BILL NUMBER: AB 322 CHAPTERED 09/04/03 CHAPTER 278 FILED WITH SECRETARY OF STATE SEPTEMBER 4, 2003 APPROVED BY GOVERNOR SEPTEMBER 3, 2003 PASSED THE SENATE AUGUST 21, 2003 PASSED THE ASSEMBLY APRIL 10, 2003 AMENDED IN ASSEMBLY APRIL 7, 2003 INTRODUCED BY Assembly Member Parra FEBRUARY 7, 2003 An act to amend Sections 205.5 and 279 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. LEGISLATIVE COUNSEL'S DIGEST AB 322, Parra. Disabled veteran's property tax exemption. The California Constitution authorizes the exemption from property taxation of the principal residence of a disabled veteran, or a veteran's spouse, in the case in which the veteran has, as a result of a service-connected disease or injury, become disabled or died while on active duty in military service. Existing property tax law specifies an exemption amount of $100,000, but increases that amount to $150,000, if the exemption claimant's income does not exceed $40,000 as adjusted by a specified inflation factor. This bill would, in conformance with the California Constitution, extend this exemption to property owned, in whole or in part, by the veteran's spouse. This bill would also specify that property is a veteran's principal residence if the veteran would principally reside at that property if not for his or her confinement to a hospital or other care facility. Existing law provides that a disabled veteran's property tax exemption, once granted, remains in continuous effect unless the title to the property changes, the property is altered so that the property no longer qualifies as a dwelling, the owner is no longer considered disabled, or the owner does not occupy the property as his or her principal place of residence on the property tax lien date. This bill would, for purposes of the disabled veteran's property tax exemption, specify that property owned by a disabled veteran who is confined to a hospital or other care facility, continues to be the principal residence of the veteran on the property tax lien date if that property was the principal place of residence of the owner immediately prior to that confinement. Section 2229 of the Revenue and Taxation Code requires the Legislature to reimburse local agencies annually for certain property tax revenues lost as a result of any exemption or classification of property for purposes of ad valorem property taxation. This bill would provide that, notwithstanding Section 2229 of the Revenue and Taxation Code, no appropriation is made and the state shall not reimburse local agencies for property tax revenues lost by them pursuant to the bill. This bill would take effect immediately as a tax levy. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. (a) The Legislature of the State of California finds and declares the following: (1) The California Constitution allows the Legislature to establish an exemption from property taxes for the home of a disabled veteran or the spouse of a disabled veteran, including the unmarried surviving spouse of a disabled veteran. (2) A disabled veteran is defined by law as a veteran who, because of an injury incurred in military service is blind in both eyes, has lost the use of two or more limbs, is totally disabled, or who, as a result of service-connected injury, died while in active military service. (3) The Revenue and Taxation Code authorizes a property tax exemption for property owned by a disabled veteran, if that property constitutes the principal place of residence of the disabled veteran. (4) The Revenue and Taxation Code also authorizes a property tax exemption for property owned by an unmarried surviving spouse of a disabled veteran, if that property constitutes the principal place of residence of the unmarried surviving spouse. (5) There are many disabled veterans who own property that qualifies for the disabled veterans' property tax exemption, but due to the fact that these disabled veterans are confined to hospitals or other medical institutions they are unable to occupy that property as their principal place of residence. In many cases the spouses of these disabled veterans continue to occupy the property as their principle place of residence. (b) It is the intent of the Legislature in enacting this act to amend the Revenue and Taxation Code to conform with the California Constitution to further extend the disabled veterans' property tax exemption to property owned by the spouse of a living disabled veteran while that disabled veteran is confined to a hospital or other care facility and to extend the veterans' property tax exemption to an otherwise qualifying veteran who is unable to occupy that property as his or her principal place of residence because he or she is confined to a hospital or other care facility, provided that the property is not rented or leased to a third party. SEC. 2. Section 205.5 of the Revenue and Taxation Code is amended to read: 205.5. (a) Property that constitutes the principal place of residence of a veteran, that is owned by the veteran, the veteran's spouse, or the veteran and the veteran's spouse jointly, is exempted from taxation on that part of the full value of the residence that does not exceed one hundred thousand dollars ($100,000), if the veteran is blind in both eyes, has lost the use of two or more limbs, or if the veteran is totally disabled as a result of injury or disease incurred in military service. The one-hundred-thousand-dollar ($100,000) exemption shall be one hundred fifty thousand dollars ($150,000), in the case of an eligible veteran whose household income does not exceed the amount of forty thousand dollars ($40,000), as adjusted for the relevant assessment year as provided in subdivision (g). (b) (1) For purposes of this section, "veteran" means either of the following: (A) A veteran as specified in subdivision (o) of Section 3 of Article XIII of the California Constitution without regard to any limitation contained therein on the value of property owned by the veteran or the veteran's spouse. (B) Any person who would qualify as a veteran pursuant to paragraph (1) except that he or she has, as a result of a service-connected injury or disease died while on active duty in military service. The United States Department of Veterans Affairs shall determine whether an injury or disease is service connected. (2) For purposes of this section, property is deemed to be the principal place of residence of a veteran, disabled as described in subdivision (a), who is confined to a hospital or other care facility, if that property would be that veteran's principal place of residence were it not for his or her confinement to a hospital or other care facility, provided that the residence is not rented or leased to a third party. A family member that