BILL NUMBER: AB 645 CHAPTERED 09/04/01 CHAPTER 238 FILED WITH SECRETARY OF STATE SEPTEMBER 4, 2001 APPROVED BY GOVERNOR SEPTEMBER 4, 2001 PASSED THE ASSEMBLY AUGUST 20, 2001 PASSED THE SENATE JULY 21, 2001 AMENDED IN SENATE JUNE 20, 2001 AMENDED IN ASSEMBLY APRIL 26, 2001 INTRODUCED BY Assembly Member Horton FEBRUARY 22, 2001 An act to amend Sections 469 and 1603 of the Revenue and Taxation Code, relating to taxation. LEGISLATIVE COUNSEL'S DIGEST AB 645, Horton. Property taxation: audits and equalization. Existing property tax law requires the assessor to audit the books and records of a profession, trade, or business at least once every 4 years in the case of a taxpayer, engaged in a profession, trade, or business, who owns, claims, possesses, or controls locally assessable trade fixtures and business tangible property with a full value of at least $400,000, and permits an audit of the personal property valued at less than $400,000. Existing law further provides, in the case of a mandatory audit of a taxpayer engaged in a profession, trade, or business, for specified procedures and conditions with respect to escape assessments and for certain duties on the part of the assessor. This bill would apply these procedures, conditions, and duties to both mandatory and discretionary audits. By imposing new duties upon local agencies, this bill would impose a state-mandated local program. This bill would also make technical, conforming changes. Existing property tax law generally requires, with respect to each assessment year, that an application for reduction in an assessment be filed within the period from July 2 to September 15, inclusive. This bill would provide, for certain assessees not receiving notice of their assessed value prior to August 1, that the application for reduction may be filed no later than November 30. By requiring county boards of equalization to provide a higher level of service, this bill would impose a state-mandated local program. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement, including the creation of a State Mandates Claims Fund to pay the costs of mandates that do not exceed $1,000,000 statewide and other procedures for claims whose statewide costs exceed $1,000,000. This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 469 of the Revenue and Taxation Code is amended to read: 469. (a) In any case in which locally assessable trade fixtures and business tangible personal property owned, claimed, possessed, or controlled by a taxpayer engaged in a profession, trade, or business has a full value of four hundred thousand dollars ($400,000) or more, the assessor shall audit the books and records of that profession, trade, or business at least once each four years. If the board determines the value of property pursuant to Section 15640 of the Government Code, that determination may be deemed an audit by the assessor for purposes of this section. (b) With respect to any audit of the books of a profession, trade, or business, regardless of the full value of the trade fixtures and business tangible personal property owned, claimed, possessed, or controlled by the taxpayer, the following shall apply: (1) Upon completion of an audit of the taxpayer's books and records, the taxpayer shall be given the assessor's findings in writing with respect to data that would alter any previously enrolled assessment. (2) Equalization of the property by a county board of equalization or assessment appeals board pursuant to Chapter 1 (commencing with Section 1601) of Part 3 of this division shall not preclude a subsequent audit and shall not preclude the assessor from levying an escape assessment in appropriate instances, but shall preclude an escape assessment being levied on that portion of the assessment that was the subject of the equalization hearing. (3) If the result of an audit for any year discloses property subject to an escape assessment, then the original assessment of all property of the assessee at the location of the profession, trade, or business for that year shall be subject to review, equalization and adjustment by the county board of equalization or assessment appeals board pursuant to Chapter 1 (commencing with Section 1601) of Part 3 of this division, except in those instances when the property had previously been equalized for the year in question. (4) If the audit for any particular tax year discloses that the property of the taxpayer was incorrectly valued or misclassified for any cause, to the extent that this error caused the property to be assessed at a higher value than the assessor would have entered on the roll had the incorrect valuation or misclassification not occurred, then the assessor shall notify the taxpayer of the amount of the excess valuation or misclassification, and the fact that a claim for cancellation or refund may be filed with the county as provided by Sections 4986 and 5096. SEC. 2. Section 1603 of the Revenue and Taxation Code is amended to read: 1603. (a) A reduction in an assessment on the local roll shall not be made unless the party affected or his or her agent makes and files with the county board a verified, written application showing the facts claimed to require the reduction and the