The state Assembly Appropriations Committee opted to retain the bill, S.B. 1410, rather than advance the legislation. The bill would have allowed property owners to claim income tax credits equal to the amount of unpaid rent from their tenants in exchange for agreeing to eliminate evictions for those who fell behind on their rent during the pandemic. The bill passed the state Senate in June and cleared the Assembly Judiciary Committee on Aug. 12.
Appropriations Committee Chair Lorena Gonzalez, D-San Diego, said the committee opted to hold the legislation while she announced the panel's actions on about 90 bills that were still on its docket ahead of the state Legislature's Aug. 31 deadline to pass bills. The committee members did not debate the legislation.
Peter Ansel, a spokesman for the bill's primary sponsor, Sen. Anna Caballero, D-Salinas, told Law360 that he had no comment on the committee's action.
Gonzalez's office did not immediately respond to a request for comment.
Under the bill, property owners could have claimed the tax credits for 10 years, starting in 2024, as reimbursement for the unpaid rent, according to a bill summary. The credits would have been refundable if lawmakers passed an appropriation for them, or carried over until exhausted, the summary said. Credits for small business owners would have been adjusted annually for inflation, and the credits could have been sold one time to an unrelated party.
Tenants would have been required to repay the unpaid rent that was deferred under the agreements to California during the 10-year period, although tenants below certain income thresholds could have some of the rent forgiven, according to the bill summary.
The California Franchise Tax Board estimated that the bill would have cost the state about $12 billion over the 10-year period due to rent forgiveness. In all, the board estimated the bill would generate about $22 billion in credits over the decade, according to the bill summary.
Democratic Gov. Gavin Newsom issued an executive order in March halting evictions amid the spread of COVID-19, the respiratory illness caused by the novel coronavirus. The state Judicial Council voted this month to extend a moratorium on evictions and judicial foreclosures through Sept. 1.
An Assembly bill currently circulating in the Senate, A.B. 1436, would halt evictions until 90 days after California's state of emergency for the pandemic ends or April 1, 2021, whichever is earlier.
S.B. 1410's summary cautioned that without further legislative intervention, the state could experience hundreds of thousands of evictions "when California is ordering residents to shelter in place to prevent the spread of COVID-19."
Opponents of the bill had raised several concerns about the legislation's price tag and scope while the legislation was before the state Judiciary Committee.
Assembly Member Jay Obernolte, R-Big Bear Lake, had called the bill irresponsible while expressing reservations about the state's ability to absorb the bill's projected $12 billion cost.
The California Rental Housing Association had also told the Judiciary Committee that the bill was too broad because it didn't require tenants to prove they fell behind on their rent due to the pandemic. The association also said that some property owners would not be able to wait until 2024 to start receiving the credits for unpaid rent without facing the prospect of going bankrupt or losing their properties.
In a statement to Law360, Sid Lakireddy, president of the association, said he was elated that the committee decided not to advance the bill. His organization would rather see lawmakers focus on providing renters with more direct financial assistance, he said.
"We are gratified that the Legislature is not proceeding with Senate Bill 1410 because it would have had disastrous consequences on the rental housing industry and small mom-and-pop rental housing owners in particular," Lakireddy said. "Policy that fails to put money in the pockets of renters, during this health crisis, will lead to a systemic collapse of the economy."
A representative for Obernolte did not immediately respond to a request for comment.
--Additional reporting by James Nani. Editing by Neil Cohen.
Update: This story has been updated with a comment from the California Rental Housing Association.
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