BILL NUMBER: SB 2086 CHAPTERED 08/14/02 CHAPTER 214 FILED WITH SECRETARY OF STATE AUGUST 14, 2002 APPROVED BY GOVERNOR AUGUST 13, 2002 PASSED THE ASSEMBLY JUNE 30, 2002 PASSED THE SENATE MAY 16, 2002 AMENDED IN SENATE MAY 2, 2002 AMENDED IN SENATE APRIL 4, 2002 INTRODUCED BY Committee on Revenue and Taxation (Senators Scott (Chair), Alpert, Bowen, and Burton) MARCH 4, 2002 An act to amend Sections 95.35, 254.5, 257, 270, 271, and 465 of, and to add Section 327.1 to, the Revenue and Taxation Code, relating to property taxation. LEGISLATIVE COUNSEL'S DIGEST SB 2086, Committee on Revenue and Taxation. Property taxation: administration. Existing property tax law provides for a state grant program for the funding of local administration of the property tax. This bill would make technical changes to these provisions to correct certain cross-references. Pursuant to authorization by the California Constitution, existing property tax law establishes a welfare exemption under which property is exempt from taxation if, among other things, that property is used exclusively for religious, hospital, scientific, or charitable purposes and is owned and operated by an entity, as provided, that is itself organized and operated for those purposes. Existing law requires those who qualify for these exemptions to notify a county assessor, on or before March 15, or in the case of the religious exemption, June 30, if the taxpayer no longer qualifies for the exemption. This bill would change these notification dates to February 15. Existing property tax law allows taxes, penalties, and interest imposed for delinquent filings of property tax exemption applications to be reduced in the case of an exemption application of a college, cemetery, church, religion, exhibition, veterans' organization, free public library, free museum, public school, community college, state college, state university, or a person or entity claiming the welfare exemption. This bill would specify that those taxpayers applying for an exemption for aircraft of historical significance may also have penalties reduced pursuant to these provisions. Existing property tax law allows taxes, penalties, and interest imposed for delinquent filings of property tax exemption applications to be reduced in the case of an exemption of a college, cemetery, church, religion, exhibition, or veterans' organization that acquires new property or is organized after the lien date, if an application for exemption is filed on or before the lien date in the calendar year next succeeding the calendar year in which the property was acquired. This bill would allow these taxes, penalties, and interest to be reduced pursuant to these provisions only if the entity files an exemption application within 90 days from the first day of the next month following the date on which the property was acquired. The California Constitution provides that, unless otherwise provided in the constitution or by federal law, all property in the state is taxable and is assessed at its fair market value. Existing law requires a taxpayer to furnish to assessors various types of information about the taxpayer's property. This bill would authorize the board of supervisors of a county to enact an ordinance that requires any party that records a digital subdivision map with the county recorder to also file a duplicate digital copy of that map with the county assessor. Existing property tax law allows county assessors to destroy documents containing information obtained from taxpayers 6 years after the lien date for the taxes for which the information was obtained, or 3 years after the lien date if the documents have been microfiched, microfilmed, imaged, or otherwise preserved. This bill would allow, in the same manner, county assessors to destroy affidavits for certain property tax exemptions. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 95.35 of the Revenue and Taxation Code is amended to read: 95.35. (a) The Legislature finds and declares that there is a significant and compelling state financial interest in the maintenance of an adequately funded system of property tax administration. This financial interest derives from the fact that 53 percent of all property tax revenues collected statewide serve to offset the General Fund obligation to fund K-12 schools, and extends not only to assessment and maintenance of the tax rolls, but also to all aspects of the system which include, but are not limited to, collection, apportionment, allocation, and processing and defending appeals. The Legislature further finds and declares that the combination of limitations on county revenue authority, increasing county financial obligations, and the shift of county property taxes to schools has created a financial disincentive for counties to adequately fund property tax administration. This disincentive is most clearly evidenced by the fact that counties, on average, receive 19 percent of statewide property tax revenues while they are obligated to pay an average of 73 percent of the costs of administration. The Legislature also finds and declares that the State-County Property Tax Loan Program contained in Section 95.31 was in recognition of the state's financial interest, and the success of that program has demonstrated the appropriateness of an ongoing commitment of state funds to reduce the burden of property tax administration on county finances. Therefore, it is the intent of the Legislature, in enacting this act, to establish a grant program known as the State-County Property Tax Administration Grant Program that will continue the success of the State-County Property Tax Loan Program and maintain the commitment to efficient property tax