CITY OF HUNTINGTON BEACH
2000 MAIN STREET, HUNTINGTON BEACH, CALIFORNIA 92648-2702
GRACEY VAN DER MARK
MAYOR
714.536.5553
May 8, 2024
The Honorable Janet Nguyen
California State Senate
1020 O Street
Sacramento, CA 95814
RE: SB 1102 (SUPPORT)
Dear Senator Nguyen,
On behalf of the City of Huntington Beach, I write to express our support for SB 1102, which would enact tax exclusions for amounts received by Huntington Beach businesses in the settlement for claims relating to the October 2021 oil spill off the coast of Orange County.
On October 1, 2021, the San Pedro Bay Pipeline broke and spilled an estimated 24,500 gallons of crude oil into the waters about five miles offshore of Huntington Beach. Commercial fishers and processors, coastal real property owners and lessees, and waterfront tourism businesses sued companies owning container ships, alleging they were responsible because those ships dragged their anchors over the pipeline during a heavy storm prior to the spill, damaging the pipeline and ultimately causing it to leak.
On April 24, 2023, a settlement agreement was approved where some of the defendants agreed to pay $50 million to commercial fishers, persons who owned or leased waterfront properties, or persons who worked in or owned business affected by the spill. Claims against other defendants remain pending.
Under current law, those receiving payments under the settlement agreement, or under any future settlements, may not be able to fully exclude them from taxable income for state tax purposes. SB 1102 rectifies that issue and allows the businesses of Huntington Beach harmed by this event to be compensated for their losses. This settlement doesn’t make any business whole which is why an exclusion from paying personal and corporate taxes is needed.
It is for these reasons we support SB 1102 and appreciate your efforts to protect the businesses of Huntington Beach.
Sincerely,
Gracey Van Der Mark
Mayor
Cc: Huntington Beach City Council
AMENDED IN SENATE APRIL 11, 2024
SENATE BILL No. 1102
Introduced by Senator Nguyen
(Coauthor: Assembly Member Davies)
February 13, 2024
An act to add and repeal Sections 17139.1 and 24309.9 of the Revenue and Taxation Code, relating to taxation, making an appropriation therefor, and declaring the urgency thereof, to take effect immediately.
legislative counsel’s digest
SB 1102, as amended, Nguyen. Personal Income Tax La w:
Corporation Tax Law: oil spill: exclusions.
The Personal Income Tax La w and the Corporation Tax La w, in conformity with federal income tax la w, generally defines “gross income” as income from whatever source derived, except as specifically excluded, and provides various exclusions from gross income.
This bill w ould pro vide an e xclusion from gross income for an y qualified taxpayer , as defined, for amounts recei ved in settlements associated with the October 2, 2021, oil spill that occurred off the coast of the County of Orange near the City of Huntington Beach. The bill would repeal these provisions on January 1, 2029.
Existing law establishes the continuously appropriated Tax Relief and Refund Account and provides that payments required to be made to taxpayers or other persons from the Personal Income Tax Fund are to be paid from that account.
This bill would authorize the refund of overpayments of tax as a result of the above-described exclusion, in prior tax years, payable out of the
98 Tax Relief and Refund Account. By authorizing new payments from a continuously appropriated fund, this bill would make an appropriation.
Existing law requires that an y bill that w ould authorize certain tax expenditures contain, among other things, specific goals, purposes, and objectives that the tax expenditure or exemption will achieve, detailed performance indicators, and data collection requirements.
This bill would include additional information required for an y bill authorizing a new tax expenditure.
This bill would apply its provisions to taxable years beginning before, on, and after the ef fective date of this bill. The bill w ould mak e legislative findings and declarations regarding the public purpose served by this bill.
This bill w ould declare that it is to tak e effect immediately as an urgency statute.
Vote: 2⁄3. Appropriation: yes. Fiscal committee: yes. State-mandated local program: no.
