BILL ANALYSIS
SENATE REVENUE & TAXATION COMMITTEE
Senator Michael J. Machado, Chair
SB 565 - Migden
Amended: August 25, 2005
Senate Rule 29.10(b) Referral
Hearing: September 6, 2005 Tax Levy Fiscal: YES
SUBJECT: Property Tax: Change in ownership exception for
domestic partners
EXISTING LAW - Article XIIIA of the Constitution
(Proposition 13) requires reassessment of real property to
current fair market value upon a change of ownership or
when new construction has taken place. Otherwise the
Constitution limits annual increases in assessed value to
the lesser of 2% or CPI increase.
Proposition 13 did not define "change of ownership."
Over the past 26 years various constitutional initiatives,
statutes and Board of Equalization regulations have
exempted certain types of property transfers from
triggering reassessment as changes in ownership under
Proposition 13, thereby allowing the owners to retain the
property's Proposition 13 "base year value." In particular,
transfers of property between spouses were first excluded
from reassessment by statute in 1979 (the year after
Proposition 13 was enacted). This interspousal exclusion
was subsequently incorporated into a legislative
constitutional change, approved by the voters in 1986.
Other transfers of property that are now excluded from
reassessment include transfers between parents and
children, and in limited cases between grandparents and
grandchildren, the sale of a residence by a person over 55
who purchases another residence within the same county, or
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in some cases within another county, and acquisition of a
new property to replace contaminated property - these
exclusions were all enacted through constitutional
amendment.
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 current fair
market value under the provisions of Proposition 13. The
bill would be effective for the 2006-07 fiscal year and
thereafter.
FISCAL EFFECT:
Board of Equalization estimates that 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:
A. Purpose of the bill
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. The
author indicates that the bill is intended "to guarantee
equality for all Californians, regardless of gender or
sexual orientation, and to further the state's interests in
protecting Californians from the potentially severe
economic and social consequences of abandonment,
separation, the death of a partner, and other life crises."
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B. Is the bill constitutional?
Probably. Proposition 13, when it was enacted in
1978, contained no definition of "change in ownership,"
thus leaving the definition to legislative interpretation.
As there was no specific exemption from the reappraisal
rule for transfers of property between spouses, the
Legislature enacted that exemption as part of the original
Proposition 13 implementation legislation. A constitutional
exemption was subsequently enacted, in 1986, to
specifically exempt interspousal transfers from the
reappraisal requirement. But during the 1978 through 1986
period, there was no apparent concern that the original
legislative enactment of the exemption was
unconstitutional. In light of current law ensuring rights
of domestic partners, the change made by this bill may be
considered analogous to the original legislative exemption
of interspousal transfers - an arguably constitutional
interpretation of Proposition 13 in a case where the
proposition itself is silent.
Support and Opposition
Support:Betty Yee, Acting Member, BOE (sponsor)
AFSCME
Equality California
Oppose:None known
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Consultant: Martin Helmke