administration. (b) Notwithstanding any other provision of law, in the 2002-03 fiscal year and each fiscal year thereafter to the 2006-07 fiscal year, inclusive, any county board of supervisors may, upon the recommendation of the assessor, adopt a resolution to elect to participate in the State-County Property Tax Administration Grant Program. Any resolution so adopted shall comply with the terms and conditions contained in paragraph (2) of subdivision (c). If adopted, a copy of the resolution shall be sent to the Department of Finance, which shall, upon approval, transmit a copy of the resolution to the Controller. (c) (1) Any county electing to participate in this program may be qualified to receive a grant in an amount, up to and including, the applicable amount listed in paragraph (3). However, the grant eligibility of a county may be terminated at the discretion of the Department of Finance if a county does not meet the conditions specified in paragraph (4). (2) The resolution to participate in this program shall include a detailed listing of the proposed uses by the county of the grant moneys, including, but not limited to: (A) The proposed positions to be funded. (B) Any increased automation costs. (C) The specific tasks and functions that will be performed during the fiscal year with these funds. (3) Upon transmittal of the electing resolution by the Department of Finance, the Controller shall, provided sufficient moneys have been appropriated by the Legislature for purposes of this section, provide a grant to the electing county for the applicable amount specified in the following schedule: Jurisdiction Amount Alameda .......................... $ 2,152,429 Alpine ........................... 3,124 Amador ........................... 80,865 Butte ............................ 381,956 Calaveras ........................ 109,897 Colusa ........................... 53,957 Contra Costa ..................... 2,022,088 Del Norte ........................ 36,203 El Dorado ........................ 302,795 Fresno ........................... 1,165,249 Glenn ............................ 59,197 Humboldt ......................... 210,806 Imperial ......................... 231,673 Inyo ............................. 100,080 Kern ............................. 1,211,318 Kings............................. 138,653 Lake ............................. 117,376 Lassen ........................... 54,699 Los Angeles ...................... 13,451,670 Madera ........................... 212,991 Marin ............................ 790,490 Mariposa ......................... 46,476 Mendocino ........................ 160,435 Merced ........................... 298,004 Modoc ............................ 24,022 Mono ............................. 47,778 Monterey ......................... 795,819 Napa ............................. 366,020 Nevada ........................... 234,292 Orange ........................... 6,826,325 Placer ........................... 628,047 Plumas ........................... 80,606 Riverside ........................ 2,358,068 Sacramento ....................... 1,554,245 San Benito ....................... 90,408 San Bernardino ................... 2,139,938 San Diego ........................ 5,413,943 San Francisco .................... 1,013,332 San Joaquin ...................... 818,686 San Luis Obispo .................. 736,288 San Mateo ........................ 2,220,001 Santa Barbara .................... 926,817 Santa Clara ...................... 4,213,639 Santa Cruz ....................... 565,328 Shasta ........................... 342,399 Sierra ........................... 7,383 Siskiyou ......................... 91,164 Solano ........................... 469,207 Sonoma ........................... 1,035,049 Stanislaus ....................... 866,155 Sutter ........................... 147,436 Tehama ........................... 97,222 Trinity .......................... 24,913 Tulare ........................... 501,907 Tuolumne ......................... 126,067 Ventura .......................... 1,477,789 Yolo ............................. 278,309 Yuba ............................. 88,968 (4) The Department of Finance shall consider the following items in determining whether a county may continue to receive a grant under this section: (A) The county's performance as indicated by the State Board of Equalization's sample survey required by Section 15640 of the Government Code. (B) Any performance measures adopted by the California Assessors' Association, the California Association of Clerks and Elections Officials, the State Association of County Auditor-Controllers, and the California Association of County Treasurers and Tax Collectors. (C) The county's reduction of backlogs of assessment appeals and declines in taxable value below adjusted base year value. (D) The county's compliance with mandatory audits required by Section 469 or the county's delivery of tax bills as required by Section 2610.5. (E) The county's reduction of backlogs of determinations regarding new construction, changes in ownership, and supplemental assessments. (F) Any other measure, as determined by the Director of Finance and transmitted to a county prior to its receiving a grant. (d) (1) Funds appropriated for purposes of this section shall be used to enhance the property tax administration system. Amounts provided to any county as a grant pursuant to this section may not be used to supplant the current level of county funding for property tax administration, exclusive of funds received pursuant to the predecessor State-County Property Tax Loan Program. In order to participate in the State-County Property Tax Administration Grant Program, a participating county shall maintain a base staffing, including contract staff, and total funding level in the county assessor's office, independent of the grant proceeds provided pursuant to this section, equal to the levels in the 1994-95 fiscal year, exclusive of amounts provided to the assessor's office pursuant to Item 9100-102-001 of the Budget Act of 1994. However, in a county in which the 1994-95 fiscal year funding level for the assessor's office was higher than the 1993-94 fiscal year level, the 1993-94 fiscal year staffing and funding levels shall be considered the base year for purposes of this section. If a county was otherwise eligible but was unable to participate in the State-County Property Tax Loan Program in the 1995-96 fiscal year because it did not meet the funding level and staffing requirements of this paragraph, that county shall maintain a base staffing, including contract staff, and total funding level in the county assessor's office equal to the levels in the 1995-96 fiscal year. (2) Prior to the assessor's recommendation for participation in the State-County Property Tax Administration Grant Program, the assessor shall consult with the county tax collector, and any other county agency directly involved in property tax administration, to develop an identifiable plan for the use of these funds during the period specified in the resolution by the board of supervisors. This plan shall be subject to modification and approval of the board of supervisors. (e) In any fiscal year in which the assessor of a county elects not to participate in the grant program or submits to the board of supervisors a grant proposal that is less than the applicable amount specified in paragraph (3) of subdivision (c), any other department of that county that is responsible for the administration, allocation, or adjudication of property tax, as defined in Section 95.3, may submit to the board of supervisors an application for the remainder of the allowable grant amount set forth in paragraph (3) of subdivision (c). Any grant proposal submitted pursuant to this subdivision shall include the information specified in paragraph (2) of subdivision (c), and will be subject to the performance standards set forth in paragraph (4) of subdivision (c). (f) If the funds appropriated by any Budget Act for the purposes set forth in this section exceed sixty million dollars ($60,000,000), the excess shall be allocated among participating counties in proportion to each county's applicable grant share listed in the schedule set forth in paragraph (3) of subdivision (c). Any additional funds allocated pursuant to this subdivision shall be transferred by the Controller to the boards of supervisors of participating counties at the same time as the transfer of funds pursuant to paragraph (3) of subdivision (c), and the funds transferred shall be available for allocation by the board of supervisors within the county only for the purposes of administration, allocation, or adjudication of property taxes, as defined in Section 95.3. Any county receiving funds pursuant to this subdivision shall be required to comply with the same reporting requirements as those required for grant funds received pursuant to subdivision (c). (g) A participating county may establish a tracking system whereby a work or function number is assigned to each appraisal or administrative activity. This tracking system should provide statistical data on the number of production units performed by the county and the positive and negative change in assessed value attributable to the activities performed by each employee. (h) At the request of the Department of Finance, the State Board of Equalization shall assist the Department of Finance in evaluating grants made pursuant to this section. (i) Notwithstanding Section 95.3, any funds provided to an eligible county pursuant to this section shall not result in any reduction of those county property tax administrative costs that are reimbursable pursuant to Section 95.3. SEC. 2. Section 254.5 of the Revenue and Taxation Code is amended to read: 254.5. (a) Affidavits for the welfare exemption and the veterans' organization exemption shall be filed in duplicate on or before February 15 of each year with the assessor. Affidavits of organizations filing for the first time shall be accompanied by duplicate certified copies of the financial statements of the owner and operator. Thereafter, financial statements shall be submitted only if requested in writing by either the assessor or the board. Copies of the affidavits and financial statements shall be forwarded not later than April 1 by the assessor with his or her recommendations for approval or denial to the board which shall review all the affidavits and statements and may institute an independent audit or verification of the operations of the owner and operator to ascertain whether both the owner and operator meet the requirements of Section 214 of the Revenue and Taxation Code. In this connection the board shall consider, among other matters, whether: (1) The services and expenses of the owner or operator (including salaries) are excessive, based upon like services and salaries in comparable public institutions. (2) The operations of the owner or operator, either directly or indirectly, materially enhance the private gain of any individual or individuals. (3) Any capital investment of the owner or operator for expansion of a physical plant is justified by the contemplated return thereon, and required to serve the interests of the community. (4) The property on which the exemption is claimed is used for the actual operation of an exempt activity and does not exceed an amount of property reasonably necessary to the accomplishment of the exempt purpose. (b) The board shall make a finding as to the eligibility of each applicant and the applicant's property and shall forward its finding to the assessor concerned. If the board conducts a hearing with respect to the eligibility of the applicant and the applicant's property, the finding shall be forwarded to the assessor concerned within 30 days after the decision is made by the board following the hearing. The assessor may deny the claim of an applicant that the board finds eligible, but may not grant the claim of an applicant the board finds ineligible. (c) Notwithstanding subdivision (a), an applicant, granted a welfare exemption and owning any property exempted pursuant to Section 214.15 or Section 231, shall not be required to reapply for the welfare exemption in any subsequent year in which there has been no transfer of, or other change in title to, the exempted property and the property is used exclusively by a governmental entity or by a nonprofit corporation described in Section 214.15 for its interest and benefit. The applicant shall notify the assessor on or before February 15 if, on or before the preceding lien date, the applicant became ineligible for the welfare exemption or if, on or before that lien date, the property was no longer owned by the applicant or otherwise failed to meet all requirements for the welfare exemption. Prior to the lien date, the assessor shall annually mail a notice to every applicant relieved of the requirement of filing an annual application by this subdivision. The notice shall be in a form and contain that information that the board may prescribe, and shall set forth the circumstances under which the property may no longer be eligible for exemption, and advise the applicant of the duty to inform the assessor if the property is no longer eligible for exemption. The notice shall include a card that is to be returned to the assessor by any applicant desiring to maintain eligibility for the welfare exemption under Section 214.15 or Section 231. The card shall be in the following form: To all persons who have received a welfare exemption under Section 214.15 or Section 231 of the Revenue and Taxation Code for the ____ fiscal year. Question: Will the property to which the exemption applies in the ____ fiscal year continue to be used exclusively by government or by an organization as described in Section 214.15 for its interest and benefit in the ____ fiscal year? YES ___ NO ___ Signature: ____________ Title: ______________ Failure to return this card does not of itself constitute a waiver of exemption as called for by the California Constitution, but may result in onsite inspection to verify exempt activity. (d) Upon any indication that a welfare exemption has been incorrectly granted, the assessor shall redetermine eligibility for the exemption. If the assessor determines that the property, or any portion thereof, is no longer eligible for the exemption, he or she shall immediately cancel the exemption on so much of the property as is no longer eligible for the exemption. (e) If a welfare exemption has been incorrectly allowed, an escape assessment as provided by Article 4 (commencing with Section 531) of Chapter 3 in the amount of the exemption, with interest as provided in Section 506, shall be made, and a penalty shall be assessed for any failure to notify the assessor as required by this section in an amount equaling 10 percent of the escape assessment, but may not exceed two hundred fifty dollars ($250). SEC. 3. Section 257 of the Revenue and Taxation Code is amended to read: 257. (a) Any person claiming the religious exemption shall submit to the assessor an affidavit giving specific information relating to property tax exemption. (b) The affidavit shall show that: (1) The building, equipment, and land are used exclusively for religious purposes. (2) The land claimed as exempt is required for the convenient use of the building. (3) The property is owned by an entity organized and operating exclusively for religious purposes. (4) The entity is nonprofit. (5) No part of the net earnings inures to the benefit of any private individual. (c) Any exemption granted pursuant to a claim filed in accordance with this section, once granted, shall remain in effect until that time that title to the property changes or the property is no longer used for exempt purposes. Any person who is granted an exemption pursuant to a claim filed in accordance with this section shall notify the assessor by February 15 if the property becomes ineligible for the exemption. (d) Upon any indication that a religious exemption has been incorrectly allowed, the assessor shall make a redetermination of eligibility for the religious exemption. If the assessor determines that the property or any portion thereof is no longer eligible for the exemption, he or she shall immediately cancel the exemption on so much of the property as is no longer eligible for exemption. If a religious exemption has been incorrectly allowed, an escape assessment as allowed by Article 4 (commencing with Section 531) of Chapter 3 in the amount of the exemption with interest as provided in Section 506 shall be made, together with a penalty for failure to notify the assessor, where applicable, in the amount of 10 percent of the assessment, but may not exceed two hundred fifty dollars ($250) in tax liability. SEC. 4. Section 270 of the Revenue and Taxation Code is amended to read: 270. (a) With respect to property as to which the college, cemetery, church, religious, exhibition, veterans' organization, free public libraries, free museums, aircraft of historical significance, public schools, community colleges, state