. [Roll Call]

Committee rules for 25-26 session have been adopted. Moving on to the consent calendar. I have a couple of... Oh, sorry.

We have two bills proposed for the consent today. These are file item number two, SB 56, by Senator Seyarto. And file item number three, SB 87, also by Senator Seyarto. The motion is to adopt the consent calendar. Do we have a motion? We have a motion to adopt the consent calendar. Please call the roll.

[Roll Call]

The consent calendar is now on call. Next we would ask Senator Seyarto to come forward and present his bill.

Thank you very much. Mr. Chair, would you like me to start? Okay. So I am delighted to. Yeah, thank you. I am delighted to be here today to bring you a Bill. Whose time is here it is SB1.

And over the last 10 years, a nationwide movement has led to 49 states adopting policies to either fully or partially exempt both retirement and survivor benefits, benefit payments from state income tax. As of last year, California is the last state in the union that fully taxes military Retirement pay and survivors benefit payment as income.

This does not go unnoticed in the veteran community as we see thousands of veterans and their families move out of California every year while other states gain 94 on the average.

SB1 exempts the first $20,000 from military retirement and survivor benefit pay and can only be applied to families with an adjusted gross income under 250,000 or an individual's AGI under 125,000. Military retirement is an earned benefit paid to those who served our nation for 20 years or more, and survivors benefit payments are an option.

Each service Member can opt into paying, which allows their family to receive payments after the service member's death. So in essence, it's an insurance.

With me here today to give further testimony on the importance of this Bill is David Boone, who is the Rear Admiral Retired of the United States Navy and President CEO of San Diego Military Advisory Council.

Good morning, Honorable Chairman and Members of the Committee. My name is David Boone. I'm President and CEO of San Diego Military Advisory Council, otherwise known as sdmac, a nonprofit whose mission is to advocate, inform and connect the military with industry, community and civic leaders. Today I'm here to advocate for a tax exemption on military retirement pay.

California is losing veterans to other states at a very high rate. Since 2000, California's population of military retirees has fallen by 27%, while the US military retiree population overall has increased by 17%. Meanwhile, Texas, Florida, Virginia, Georgia and North Carolina are all growing in their veteran population.

There are many reasons why veterans are leaving our state, but the primary factor is cost of living. The states that are gaining veterans have developed strategies to target and attract veterans to their state. California is currently the only state in the union that fully taxes military retirement pay.

At SC Mac, our goal is to reverse this trend and retain more veterans in California to address our skilled labor shortages and other challenges. SB1 Bill, along with the Governor's language in its current budget proposal, provides a tax exemption up to $20,000 of military pension.

The language also places caps on this exemption with adjusted gross income on single veterans of 125,000 or joint taxpayers of 250,000. While we are pleased with this move on this issue and applaud all parties for making progress in this endeavor, we would hope that we could continue to advance this issue by eliminating barriers for veterans to stay.

California if the litmus test is whether we set the conditions for veterans to stay, I would offer that we have to be more aggressive in competing with other states. The average military retiree received approximately $34,000 in retirement pay.

In 2023, a Navy electrician with years of service would easily exceed $100,000 in private sector salary, soon exceeding the income caps in the Bill.

So the point is the current language targets the lower income veterans to benefit, while we want to also attract the middle class veteran earners to remain here, begin second careers and contribute to the economy and tax base well beyond what would be lost from pension tax exemption.

The higher we set thresholds or the more we lim restrictions, the more we will see veterans staying in our state. I have provided the Committee separately a 2018St Max study which analyzed the impact of fully exempting retired military pay from California State taxes.

Had it been implemented in 2015, state revenue loss from ending taxation of that modest military pension would be more than offset by revenues from state sales taxes, personal income taxes and other taxes with the retention of these individuals and families.

Finally, let me add that the impact of military retirees in California extend far beyond their economic and fiscal effects. Retired Members of the military represent some of the state's most enterprising residents, bringing a strong work ethic, integrity, innovative spirit and respect for others that will drive the state's prosperity.

Thank you very much and I'm happy to answer any questions. Thank you.

Are there any other witnesses in support? Please come forward to the microphone and state your name and position.

Hi, my name is Durazo Manning. I'm here on behalf of California State Treasurer. Fiona Ma support.

