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