Details of Public Law 119-21, section 70109 , One Big Beautiful Bill Act
This provision makes permanent the Tax Cuts and Jobs Act provision (Public Law 115-97, section 11044), that was set to expire on December 31, 2025, limiting the itemized deduction for personal casualty or theft loss to only those losses attributable to a Federally declared disaster. This provision expands the itemized deduction for losses if they were attributable to a State declared disaster.
This provision adds and defines the term “State declared disaster”, as any natural catastrophe which includes any hurricane, tornado, storm, high water, wind-driven water, tidal wave, tsunami, earthquake, volcanic eruption, landslide, mudslide, snowstorm, drought, or, regardless of cause, any fire, flood, or explosion, in any part of the State. The Governor of such state will make the determination with the Secretary of the Treasury whether the natural catastrophe causes damage of sufficient severity and magnitude to warrant the application of this rule.
Under the PITL, California conforms to the treatment of personal casualty loss deductions under IRC section 165(h), as of the specified date of January 1, 2025, with modifications and specifically does not conform to the federal modification to only allow a deduction for presidentially declared or State declared disasters as personal casualty losses.
California tax law identifies specific events as disasters and excess disaster losses are allowed special carry forward treatment. That is, 100 percent of the excess disaster loss may be carried over for up to 15 taxable years. In addition, IRC section 165(i), relating to the election to take a loss deduction in the preceding year, applies to disasters that were the subject of a Governor’s proclamation, but not the subject of a Presidential disaster declaration.
As a result, California does not conform to the changes made by this provision.
The estimated revenue impact to conform to the above provisions would result in the following gain:
26/27 27/28 28/29 29/30 $22,000,000 $15,000,000 $15,000,000 $14,000,000