The people of the State of California do enact as follows:
line 1 SECTION 1. The Le gislature finds and declares all of the line 2 following:
line 3 (a) On October 2, 2021, an oil spill occurred off the coast of the line 4 County of Orange near the City of Huntington Beach. line 5 (b) The spill resulted in approximately 144,000 gallons of crude line 6 oil seeping into the ocean from a ruptured pipeline. line 7 (c) The spill forced beaches to close along the County of Orange line 8 coast, resulting in significant property damage, loss of re venue line 9 from closed businesses, and a loss in revenue to the fishing industry line 10 due to the halting of fishing operations.
line 11 (d) The impacts on the fishing industry were the result of a ban line 12 that encompassed 650 square miles of marine w aters and line 13 approximately 45 miles of shoreline, including all bays and harbors line 14 from the City of Seal Beach to San Onofre State Beach. line 15 SEC. 2. Section 17139.1 is added to the Revenue and Taxation line 16 Code, to read:
line 17 17139.1. (a) Gross income does not include an y qualified line 18 amount received by a qualified taxpayer.
line 19 (b) For purposes of this section:
line 20 (1) “Qualified amount” means any amount received in settlement line 21 by a qualified taxpayer from Amplify Energy Corp., Beta Operating 98 — 2 — SB 1102
line 1 Company, LLC, San Pedro Bay Pipeline Compan y, or any other line 2 settling defendant qualified taxpayer in settlement for claims line 3 relating to the October 2, 2021, oil spill off the coast of the County line 4 of Orange near the City of Huntington Beach.
line 5 (2) “Qualified taxpayer” means any of the following:
line 6 (A) Any taxpayer that owned real property located in the County line 7 of Orange near the City of Huntington Beach during the October line 8 2, 2021, oil spill who paid and or incurred expenses and received line 9 amounts from a settlement arising out of or pursuant to the October line 10 2, 2021, oil spill.
line 11 (B) Any taxpayer that resided within the County of Orange near line 12 the City of Huntington Beach during the October 2, 2021, oil spill line 13 who paid and or incurred expenses and received amounts from a line 14 settlement arising out of or pursuant to the October 2, 2021, oil line 15 spill.
line 16 (C) Any taxpayer that had a place of business within the County line 17 of Orange near the City of Huntington Beach during the October line 18 2, 2021, oil spill who paid and or incurred expenses and received line 19 amounts from a settlement arising out of or pursuant to the October line 20 2, 2021, oil spill.
line 21 (3) “Settlement entity” means the entity making the settlement line 22 payment to a qualified taxpayer as described in paragraph (2). line 23 (c) The settlement entity shall pro vide, upon request by the line 24 Franchise Tax Board, documentation of the settlement payments line 25 in the form and manner requested by the Franchise Tax Board. line 26 (d) (1) This section shall apply to taxable years be ginning line 27 before, on, or after the effective date of the act adding this section. line 28 (2) If the credit or refund of an y overpayment of tax resulting line 29 from the application of this section to a period before the effective line 30 date of this section is prevented as of that date by the operation of line 31 any law or rule of law, including res judicata, that credit or refund line 32 may nevertheless be allowed or made if the claim therefor is filed line 33 before the close of the one-year period beginning on the effective line 34 date of the act adding this section.
line 35 (e) This section shall remain in effect only until January 1, 2029, line 36 and as of that date is repealed.
line 37 SEC. 3. Section 24309.9 is added to the Revenue and Taxation line 38 Code, to read:
line 39 24309.9. (a) Gross income does not include an y qualified line 40 amount received by a qualified taxpayer.
98 SB 1102 — 3 —
line 1 (b) For purposes of this section:
line 2 (1) “Qualified amount” means any amount received in settlement line 3 by a qualified taxpayer from Amplify Energy Corp., Beta Operating line 4 Company, LLC, San Pedro Bay Pipeline Compan y, or any other line 5 settling defendant qualified taxpayer in settlement for claims line 6 relating to the October 2, 2021, oil spill off the coast of the County line 7 of Orange near the City of Huntington Beach.