resides at the residence is not considered to be a third party. (c) (1) Property that is owned by, and that constitutes the principal place of residence of, the unmarried surviving spouse of a deceased veteran is exempt from taxation on that part of the full value of the residence that does not exceed one hundred thousand dollars ($100,000), in the case of a veteran who was blind in both eyes, had lost the use of two or more limbs, or was totally disabled provided that either of the following conditions is met: (A) The deceased veteran during his or her lifetime qualified in all respects for the exemption or would have qualified for the exemption under the laws effective on January 1, 1977, except that the veteran died prior to January 1, 1977. (B) The veteran died from a disease that was service connected as determined by the United States Department of Veterans Affairs. The one-hundred-thousand-dollar ($100,000) exemption shall be one hundred fifty thousand dollars ($150,000), in the case of an eligible unmarried surviving spouse whose household income does not exceed the amount of forty thousand dollars ($40,000), as adjusted for the relevant assessment year as provided in subdivision (g). (2) Commencing with the 1994-95 fiscal year, property that is owned by, and that constitutes the principal place of residence of, the unmarried surviving spouse of a veteran as described in paragraph (2) of subdivision (b) is exempt from taxation on that part of the full value of the residence that does not exceed one hundred thousand dollars ($100,000). The one-hundred-thousand-dollar ($100,000) exemption shall be one hundred fifty thousand dollars ($150,000), in the case of an eligible unmarried surviving spouse whose household income does not exceed the amount of forty thousand dollars ($40,000), as adjusted for the relevant assessment year as provided in subdivision (g). (d) As used in this section, "property that is owned by a veteran" or "property that is owned by the veteran's unmarried surviving spouse" includes all of the following: (1) Property owned by the veteran with the veteran's spouse as a joint tenancy, tenancy in common, or as community property. (2) Property owned by the veteran or the veteran's spouse as separate property. (3) Property owned with one or more other persons to the extent of the interest owned by the veteran, the veteran's spouse, or both the veteran and the veteran's spouse. (4) Property owned by the veteran's unmarried surviving spouse with one or more other persons to the extent of the interest owned by the veteran's unmarried surviving spouse. (5) So much of the property of a corporation as constitutes the principal place of residence of a veteran or a veteran's unmarried surviving spouse when the veteran, or the veteran's spouse, or the veteran's unmarried surviving spouse is a shareholder of the corporation and the rights of shareholding entitle one to the possession of property, legal title to which is owned by the corporation. The exemption provided by this paragraph shall be shown on the local roll and shall reduce the full value of the corporate property. Notwithstanding any provision of law or articles of incorporation or bylaws of a corporation described in this paragraph, any reduction of property taxes paid by the corporation shall reflect an equal reduction in any charges by the corporation to the person who, by reason of qualifying for the exemption, made possible the reduction for the corporation. (e) For purposes of this section, being blind in both eyes means having a visual acuity of 5/200 or less, or concentric contraction of the visual field to 5 degrees or less; losing the use of a limb means that the limb has been amputated or its use has been lost by reason of ankylosis, progressive muscular dystrophies, or paralysis; and being totally disabled means that the United States Department of Veterans Affairs or the military service from which the veteran was discharged has rated the disability at 100 percent or has rated the disability compensation at 100 percent by reason of being unable to secure or follow a substantially gainful occupation. (f) An exemption granted to a claimant in accordance with the provisions of this section shall be in lieu of the veteran's exemption provided by subdivisions (o), (p), (q), and (r) of Section 3 of Article XIII of the California Constitution and any other real property tax exemption to which the claimant may be entitled. No other real property tax exemption may be granted to any other person with respect to the same residence for which an exemption has been granted under the provisions of this section; provided, that if two or more veterans qualified pursuant to this section coown a property in which they reside, each is entitled to the exemption to the extent of his or her interest. (g) Commencing on January 1, 2002, and for each assessment year thereafter, the household income limit shall be compounded annually by an inflation factor that is the annual percentage change, measured from February to February of the two previous assessment years, rounded to the nearest one-thousandth of 1 percent, in the California Consumer Price Index for all items, as determined by the California Department of Industrial Relations. SEC. 3. Section 279 of the Revenue and Taxation Code is amended to read: 279. (a) A claim for the disabled veterans' property tax exemption described in Section 205.5 filed by the owner of a dwelling, once granted, shall remain in continuous effect unless any of the following occurs: (1) Title to the property changes. (2) The owner does not occupy the dwelling as his or her principal place of residence on the lien date. For purposes of this paragraph, if a veteran is, on the lien date, confined to a hospital or other care facility but principally resided at a dwelling immediately prior to that confinement, the veteran will be deemed to occupy that same dwelling as his or her principal place of residence on the lien date, provided that the dwelling has not been rented or leased as described in Section 205.5. (3) The property is altered so that it is no longer a dwelling. (4) The veteran is no longer disabled as defined in Section 205.5. (b) The assessor of each county shall verify the continued eligibility of each person receiving a disabled veterans' exemption, and shall provide for a periodic audit of, and establish a control system to monitor, disabled veterans' exemption claims. SEC. 4. Notwithstanding Section 2229 of the Revenue and Taxation Code, no appropriation is made by this act and the state shall not reimburse any local agency for any property tax revenues lost by it pursuant to this act. SEC. 5. This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect.