Personal Income Tax Law: Corporation Tax Law: wildfires: exclusions., the official text

An act to add and repeal Sections 17139 and 24309.4 of the Revenue and Taxation Code, relating to taxation.

LEGISLATIVE COUNSEL'S DIGEST

The Personal Income Tax Law and the Corporation Tax Law, in conformity with federal income tax law, generally defines “gross income” as income from whatever source derived, except as specifically excluded, and provides various exclusions from gross income.
This bill would, for taxable years beginning on or after January 1, 2023, and before January 1, 2028, provide an exclusion from gross income for a qualified taxpayer, as defined, for amounts received for costs and losses associated with wildfires, as provided.
Existing law requires a bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
This bill would include additional information required for any bill authorizing a new tax expenditure.
This bill would make findings and declarations related to a gift of public funds.

The people of the State of California do enact as follows:

SECTION 1.
Section 17139 is added to the Revenue and Taxation Code, to read:
17139.
(a) For taxable years beginning on or after January 1, 2023, and before January 1, 2028, gross income does not include any qualified amount received by a qualified taxpayer.
(b) For purposes of this section:
(1) “Qualified amount” means any amount received in settlement by a qualified taxpayer to replace property damaged or destroyed by wildfire if the property damaged or destroyed is located in an area of California damaged by the wildfire.
(2) “Qualified taxpayer” means any of the following:
(A) A taxpayer that owns real property located in an area damaged by a wildfire who paid or incurred expenses, and received amounts from a settlement, arising out of or pursuant to the wildfire.
(B) A taxpayer that resides within an area damaged by a wildfire who paid or incurred expenses, and received amounts from a settlement, arising out of or pursuant to the wildfire.
(C) A taxpayer that has a place of business within an area damaged by a wildfire who paid or incurred expenses, and received amounts from a settlement, arising out of or pursuant to the wildfire.
(3) “Settlement entity” means the entity, approved by a class action settlement administrator, making the settlement payment to a qualified taxpayer.
(c) The settlement entity shall provide, upon request by the Franchise Tax Board or qualified taxpayer, documentation of the settlement payments in the form and manner requested by the Franchise Tax Board or the qualified taxpayer who may provide the documentation to the Franchise Tax Board upon request.
(d) (1) For the purpose of complying with Section 41, as it relates to the exclusion provided by this section and Section 24309.4, the Legislature finds and declares that the purpose of the exclusion is to provide essential relief to individuals who have suffered injury, loss, inconvenience, and expenses resulting from devastating wildfires and other natural disasters.
(2) (A) By November 1, 2028, the Franchise Tax Board shall deliver to the Legislature a written report, in accordance with Section 9795 of the Government Code, that includes both of the following:
(i) The number of qualified taxpayers that excluded qualified amounts from gross income, as those terms are used in this act, as a result of the tax expenditure allowed by this act.
(ii) The aggregate amount of those settlement payments arising out of the wildfires and natural disasters.
(B) The disclosure provisions of this paragraph shall be treated as an exception to Section 19542.
(e) This section shall remain in effect only until December 1, 2028, and as of that date is repealed.

SEC. 2.
Section 24309.4 is added to the Revenue and Taxation Code, to read:
24309.4.
(a) For taxable years beginning on or after January 1, 2023, and before January 1, 2028, gross income does not include any qualified amount received by a qualified taxpayer.
(b) For purposes of this section:
(1) “Qualified amount” means any amount received in settlement by a qualified taxpayer to replace property damaged or destroyed by wildfire if the property damaged or destroyed is located in an area of California damaged by the wildfire.
(2) “Qualified taxpayer” means either of the following:
(A) A taxpayer that owns real property located in an area damaged by a wildfire who paid or incurred expenses, and received amounts from a settlement, arising out of or pursuant to the wildfire.
(B) A taxpayer that has a place of business within an area damaged by a wildfire who paid or incurred expenses, and received amounts from a settlement, arising out of or pursuant to the wildfire.
(3) “Settlement entity” means the entity, approved by a class action settlement administrator, making the settlement payment to a qualified taxpayer.
(c) The settlement entity shall provide, upon request by the Franchise Tax Board or qualified taxpayer, documentation of the settlement payments in the form and manner requested by the Franchise Tax Board or the qualified taxpayer who may provide the documentation to the Franchise Tax Board upon request.
(d) This section shall remain in effect only until December 1, 2028, and as of that date is repealed.

SEC. 3.
The Legislature hereby finds and declares that the exclusions authorized by Sections 17139 and 24309.4 of the Revenue and Taxation Code, as added by this act, serve the public purpose of preventing undue hardship to taxpayers who reside, or used to reside, in parts of California devastated by recent wildfires, and do not constitute a gift of public funds within the meaning of Section 6 of Article XVI of the California Constitution.