Thank you. My name is Steve Vancel. I'm with the Solano MOA in support. I live the issue of this bill. I was a national security contractor. I had 51 military retirees or employees in three years. I lost 12 moving to other states.

None went to Texas, none went to Florida, but they all went to states that gave full exemption. Last week your comrades in Georgia Senate passed a Bill to go from partial exemption to full exemption. If that becomes law, they'll become the 39th state to have full tax exemption.

We are losing billions of dollars of federal dollars to other states through contracts and we're losing skilled workers. Thank you.

Good morning. My name is Josh Baker and I represent the California Enlisted Association of the National Guard. I represent your National Guardsmen in uniform and this is impacting your state's military. Service when they do decide to retire. They rarely decide to retire in their own state. We are in full support.

Good morning Chair and Members. My name is Seth Reeb with Reeb Government Relations representing American Legion Department of California AmVets Department of California, California State Commanders Veterans Council, Military Officers Association of America, California Council of Chapters, Vietnam Veterans of America, California State Council, all in strong support.

Good morning. My name is Bruce Hodgman. I represent the Military Order, the Purple Heart and we are in support of this legislation. Thank you.

Good morning. I'm Thomas Lamphere from the Veteran Transition center of California. We're the largest housing provider on the Central coast for veterans. We are in support.

Good morning. I'm Chuck Jamison. I represent the Scottish American Military Society. Northern California and we are in support.

George Marsh representing the Marine Corps Veterans Association in support.

Hello, I'm David West, President of the California Association of County Veteran Services Officers and I represent local county government and we fully support this Bill. Thank you.

Scott Kaufman, Howard Drivers Taxpayer Association, in support.

Ladies and gentlemen, Dennis Wright, Military of The Purple Heart, Chapter 385. I support the bill.

Good morning. I'm Peter Cross, the President of the. National Guard Association of California and a 38 year veteran of the California National Guard. And we support the Bill. Thank you.

Good morning. Zach Delwich, retired colonel from the California National Guard. I'm with VFW Post 67 here in Sacramento, the oldest post in California. We've lost 100 Members in the last 10 years to other states. We are seeing our membership decline because of these taxation benefits in other states. We're in full support. Thank you.

The chair thanks the witnesses in support. Are there any witnesses in opposition? Please come forward. Question or comments from the Committee Members? Mr. Umberg.

Thank you, Mr. Chair. And thank you to Senator Syrto. I know you've been fighting for veterans since you've been here. I appreciate both you and all those who have come in support. I'm glad to see California. We're attempting to join the other 49 states in the union.

Next step is to join the other 38 states, states that provide employers the opportunity to solicit veterans for employment opportunities. Thank you. All right, thank you.

Chair recognizes the Vice Chair, Senator Valladares.

Again, I just want to thank you, Senator Seyarto, for bringing this important Bill forward as a very small token of, I feel, something that we owe to our veterans and to join, yes, the 49 other states. I also want to thank our veterans in the room and across California.

We live under a blanket of freedom and the greatest nation in the world because of your sacrifice. And this is a small token of what we can do to pay that forward.

The Chair commends Senator Seardo for introducing this SB1 which seeks to exclude up to $20,000 of military retirement pay and survivor benefits, annuities from the state income taxation for qualified taxpayers. The chair is strongly in support of this Bill.

The measure not only honors the sacrifice of our veterans and their families, but also enhances California's competitiveness in retaining and attracting retired military personnel who are well qualified and will add to the state's economic vitality. By providing US tax relief, the state demonstrates our commitment to supporting those who have dedicated their lives to serving our nation.

Any other comments from the Members? Move the Bill. The motion is do pass the Committee. zero, yes, the Vice Chair has moved.

Senator. Saturday, would I close? Thank you. Just a couple of comments. I would. You know, I've been advocating for this Bill with alongside colleagues from both sides of the aisle for the last four years.

And in that time, we've lost 10,600 of these families, which equates to tens of millions of dollars of lost federal income tax that has the opportunity to come back to California.

So SB1 will take a step in the right direction to help these wonderful families, our military families that have sacrificed so much for our country and will show the country that we truly support not just our veterans, but their families as well.

And I want to thank all of the people for coming and supporting this Bill out there, all of our veterans for taking the time out of their day to support this Bill. And I respectfully ask for an aye vote.

Well, I thank the Senator again for your patriotism in bringing this Bill forward. The motion is do pass. The Committee on Military Veterans affairs, please call a roll.

[Roll call]

The Bill is called out. Thank you. Okay, let's roll. The Vice Chair will now present her Bill. SB32. SB23, you're recognized.

Good morning, Mr. Chair and Members of the Committee. I'm here today to present Senate Bill 23, the Homes for Heroes Act. SB 23 would fully exempt the primary residence of 100% disabled veterans from property taxes. It also ensures that an unmarried surviving spouse receives the same exemption if their late spouse would have qualified.

Right now, California law does provide some tax relief for veterans, but it doesn't go far enough, especially with the cost of living skyrocketing. The reality is California has some of the highest home prices in the country and, at the same time, the highest number of homeless veterans.

Veterans with a 100% disability rating face not only the rising cost of living, but also significant ongoing medical expenses. Even with the VA benefits, many struggle to keep up with the basic costs, forcing far too many into financial hardship. Simply put, California is becoming and is unaffordable, especially for those who have already sacrificed so much for our country.

Support supporting SB 23 today, joining us is JR Wilson from the Disabled American Veterans Department of California and Seth Reeb representing the American Legion Department of California, AMVETS Department of California, California State Commanders Veterans Council, the Military Officers Association of America Council of California Chapters, and Vietnam Veterans of America California State Councils. And correction, JR is actually not able to be with us today, so Seth.

The witness in support, you have three minutes.

Thank you, Senator. Good morning, Chair and Members. My name is Seth Reeb with Reeb Government Relations. I am a US Army Infantry combat veteran with two deployments. I'm here representing American Legion, AMVETS, California State Commanders Veterans Council, Military Officers Association of America, and the Vietnam Veterans of America, all California departments and chapters.

I'm here in strong support of SB 23 on behalf of these organizations. I want to highlight how exempting property tax from 100% disabled veterans and their surviving spouses is not just a benefit for them, it's an investment in California's economy.

Many disabled veterans rely solely on VA compensation, which often falls short of covering the rising costs of living in California. Without these exemptions, these veterans are frequently forced to leave California in search of a more affordable living condition.

For the 100% disabled veterans who can still work, these financial strains compel them to take their skills and expertise elsewhere. Tragically for some, the financial strain can result in homelessness and, in the most heartbreaking of cases, a loss of life.

By passing SB 23, we provide disabled veterans with a reason to stay in California, benefiting not only them but also the state as a whole. This exemption will help veterans and their families remain in their homes and communities, allowing them to continue contributing to local economies.

The federal funds that these veterans receive will flow into California's local economy through taxes and other spending, creating a positive cycle that both benefits the state and counties. When I began advocating for veterans in this building in 2017, there was nearly 2 million veterans in the State of California.

Today, that number has dropped to around 1.5, not just because of aging, but because many have left the state due to its high cost of living. If we do not act now, this trend will continue. Veterans are a vital part of California's workforce and social fabric.

Many retired or disabled veterans pursue second careers or volunteer in ways that enrich our communities. Ensuring they can afford to stay here strengthens our state economically and socially. In closing, I urge your support for SB 23. By exempting property taxes for disabled veterans, their spouses, we will ensure California remains a place where our heroes can live with dignity and continue contributing to our shared prosperity. Thank you for your time and consideration.

Thank you. I see that your chief witness, JR Wilson, has arrived. Would you like to have him present for three minutes?

Yes, please.

Mr. Wilson, you're recognized for three minutes.

I stand before you today on behalf of the Disabled American Veterans Department of California to express our full and unwavering support for SB 23, introduced by Senators Valladares, Grove, and co-authors Senators Choi, Megan, Hurtado, Ochoa, and Seyarto. Did I say that correctly?

At our 2024 state convention in Laguna Hills, California, our membership overwhelmingly passed a resolution supporting this important legislation, which we believe will directly benefit disabled veterans who call California home. This bill addresses a critical need for some of our most disabled veterans, those who have sacrificed so much for our nation.

These veterans, whether young or old, have given not just their bodies, but their minds in service to our country. As a state and a country, we can never fully repay them for their sacrifices, but we can take meaningful steps towards supporting them by passing SB 23.