colleges, state universities or welfare exemption was available, but for which a timely application for exemption was not filed: (1) Ninety percent of any tax or penalty or interest thereon shall be canceled or refunded, provided that an appropriate application for exemption is filed on or before the lien date in the calendar year next succeeding the calendar year in which the exemption was not claimed by a timely application. (2) If the application is filed after the date specified in paragraph (1), 85 percent of any tax, penalty, or interest thereon shall be canceled or refunded, provided that an appropriate application for exemption is filed and relief is not authorized under Section 214.01 or 271. (b) Notwithstanding the provisions of subdivision (a), any tax, penalty, or interest thereon exceeding two hundred fifty dollars ($250) in total amount shall be canceled or refunded, provided that it is imposed upon property entitled to relief under subdivision (a) for which an appropriate claim for exemption has been filed. (c) With respect to property as to which the welfare exemption or veterans' organization exemption was available, all provisions of Section 254.5, other than the specified dates for the filing of affidavits and other acts, are applicable to this section. SEC. 5. Section 271 of the Revenue and Taxation Code is amended to read: 271. (a) Provided that an appropriate application for exemption is filed within 90 days from the first day of the next month following the date on which the property was acquired, any tax or penalty or interest imposed upon: (1) Property owned by any organization qualified for the college, cemetery, church, religious, exhibition, veterans' organization, or welfare exemption that is acquired by that organization during a given calendar year, after the lien date but prior to the first day of the fiscal year commencing within that calendar year, when the property is of a kind that would have been qualified for the college, cemetery, church, religious, exhibition, veterans' organization, or welfare exemption if it had been owned by the organization on the lien date, shall be canceled or refunded. (2) Property owned by any organization that would have qualified for the college, cemetery, church, religious, exhibition, veterans' organization, or welfare exemption had the organization been in existence on the lien date, that was acquired by it during that calendar year after the lien date in that year but prior to the commencement of that fiscal year, and of a kind that presently qualifies for the exemption and that would have so qualified for that fiscal year had it been owned by the organization on the lien date and had the organization been in existence on the lien date, shall be canceled or refunded. (3) Property acquired after the beginning of any fiscal year by an organization qualified for the college, cemetery, church, religious, exhibition, veterans' organization, or welfare exemption and the property is of a kind that would have qualified for an exemption if it had been owned by the organization on the lien date, whether or not that organization was in existence on the lien date, shall be canceled or refunded in the proportion that the number of days for which the property was so qualified during the fiscal year bears to 365. (b) Eighty-five percent of any tax or penalty or interest thereon imposed upon property that would be entitled to relief under subdivision (a) or Section 214.01, except that an appropriate application for exemption was not filed within the time required by the applicable provision, shall be canceled or refunded provided that an appropriate application for exemption is filed after the last day on which relief could be granted under subdivision (a) or Section 214.01. (c) Notwithstanding subdivision (b), any tax or penalty or interest thereon exceeding two hundred fifty dollars ($250) in total amount shall be canceled or refunded provided it is imposed upon property entitled to relief under subdivision (b) for which an appropriate claim for exemption has been filed. (d) With respect to property acquired after the beginning of the fiscal year for which relief is sought, subdivisions (b) and (c) shall apply only to that pro rata portion of any tax or penalty or interest thereon which would have been canceled or refunded had the property qualified for relief under paragraph (3) of subdivision (a). SEC. 6. Section 327.1 is added to the Revenue and Taxation Code, to read: 327.1. The board of supervisors of any county may enact, by a majority vote of its membership, an ordinance that requires any party that records a digital subdivision map with the county recorder to also file a duplicate digital copy of that map with the county assessor. SEC. 7. Section 465 of the Revenue and Taxation Code is amended to read: 465. (a) Except as provided in subdivision (b), the assessor may destroy any document when six years have elapsed since the lien date for the tax year for which that document was obtained. Documents may be destroyed when three years have elapsed since the lien date described in the preceding sentence, if the documents have been microfilmed, microfiched, imaged, or otherwise preserved on a medium that provides access to the documents. (b) Affidavits claiming an exemption, for the first time, pursuant to Sections 254.5, 257, and 277 may be destroyed by the assessor as follows: (1) Six years after the lien date of the tax year for which the exemption was last granted. (2) Three years after the lien date described in paragraph (1) if the documents have been microfilmed, microfiched, imaged, or otherwise preserved on a medium that provides access to the documents.