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Ask the Advocate: Rolling blackouts

New law allows for information sharing among agencies

Effective June 30, 2001, California law requires us to provide address information for individuals with outstanding arrest warrants to the Department of Justice, courts, and California law enforcement agencies.

Senate Bill 1310 amended sections 19820 and 19823 and added Section 19550 to the Revenue and Taxation Code.

The bill also added Penal Code 817.5, which extends these requirements to all state and local government agencies.

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To calculate the decrease in fair market value, compare the property's fair market value immediately prior to the blackout and its fair market value immediately after the blackout.

Important: Do not use the amount of the property's perceived value lost during operation, or a decline in business reputation. For example, loss of sales due to a blackout is an operating consequence and should appear in the computation of the taxpayer's income or loss.

For example: If a truck is damaged because traffic lights are inoperable during a blackout, the decrease in the fair market value of the truck may qualify as a nonbusiness casualty loss as long as the decrease in fair market value wasn't compensated by the taxpayer's insurance.

Businesses could incur losses in revenue or production if a blackout occurs during operating hours. These losses are normal operating expenses. If inventory is damaged, spoiled, or lost, the taxpayer should adjust the costs of goods sold. It should not be reported as a business casualty or theft loss.

Q: What type of expenses/losses may be attributable to rolling blackouts?

A: The types of losses or extra expenses that could occur during a blackout would be similar to any type of loss resulting from an unexpected outage. The difference this year in California will be the frequency of this typically unusual situation. It doesn't change the type of losses or expenses incurred, just the number of losses (frequency) occurring and the amount of expenses.

Impact on individual taxpayers
For most individual taxpayers, the losses should be minimal to moderate and limited to those that normally occur when there is an interruption in power (assuming the outages average 60 -90 minutes in duration), i.e. food

spoilage and disruptions in automated home monitoring devices such as automatic irrigation, swimming pool filtration and home security systems.

There's the potential for damage to household appliances, e.g., computers and televisions, in the event there is a power surge once service is restored. And on the roads, there's also the potential for an increased risk of motor vehicle accidents if traffic control systems are not functioning.

And while not necessarily a casualty loss, there could be significant impacts to individuals with health conditions that require electrically operated home health devices or must maintain constant household temperatures.

Impact on businesses
For businesses, the losses from rolling blackouts can be costlier than those suffered by individual taxpayers. For most businesses, the loss of income or property resulting from a rolling blackout (power interruption) is not covered by insurance unless the outage goes beyond 12 - 48 hours.

Consequently, losses such as spoilage of product, lost income, production downtime, cost of idle employees, etc. will not be reimbursed by insurance. Instead, the cost will generally be borne by the business owner. Some of the losses attributable to rolling blackouts that businesses might incur include but are not limited to:

• Loss of product.
• Damage to machinery and equipment as a result of a sudden loss of power.
• Inopportune failure of safety equipment and other devices dependent on external power.
• Lost (unrecorded) sales resulting from disruptions in the automated recording of business transactions.
• Increases in damaged or spoiled products in businesses dependant on food preparation, i.e. restaurants, bakeries, caterers, etc.

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September/October 2001

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