BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 565
                                                                  Page  1

          Date of Hearing:   July 13, 2005

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                   Judy Chu, Chair

                    SB 565 (Migden) - As Amended:  June 20, 2005 

          Policy Committee:                              Revenue and  
          Taxation     Vote:                            5-2
                        Judiciary                             6-2

          Urgency:     No                   State Mandated Local Program:  
          Yes    Reimbursable:              No

           SUMMARY 

          This bill excludes from the definition of "change in ownership"  
          any transfer of property between registered domestic partners,  
          thereby exempting such transfers from triggering reassessment of  
          the property to fair market value under the provisions of  
          Proposition 13.  This bill would be effective for the lien date  
          for the 2006-07 fiscal year. 

           FISCAL EFFECT  

          The Board of Equalization (BOE) estimates this bill would result  
          in local property tax revenue losses of $865,000 annually,  
          beginning in 2006-07.  Pursuant to the Proposition 98 funding  
          formula, the state General Fund would be required to backfill  
          about 39 percent of the K-12 school district property tax  
          reduction, or $337,000 annually.

           COMMENTS  

           1)Background  .  Article XIII A of the California Constitution  
            (Proposition 13) allows reassessment of real property to fair  
            market value only upon a change of ownership or new  
            construction, and otherwise limits annual increases in  
            assessed value to 2% of the property's adjusted base year  
            value.  Proposition 13 did not define the term "change of  
            ownership."

            Over the past 26 years, several constitutional initiatives,  
            statutes, and BOE regulations have exempted certain types of  
            property transfers from triggering reassessment as changes in  








                                                                  SB 565
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            ownership under Proposition 13, thereby allowing the owners to  
            retain the property's "base year value."  Most relevant to  
            this bill, transfers of property between spouses were first  
            excluded from reassessment by statute in 1979.  (This  
            interspousal exclusion was subsequently incorporated into a  
            constitutional initiative approved by the voters in 1986).   
            Other transfers of property that are excluded from  
            reassessment include the transfer of the principal place of  
            residence between parents and children or between grandparents  
            and grandchildren, the sale of a residence by a person over 55  
            who purchases another residence within a county or in another  
            county, and new construction to replace contaminated property.

           2)Purpose  .  Currently there is no domestic partner exclusion  
            that equates to the interspousal exclusion. This bill would  
            establish an exclusion from reassessment for transfers of real  
            property between registered domestic partners.
           Analysis Prepared by  :    Stephen Shea / APPR. / (916) 319-2081