BILL ANALYSIS
SB 565
Page 1
SENATE THIRD READING
SB 565 (Migden)
As Amended August 25, 2005
Majority vote
SENATE VOTE :Not relevant
REVENUE & TAXATION 5-2 JUDICIARY 6-2
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|Ayes:|Klehs, Canciamilla, Chu, |Ayes:|Jones, Evans, Laird, |
| |Jones, Lieber | |Levine, Lieber, Montanez |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Walters, DeVore |Nays:|Haynes, Leslie |
| | | | |
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APPROPRIATIONS 13-4
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|Ayes:|Chu, Bass, Berg, | | |
| |Calderon, Karnette, | | |
| |Klehs, Leno, Nation, | | |
| |Oropeza, Laird, | | |
| |Saldana, Yee, Mullin | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Sharon Runner, Emmerson, | | |
| |Nakanishi, Walters | | |
| | | | |
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SUMMARY : Excludes the transfer of real estate between
registered domestic partners (RDPs) 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 or sexual orientation, and
to protect Californians from potentially severe economic and
social consequences following life crises.
2)Provides that a change of ownership for property tax purposes
excludes specific transfers between RDPs. Includes transfers
to trusts, at death, in connection with property settlements
upon dissolution of registered domestic partnerships
SB 565
Page 2
(Partnership), of co-ownership interests, and distributions of
a legal entity's property to a RDP, or former RDP, in exchange
for the interest of the RDP in the legal entity in connection
with a property settlement or dissolution of a Partnership.
3)Is effective commencing with the lien date for fiscal year
(FY) 2006-07.
4)Provides for no reimbursement to local governments for any
property tax revenue lost pursuant to this bill.
EXISTING LAW :
1)Requires reassessment of real property to fair market value
upon a change of ownership. Adopts the fair market value as
the new base year value for real property.
2)Defines "change of ownership" as a transfer of a present
interest in real property, the value of which is substantially
equal to the value of the fee interest
3)Provides numerous specific exclusions to changes in ownership.
4)Excludes interspousal transfers and transfers between parents
and children from a change of ownership.
5)Provides that numerous transfers of ownership interests in a
legal entity are not considered transfers of the real property
of the legal entity. Requires that subsequent transfers of
ownership interests be tracked so that when any person
acquires more than 50% of the interests in the entity, a
change of ownership is deemed to occur for all of the real
property owned by the entity.
FISCAL EFFECT : The Board of Equalization (BOE) staff estimate
that the property tax revenue loss from this bill will be
approximately $865,000 for each FY.
COMMENTS : The author asserts that RDPs experience unequal
treatment with regard to property reassessments following
inter-domestic partner transfers and that this bill will
eliminate the inequality by excluding inter-domestic partner's
transfers from creating a change in ownership.
SB 565
Page 3
Proponents state that this bill eliminates one of the many
legally entrenched forms of economic discrimination that
continue to confront gay, lesbian and bisexual Californians.
Proponents proffer the following example: "Currently, 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," and state that this bill
rectifies this existing disparity.
BOE amended two regulations, Property Tax Rule 462.040, "Change
in Ownership - Joint Tenancies," and Property Tax Rule 462.240,
"The Following Transfers Do Not Constitute a Change in
Ownership," in November 2003. The Property Tax Rule changes
existing law to cover transfers of real property between RDPs
through intestate succession following death of one RDP as well
as the use of estate planning tools by RDPs to become original
transferor status under joint tenancy. The Property Tax Rule
changes are effective for transfers made on or after November
13, 2003. The transfers described in the Property Tax Rule
changes are included among the transfers specifically authorized
under this bill.
Property taxes are assessed as of the lien date (January 1 of
each year) and paid with respect to the FY commencing the
following July 1. This bill is effective for transfers
occurring on or after January 1, 2006 (the lien date of the
2006-07 FY).
Revenue and Taxation Committee staff note that reassessment of
base year value for property tax purposes is a primary factor
that determines whether individuals are able to retain
appreciated real property following significant life changing
circumstances (e.g., death, divorce, and dissolution). The
assistance offered by this bill will eliminate most property tax
concerns resulting from such circumstances and provide equal
treatment for RDPs and spouses.
Analysis Prepared by : Kimberly Bott / REV. & TAX. / (916)
319-2098
FN: 0012455