applicant's opinion of the full value of the property. The form for the application shall be prescribed by the State Board of Equalization. (b) (1) The application shall be filed within the time period from July 2 to September 15, inclusive. An application that is mailed and postmarked September 15 or earlier within that period shall be deemed to have been filed within the time period beginning July 2 and continuing through and including September 15. (2) Notwithstanding paragraph (1), if the taxpayer does not receive the notice of assessment described in Section 619 at least 15 calendar days prior to the deadline to file the application described in this subdivision, the party affected, or his or her agent, may file an application within 60 days of receipt of the notice of assessment or within 60 days of the mailing of the tax bill, whichever is earlier, along with an affidavit declaring under penalty of perjury that the notice was not timely received. (3) Notwithstanding paragraph (1), the last day of the filing period shall be extended to November 30 in the case of an assessee with respect to real property on the local secured roll, if both of the following are true: (A) A notice is not required to be provided to that assessee with respect to that real property under Section 619. (B) The county assessor does not provide, by August 1, notice to that assessee of the assessed value of the assessee's real property as it shall appear, or does appear, on the completed local secured roll. (4) If a final filing date specified in this subdivision falls on Saturday, Sunday, or a legal holiday, an application that is mailed and postmarked on the next business day shall be deemed to have been filed within the requisite time period specified in this subdivision. If on any final filing date specified in this subdivision, the county's offices are closed for business prior to 5 p.m. or for that entire day, that day shall be considered a legal holiday for purposes of this section. (c) The application may be filed within 12 months following the month in which the assessee is notified of the assessment, if the party affected or his or her agent and the assessor stipulate that there is an error in the assessment as the result of the exercise of the assessor's judgment in determining the full cash value of the property and a written stipulation as to the full cash value and assessed value is filed in accordance with Section 1607. (d) Upon the recommendation of the assessor and the clerk of the county board of equalization, the board of supervisors may adopt a resolution providing that an application may be filed within 60 days of the mailing of the notice of the assessor's response to a request for reassessment pursuant to paragraph (2) of subdivision (a) of Section 51, if all of the following conditions are met: (1) The request for reassessment was submitted in writing to the assessor in the form prescribed by the State Board of Equalization and includes all information that is prescribed by the State Board of Equalization. (2) The request for reassessment was made on or before the immediately preceding March 15. (3) The assessor's response to the request for reassessment was mailed on or after September 1 of the calendar year in which the request for reassessment was made. (4) The assessor did not reduce the assessment in question in the full amount as requested. (5) The application for changed assessment is filed on or before December 31 of the year in which the request for reassessment was filed. (6) The application for reduction in assessment is accompanied by a copy of the assessor's response to the request for reassessment. (e) In the form provided for making application pursuant to this section, there shall be a notice that written findings of facts of the local equalization hearing will be available upon written request at the requester's expense and, if not so requested, the right to those written findings is waived. The form shall provide appropriate space for the applicant to request written findings of facts as provided by Section 1611.5. (f) The form provided for making an application pursuant to this section shall contain the following language in the signature block: I certify (or declare) under penalty of perjury under the laws of the State of California that the foregoing and all information hereon, including any accompanying statements or documents, is true, correct, and complete to the best of my knowledge and belief and that I am (1) the owner of the property or the person affected (i.e., a person having a direct economic interest in the payment of the taxes on that property--"The Applicant," (2) an agent authorized by the applicant under Item 2 of this application, or (3) an attorney licensed to practice law in the State of California, State Bar No. ____, who has been retained by the applicant and has been authorized by that person to file this application. SEC. 3. Notwithstanding Section 17610 of the Government Code, if the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code. If the statewide cost of the claim for reimbursement does not exceed one million dollars ($1,000,000), reimbursement shall be made from the State Mandates Claims Fund.