BILL ANALYSIS
SB 565
Page 1
Date of Hearing: June 28, 2005
ASSEMBLY COMMITTEE ON JUDICIARY
Dave Jones, Chair
SB 565 (Migden) - As Amended: June 20, 2005
SENATE VOTE : 35-1
SUBJECT : PROPERTY TAX: DOMESTIC PARTNERS
KEY ISSUE : SHOULD THE EXEMPTION FROM PROPERTY REAPPRAISAL AT
FAIR MARKET VALUE UPON CHANGE OF OWNERSHIP BE AVAILABLE TO
REGISTERED DOMESTIC PARTNERS SO THAT THEY ARE TREATED THE SAME
AS SPOUSES AND OTHER FAMILIAL RELATIONSHIPS ARE UNDER CALIFORNIA
LAW?
SYNOPSIS
This bill seeks to revise the exemptions for tax relief based on
familial transfer of property, in order to include domestic
partners in the group of individuals that can forego a fair
market valuation and reassessment of property upon the change of
ownership. According to the author, this bill would treat
similarly situated homeowners equally, inasmuch as registered
domestic partners would have the same property tax treatment as
spouses, and thus, all transfers among domestic partners will be
excluded from a change in ownership reassessment. Proponents of
the bill state that this bill eliminates one of the many legally
entrenched forms of economic discrimination that continue to
confront gay, lesbian and bisexual Californians. There is no
opposition to the bill.
SUMMARY : Excludes the transfer of real estate between domestic
partners from transfers resulting in the reappraisal of real
property. Specifically, this bill :
1)States legislative intent to guarantee equality for all
Californians, regardless of gender and sexual orientation, and
to protect Californians from potentially severe economic and
social consequences involving life crises.
2)Change in ownership shall not include any transfer between
registered domestic partners, including, but not limited to:
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a) Transfers to a trustee for the beneficial use of a
registered domestic partner, or the surviving registered
domestic partner of a deceased transferor, or by a trustee
of such a trust to the registered domestic partner of the
trustor.
b) Transfers that take effect upon the death of a
registered domestic partner.
c) Transfers to a registered domestic partner or former
registered domestic partner in connection with a property
settlement agreement or decree of dissolution of a
registered domestic partnership or legal separation.
d) The creation, transfer, or termination, solely between
registered domestic partners, of ant co-owner's interest.
e) The distribution of a legal entity's property to a
registered domestic partner or former registered domestic
partner in exchange for the interest of the registered
domestic partner in the legal entity in connection with a
property settlement agreement or a decree of dissolution of
a registered domestic partnership or legal separation.
EXISTING LAW :
1)Requires reassessment of real property to fair market value
upon a change of ownership and adopts the fair market value as
the new base year value for real property. (California
Constitution, Article XIII A, section 2, (a),(b).)
2)Provides numerous specific exclusions to changes in ownership
as between spouses. (Revenue and Taxation Code section 63.)
3)Provides numerous specific exclusions to changes in ownership
including transfers between parents and children, and
grandparents and grandchildren. (Revenue and Taxation Code
section 63.1.)
FISCAL EFFECT : As currently in print, this bill is keyed
fiscal.
COMMENTS : This bill seeks to protect registered domestic
partners from tax reassessment of their property following
transfers between registered domestic partners to the same
extent that spouses are protected under California law.
The system of property taxation in California rests largely upon
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an amendment to the California Constitution, approved by the
voters in 1978, known as Proposition 13. Property tax rules
under Proposition 13 require that a parcel of real property be
reassessed whenever it changes ownership, with annual inflation
adjustments limited at 2 percent. Properties are reassessed
based upon fair market value only upon a change of ownership. A
change in ownership includes almost all transfers of title in
real property.
California property tax law permits certain exemptions from fair
market value reassessment upon the change of ownership. Some
changes of ownership that are excluded from reappraisal include
the transfer of property between spouses, the transfer of the
principal place of residence of up to $1 million of any other
real property between parents and children. Transfers from
grandparents to grandchildren are also excluded from
reassessment. The net effect is that spouses and other family
members who acquire the property by transfer are able to retain
the base year value of the property, thus avoiding an increased
tax burden upon transfer.
There is currently no domestic partner exemption that equates to
the interspousal exemption, despite legal recognition of
registered domestic partners that secures many important rights
and responsibilities consistent with those between married
spouses. This bill would treat all homeowners similarly
situated inasmuch as registered domestic partners would have the
same property tax treatment as spouses, and thus, all transfers
among domestic partners will be excluded from a change in
ownership.
In support of the bill, Equality California writes:
Registered domestic partners experience unequal treatment
with regard to property reassessments following
inter-domestic partner transfers. ? SB 565 eliminates one
of the many legally entrenched forms of economic
discrimination that continue to confront gay, lesbian and
bisexual Californians. For example, if one of two domestic
partners owns a home and dies, the property cannot usually
be transferred to the surviving partner without a
devastating property tax liability. This bill rectifies
this existing disparity.
Without this bill the transfer of property between unmarried
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individuals triggers a reassessment of property tax unless the
individuals hold title as joint tenants or if a surviving joint
tenant was an "original transferor" after the transfer. Under
the current law, if an individual holds property in his or her
name alone and subsequently adds another individual to the deed
as a joint tenant, the individual who is later added to the deed
is not considered an "original transferor." Consequently, a
reassessment occurs should the second individual who was added
to the deed survive the other. As the sponsor states, "the bill
would end this disparity for registered domestic partner and
provide clearer guidance to county assessors relating to
properties held by registered domestic partners."
REGISTERED SUPPORT / OPPOSITION :
Support
Betty Yee, Acting Member, State Board of Equalization (sponsor)
American Federation of State, County and Municipal Employees,
AFL-CIO
Equality California
Opposition
None on file.
Analysis Prepared by : Cynthia Alvillar / JUD. / (916)
319-2334