List of CA Disasters – The FTB maintains a list of CA disaster declarations on their website at: https://www.ftb.ca.gov/file/business/deductions/disaster-codes.html

Generally, California law conforms to federal law regarding the treatment of casualty and disaster losses, including the safe harbor treatment for Ponzi schemes (see Rev Proc 200920), with the following exceptions:

California has not adopted conforming legislation for the special relief provisions of this Act. However, California automatically conforms to Sec 72(t) changes, so the early distribution penalty relief for qualified disaster distributions, spreading the income from qualified disaster distributions over 3 years (different federal and California elections allowed) and the provision allowing recontribution of distributions for home purchases will apply for California. While California has conformed to the federal provisions related to COVID-19 retirement plan distributions, additional legislation will be required before the state conforms to the qualified disaster distribution provisions in the federal 2020 Disasters Tax Relief Act.

California enacted its own new hiring credit for 2020 in response to the COVID-19 emergency, but businesses affected by other disasters could potentially be eligible – see the guide "California Credits".

California has not conformed to the changes in the TCJA related to casualty losses but has belatedly and partially conformed to the NOL changes (See the guide Net Operating Loss Tax Overview). Nor does CA conform to the temporary provision of the CARES Act. Thus, for California casualty losses do not have to be disaster related. See form instructions:

Net Operating Loss - A casualty or disaster loss occurring prior to 2019 that results in a NOL can be carried back 2 years and any balance remaining can be carried forward for 20 years, or an election to forego the carryback can be made. The election to waive the carryback can be made separately for California and federal. For NOLS occurring in taxable years beginning after December 31, 2018, AB 91(signed by the governor 6/27/2019) repeals the 2-year carryback period. California continues to allow a 20year carryover period and has not adopted the federal rule limiting the NOL deduction to 80% of the carryover year’s taxable income in certain years. Thus, 100% of the unused CA NOL is carried over.

AB 85, signed into law on June 29, 2020, added R&TC Sec 17276.23 that suspended the NOL deduction for certain businesses during tax years 2020 through 2022. The NOL deduction suspension does NOT apply to a taxpayer with a net business income or modified AGI of less than $1,000,000 for the taxable year. For this purpose, “business income” includes:

The carryover period for an NOL deduction disallowed by this provision is extended by:

SB 35, signed into law 9/1/15, allows the Governor to declare a state of emergency (disaster) for California purposes without action by the state legislature. Special legislation is not needed. For California purposes, a casualty loss becomes a disaster loss depending upon who declares a disaster:

A Disaster Loss is Allowed If:

A complete list of all California disasters declared by the President and/or the Governor is included in the instructions to FTB Form 3805-V. The list covers the disasters through the tax year of the form. A current list is also available on the FTB web site - enter “List of Disasters” in the Search box.

A disaster loss can be claimed on California returns for either the tax year in which the disaster occurs or the tax year immediately before the disaster took place (same as federal). The time for making the election will be the same for federal and California - no later than six months after the due date of the taxpayer’s tax return for the disaster year, without regard to any extension of time to file. Therefore, in most cases the election will need to be made by October 15 of the year following the disaster year.

While disaster losses incurred prior to 2013 cannot be used to compute a California net operating loss (NOL), they are eligible to be carried over and deducted in future years. Generally, for years 2004 through 2012, 100% of excess disaster losses can be carried over for up to five years. If subsequent California legislation identified the disaster for special carryover treatment, excess losses may be carried over for up to 15 years. If disaster losses in 2013 through 2018 result in an NOL the NOL can be carried back 2 years, but the amount of carryback allowed for specific years varies (see Chapter 3.16). SB 35 (discussed above) provides that any law that suspends, defers, reduces, or otherwise diminishes the deduction of an NOL, other than those variations already imposed in existing law, shall not apply to an NOL attributable to these specified disaster losses. The 2-year carryback period for NOLs is repealed, effective for losses beginning in years after December 31, 2018, and the loss can only be carried forward and for a maximum of 20 years.