line 8 (2) “Qualified taxpayer” means any of the following:
line 9 (A) Any taxpayer that owned real property located in the County line 10 of Orange near the City of Huntington Beach during the October line 11 2, 2021, oil spill who paid and or incurred expenses and received line 12 amounts from a settlement arising out of or pursuant to the October line 13 2, 2021, oil spill.
line 14 (B) Any taxpayer that resided within the County of Orange near line 15 the City of Huntington Beach during the October 2, 2021, oil spill line 16 who paid and or incurred expenses and received amounts from a line 17 settlement arising out of or pursuant to the October 2, 2021, oil line 18 spill.
line 19 (C) Any taxpayer that had a place of business within the County line 20 of Orange near the City of Huntington Beach during the October line 21 2, 2021, oil spill who paid and or incurred expenses and received line 22 amounts from a settlement arising out of or pursuant to the October line 23 2, 2021, oil spill.
line 24 (3) “Settlement entity” means the entity making the settlement line 25 payment to a qualified taxpayer as described in paragraph (2). line 26 (c) The settlement entity shall pro vide, upon request by the line 27 Franchise Tax Board, documentation of the settlement payments line 28 in the form and manner requested by the Franchise Tax Board. line 29 (d) (1) This section shall apply to taxable years be ginning line 30 before, on, or after the effective date of the act adding this section. line 31 (2) If the credit or refund of an y overpayment of tax resulting line 32 from the application of this section to a period before the effective line 33 date of this section is prevented as of that date by the operation of line 34 any law or rule of law, including res judicata, that credit or refund line 35 may nevertheless be allowed or made if the claim therefor is filed line 36 before the close of the one-year period beginning on the effective line 37 date of the act adding this section.
line 38 (e) This section shall remain in effect only until January 1, 2029, line 39 and as of that date is repealed.
98 — 4 — SB 1102
line 1 SEC. 4. (a) For the purpose of complying with Section 41 of line 2 the Revenue and Taxation Code, the Legislature finds and declares line 3 that the purpose of the tax expenditure allowed pursuant to Sections line 4 17139.1 and 24309.9 of the Revenue and Taxation Code, as added line 5 by this act, is to pro vide essential relief to indi viduals who have line 6 suffered injury, loss, inconvenience, and expenses resulting from line 7 the devastating October 2, 2021, oil spill.
line 8 (b) (1) On January 1, 2030, 2032, the Franchise Tax Board line 9 shall deliver to the Legislature a written report that includes both line 10 of the following:
line 11 (A) The number of qualified taxpayers that excluded qualified line 12 amounts from gross income, as those terms are used in this act, as line 13 a result of the tax expenditure allowed by this act. line 14 (B) The aggregate amount of those settlement payments arising line 15 out of the October 2, 2021, oil spill.
line 16 (2) The report required by this subdi vision shall be deli vered line 17 to the Le gislature pursuant to Section 9795 of the Go vernment line 18 Code.
line 19 (3) The disclosure provisions of this subdivision shall be treated line 20 as an e xception to Section 19542 under Article 2 (commencing line 21 with Section 19542) of Chapter 7 of Part 10.2 of Division 2 of the line 22 Revenue and Taxation Code, and any taxpayer information shall line 23 be in an aggregate and anonymized form.
line 24 SEC. 5. The Le gislature finds and declares that Sections line 25 17139.1 and 24309.9 of the Revenue and Taxation Code, as added line 26 by this act, are necessary for the public purpose of pre venting line 27 undue hardship to taxpayers who reside, or used to reside, in a part line 28 of California devastated by oil spills, and do not constitute a gift line 29 of public funds within the meaning of Section 6 of Article XVI of line 30 the California Constitution.
line 31 SEC. 6. This act is an ur gency statute necessary for the line 32 immediate preservation of the public peace, health, or safety within line 33 the meaning of Article IV of the California Constitution and shall line 34 go into immediate effect. The facts constituting the necessity are:
line 35 In order to pro vide essential relief to those persons who ha ve line 36 suffered injury, loss, inconvenience, and expenses resulting from line 37 the devastating October 2, 2021, oil spill as soon as possible, it is line 38 necessary that this act take effect immediately.
O
98 SB 1102 — 5 —