BILL ANALYSIS SCA 9 Page 1 Date of Hearing: August 14, 2002 ASSEMBLY COMMITTEE ON APPROPRIATIONS Darrell Steinberg, Chair SCA 9 (Speier) - As Amended: June 26, 2002 Policy Committee: Revenue and Taxation Vote: 4-1 E.R&C.A. 5-1 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill expands the exemption from the change-in-ownership reappraisal requirement for the transfer of property between spouses to the transfer of a principal residence between co-owners, if the following conditions are met: 1)The residence was co-owned and continuously resided in by the transferor and the transferee for the three years immediately preceding the transfer, 2)The transfer occurs, on or after January 1, 2005, because of the death of the transferor. 3)The county board of supervisors adopts an ordinance allowing for the exemption. FISCAL EFFECT 1)Local property tax losses in the range of $10 million to $20 million annually, assuming county boards of supervisors adopt enabling ordinances. 2)State General Fund costs of approximately $5 to $10 million annually to backfill K-12 property tax revenue losses. COMMENTS 1)Background . The State Constitution requires property to be reassessed to fair market value when it changes ownership, but provides exemptions or several different types of transfers, SCA 9 Page 2 including those between spouses, between parents and children, and between grandparents and grandchildren in cases where all parents of the grandchildren are deceased. These exemptions apply to principal places of residence and to the first $1 million of real property other than a principal residence. Persons over the age of 55 may transfer their Proposition 13 adjusted base year values from one property to another property or to a property in a different (in selected counties that have approved this treatment). Exemptions from the change in ownership reappraisal also are provided in cases where a residence is vacated due to government acquisition, disaster, or environmental contamination. Property that is transferred between co-owners who do not satisfy the requirements of any of the exclusions described above is either partially or fully reassessed, depending on whether the property is held through joint tenancy or tenancy in common and whether both individuals were added to the title upon property acquisition or one was added at a subsequent date. For example, a 100% reappraisal would occur if the co-owner receiving the property was added to the title at a later date in a joint tenancy form of ownership. A 50% reappraisal would result if both co-owners were added to the title at the same time as tenants in common. 2)Purpose . The author and the supporters of SCA 9 note that Proposition 13 was designed to prevent homeowners from being "taxed" out of their homes due to rising property values. Noting the various exceptions to the change of ownership reassessment requirements that have previously been added to the Constitution, proponents argue that SCA 9 is consistent with the spirit of Proposition 13 and should apply to homeowner cohabitants, not just those who are married or who have a familial relationship. Analysis Prepared by : Stephen Shea / APPR. / (916) 319-2081