Use FTB Form 3805V, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations, for the year of the loss to compute the carryover. Even when the federal and California losses stem from the same casualty or disaster event, adjustments may be needed to account for differences in federal and California laws. If the taxpayer has both disaster loss carryovers and NOL carryovers, they are used in the order they were incurred. Disaster loss carryovers are not subject to the California NOL suspensions for years 2008 – 2011.

California automatically follows the federal postponement periods announced by the IRS with respect to tax deadlines for taxpayers affected by Presidentially declared disasters. This applies to taxpayers with a California tax-filing requirement even if the disaster occurred outside of California if the taxpayer meets the qualifications to claim a disaster loss anywhere within the U.S.

In addition to completing FTB Form 3805V and attaching it to their return on which the loss is claimed, individuals must attach copies of completed federal Form 4684 (using California amounts, if different) and a copy of their federal return (1040/1040SR or 1040X) and must attach a written statement that indicates the date and location of the disaster, and if applicable, the election to deduct the loss on the return of the year prior to the loss year.

Over the years, California voters have approved Constitutional amendments that allow a residence’s base year property tax valuation to be transferred to another residence in certain circumstances (for example, upon sale when over age 55 or permanently disabled). Both properties had to be located in the same county or the replacement property had to be in one of ten counties that accepted valuation transfers. On November 3, 2020, California voters approved Proposition 19, which adds new provisions for a base year value transfer of primary residence for persons at least age 55 or severely disabled or for victims of wildfires or natural disasters.

This discussion relates to the wildfire/natural disaster provisions of Proposition 19, which became operative April 1, 2021. A victim of a wildfire or natural disaster may transfer the base year value of their primary residence to a replacement primary residence located anywhere in California that is purchased or newly constructed as that person's principal residence within two years of the sale of the original primary residence, regardless of the value of the replacement residence. The requirements include:

The purchase of the replacement primary residence must occur within two years of the sale of the original primary residence in its damaged state. The date of the wildfire or disaster does not have to occur within two years of the date of sale or the date of purchase. For example, if a principal residence was destroyed in 2018 in a wildfire and the vacant lot sold in 2022, the property owner would have two years from the 2022 sale date to purchase a qualifying replacement primary residence.

For property that has been damaged or destroyed, for property tax purposes, the base year value that is transferred is the adjusted base year value immediately prior to the date of damage or destruction of the original primary residence, plus any inflation factoring for the period between the destruction and the purchase of the replacement primary residence. The date the base year value is transferred is the date of the latest qualifying transaction—the sale of the original primary residence, the purchase of the replacement primary residence, or the completion of new construction of a new replacement primary residence.

If the replacement residence is of equal or lesser value than the original primary residence, the taxable value (also referred to as the factored base year value) of the original primary residence may be transferred to the replacement residence.

If the replacement residence is of greater value than the original primary residence, partial relief is available. The new base year value of the replacement residence is the sum of the factored base year value of the original primary residence plus the difference between the full cash values of the original primary residence and the replacement residence. Definitions for this purpose:

Once the original primary residence is sold and a replacement primary residence is purchased within two years of the sale of that original primary residence, and the individual has occupied the replacement residence as their primary residence, a claim form can be filed with the local County Assessor's office where the replacement primary residence is located to request that the base year value be transferred.

The claim must be filed within three years of the purchase or new construction of the replacement property to receive relief as of the latest qualifying transaction. If this period is missed, prospective relief is available for the lien date of the assessment year in which the claim is filed.

New forms have been created for the changes brought about by Prop 19. For wildfire/natural disaster victims, the form is BOE-19-V, Claim for Transfer of Base Year Value to Replacement Primary Residence for Victims of Wildfire or Other Natural Disaster.

Additional information on the Prop 19 provisions is available on the Board of Equalization website: https://www.boe.ca.gov/prop19/

The CA R&T Code, Sections 69 and 69.3 permit individuals to carry over their property tax base in certain circumstances when there is a disaster loss.

For purposes of R&TC Sec 69.3 (transfer property tax base to another County) the following definitions apply:

Go to http://leginfo.legislature.ca.gov/faces/codes.xhtml to search for the California code.