Lawmaker Seeks Tax Exemption for State Quake Agency

A congressman long active in seismic issues introduced a bill Monday that would require the Internal Revenue Service to grant a federal tax exemption to the proposed state-run California earthquake insurance agency.

The measure by Rep. Jerry Lewis (R-Redlands) comes six weeks after the IRS, with no official explanation, abruptly withdrew an exemption for the agency and reopened consideration of the matter without saying how long its review would take.

State Insurance Commissioner Chuck Quackenbush has said the proposed California Earthquake Authority could not function without the exemption.

Meanwhile, a legislative conference committee that is trying to hammer out a compromise bill to establish the agency, contingent on eventual favorable IRS action, has made little progress since the IRS announcement.

Lewis said Monday that he introduced the bill on his own and not at Quackenbush’s request.

He added that he has no inside information about the progress of the IRS review. Some IRS sources said last month that agency officials were concerned that California was unwilling to commit sufficient state funds to the earthquake authority to qualify it for an exemption.

“I have not called them at all,” Lewis said of the IRS. “You’ve got to deal with them with some care and delicacy, but I feel it is important that the whole Congress express its views on this.”

Congress has been very slow in acting on a proposed federal disaster insurance package to cap the liability of the insurance industry and supplement California’s efforts. In three attempts, its proponents have never gotten so much as a vote on the floor of either house.

The initial reaction in Sacramento to Lewis’ bill was pessimistic.

“The odds of this working are fairly low,” said a staff member who has been working with the conference committee. “It’s hard for me to imagine Congress would want to give a blank check exemption before we have even ironed out all the details of the agency.”

Lewis said, however, that he decided it would be unwise to further delay a bill that could help avert an insurance availability crisis in California.