SB 23 seeks to help our most severely disabled veterans, giving them the opportunity to stay in the homes they have earned or at least afford a home in their home State of California. For many veterans with a 100% service connected disability rating for the Department of Veterans Affairs, their VA compensation is their sole source of income.

This compensation is meant to address employment challenges and disabilities they face. But for many, it is not enough to sustain life in an increasingly expensive state like California. As a result, some veterans are forced to move to other states where they can afford to live.

SB 23 provides a solution by exempting from taxation the property owned by 100% disabled veteran or their spouse, or jointly by both. It also ensures that the unmarried spouse would receive the same property tax exemption that the veteran would have been entitled to as long as specific conditions are met.

This bill ensures that these veterans and their families who have borne the greatest cost to our freedoms are not priced out by every state they fought to protect. This bill also requires certain documentation provided to the county assessor's office in order to receive the exemption, while there are additional duties for local tax officials.

We believe that these provisions will make a real and lasting difference for our veterans. The exemptions are set to apply for property tax lien dates occurring between January 1, 2025 and January 1, 2035. We urge this body and future bodies to vote in favor of this legislation. We also looked at the governor of this great state sign it to the law for the men and women families who have borne the cost of freedoms we hold dear. Thank you for your time and continued support of our veterans community.

I thank the witness. Any other witnesses in support, please approach the microphone. State your name and position.

George Marsh, commanding officer, Marine Corps Veterans Association, in support.

Good morning, Mr. Chair and Members. Yolanda Benson representing the California Association of County Veterans Service Officers in very strong support. And thank you to the author.

Good morning, again. Josh Baker with the California Enlisted Association of the National Guard. We are in strong support. Thank you.

Good morning. Amy Garrett on behalf of California Association of Realtors in strong support of the measure. Thank you.

David West, Nevada County Veteran Services Officers. We support this bill. Thank you.

My name is Bruce Hodgman. I'm with the Military Order the Purple Heart. Our chapter has 274 combat wounded veterans. Many of them are 100% disabled, so we're in strong support of this legislation. Thank you.

I'm Jared Botelho. I'm members of the 385 Purple Heart. I support this bill.

Good morning. Kasha Hunt here with Nossaman on behalf of County of Monterey Board of Supervisors in support. Thank you.

Thomas Lamphere, Veteran Transition Center. On behalf of the Veteran Transition Center, the more than 800 100% disabled homeowners in Monterey County, and the 42 100% disabled future homeowners in our program, we are in support.

Chuck Jamison, Scottish American Military Society. We are in full support.

Good morning. Alex Fay here on behalf of California State Board of Equalization Member Antonio Vazquez in strong support.

Senator, thank you for your efforts on this. The National Guard Association of California strongly supports this bill. Thank you.

Good morning. Zac Delwiche representing the Veterans of Foreign Wars Post 67. We are in full support.

Scott Kaufman, Howard Jarvis Taxpayers Association, in support.

The Chair thanks the witnesses in support. Any witnesses opposed? Please approach the microphone. State your position and your name. None seen. I would like to thank the Vice Chair for this bill and your hard work. And this is an important bill that will provide meaningful tax benefits for those veterans who are 100% disabled as a result of service connected disabilities. These heroes have given everything to their country, and I support the effort to give something back. Now, any questions or comments from Committee Members? We have a motion. Would the author like to close?

Yes, Mr. Chair. So this bill is more than just about property taxes. This is about fairness. Our veterans have enlisted, they have served, they have sacrificed for our wonderful nation and for the State of California. And this is a small token of what we can do to help them stay in the state they fought so hard for. Thank you, and I ask for an aye vote.

Thank you. The motion is do pass to the Committee on Military and Veterans Affairs. Please call the roll.

[Roll Call] 5-0.

The bill is out. I thank the witnesses and thank the witnesses and thank the author. I now lift the call on the consent calendar. Secretary, call the roll.

This is file item number two. This is the consent calendar. Motion is to adopt the consent calendar. Current vote is 3-0. Chair and Vice Chair voting aye. [Roll Call] 5-0.

The consent calendar is adopted. Thank you. That concludes the business business today and the Chair and the committee is adjourned.