BILL ANALYSIS AB 402 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 402 (Ma) As Amended August 20, 2007 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |45-31|(May 24, 2007) |SENATE: |25-13|(September 7, | | | | | | |2007) | ----------------------------------------------------------------- Original Committee Reference: REV. & TAX. SUMMARY : Makes various changes regarding change of ownership of real property. The Senate amendments : 1)Clarify the circumstances wherein foster children may be included in the definition of "children" for purposes of the parent/child exclusion from change of ownership. 2)Add double-jointing language to include changes made to a statute amended in this bill also amended in SB 1045 (Committee on Revenue and Taxation). 3)Create a new statute to enact the compliance requirements for notices of change of ownership of interests in cooperative housing corporations, etc., contained in this bill. EXISTING LAW : 1)Requires reassessment of real property to fair market value whenever there is a change of ownership. Excludes from the definition of change of ownership transfers between parents and children of: a) principle places of residence; and, b) the first $1 million of real property other than principal residences. Defines "children" to include a natural child (other than a natural child adopted by another), a stepchild (until the marriage upon which the relationship exists is terminated by divorce or, if by death, until remarriage of the surviving stepparent), a son-in-law or daughter-in-law, and an adopted child (other than one adopted after age 18). 2)Requires a property owner to notify the county assessor whenever there is a change of ownership. However, there is no AB 402 Page 2 penalty for failing to file the change of ownership statement unless the assessor requests the notice. Assessors typically are alerted to changes of ownership when transfer documents (deeds) are filed with the county recorder's office. AS PASSED BY THE ASSEMBLY , this bill: 1)Amended the definition of "children" with respect to a change of ownership exclusion to include foster children. Identified the information needed to be filed with the county assessor to establish the right to the exclusion. 2)Required owners to provide notice upon request by the county assessor if a change of ownership interest occurred without utilizing recorded deeds. 3)Required reimbursement to local agencies and school districts for costs that the Commission on State Mandates determined were mandated by the state. 4)Provided that no appropriation was made by this bill and the state shall not reimburse any local agency for any property tax assessment lost due to this bill. FISCAL EFFECT : The Board of Equalization estimates an annual property tax loss related to the transfers between foster parents and foster children of $173,000, resulting in a General Fund revenue loss of approximately $57,000. COMMENTS : The author states, "AB 402 addresses two areas of concern regarding change in ownership property tax laws under Proposition 13 - It requires managers of cooperatives to report the transfer of individual units in cooperative to county assessors and expands Proposition 13's inter-familial tax exemption to include foster children." According to the author, this bill is about assessment fairness, including foster children under the inter-familial exclusion from change of ownership and requiring notices for change of ownership interests in housing cooperatives is just like requiring notices for other changes of ownership in real property. Proponents state this bill, as amended, addresses concerns over the administration of the exclusion for foster child/foster parent transfers and the need for reporting requirements for changes in ownership for stock cooperative developments. AB 402 Page 3 Further, the incorporation of required documentation for foster child/foster parent transfers will improve administration of the exclusion and minimize abuse. Proponents believe a penalty should be imposed for the failure to report transfers of interest in the co-op association consistent with other transfers to improve reporting compliance, which is a real problem. Revenue and Taxation Committee staff note that the ability for one form of property ownership to escape reassessments on transfer creates unfairness and uncertainty within property taxation. It also undermines the general tenets of Proposition 13, which provide that a change of ownership causes a reassessment to current fair market value. Analysis Prepared by : Kimberly Bott / REV. & TAX. / (916) 319-2098 FN: 0002528