BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Tom Torlakson, Chairman
559 (Kehoe)
Hearing Date: 5/31/07 Amended: 4/18/07
Consultant: Mark McKenzie Policy Vote: Rev.&Tax 5-3
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BILL SUMMARY: SB 559 would allow registered domestic partners
whose property was reassessed due to a change of ownership
between January 1, 2000 and January 1, 2006 to apply to the
county assessor to receive a reversal of the reassessment.
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Fiscal Impact (in thousands)
Major Provisions 2007-08 2008-09 2009-10 Fund
Property tax backfill state impact for property
reassessmentsGeneral
from 2000-2006 of up to $1,100
(see staff comments)
Local mandate unknown, likely minor costs General
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STAFF COMMENTS: SUSPENSE FILE.
Article XIII A of the California Constitution (Proposition 13)
requires reassessment of real property at fair market value upon
a change of ownership, and otherwise limits annual increases to
assessed value to 2% of the adjusted base year value.
Proposition 13 did not define "change of ownership." Existing
law provides exclusions from reassessment by state law and
regulations issued by the Board of Equalization (BOE).
Generally, exclusions are provided between spouses, parents and
children, and grandparents and grandchildren, with specified
limitations. Notably, transfers between registered domestic
partners (RDPs) under certain circumstances were excluded from
the definition of change of ownership first by BOE rule in 2003,
then by state law (SB 565, Migden, 2005). Generally, a change
of ownership does not include any situation where one person
continues to own or reside in the home, such as placing property
in a trust, creating a life estate, or purchasing the land under
a mobile home.
This bill would exclude transfers of property between registered
domestic partners that occurred between January 1, 2000 and
January 1, 2006 (when SB 565 took effect) from the definition of
change of ownership. Assessors would be required to reverse any
reassessment due to property transfers between RDPs during this
timeframe, upon application by the transferee before June 30,
2009. This bill prohibits refunds of property taxes due to the
reversal of reassessment.
Staff notes that this bill is similar to other retrospective
changes in ownership exclusions where reassessments have been
reversed on a prospective basis. Existing law provides for
transfers between co-owners between 1975 and 1981, and between
parents and disabled children between 1975 and 1984.
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SB 559 (Kehoe)
Staff notes that BOE estimates reductions in statewide property
taxes due to reversal of reassessments as a result of this bill
would be approximately $912,000 for principal residences, and
approximately $2 million for other property types. These
figures for personal residences are based on a methodology that
estimates the number of RDP households, the value difference
between current median home prices and assessed value of
properties receiving the homeowner's exemption, the average
reappraisal amount, and an assumed 4% annual rate of transfer.
BOE acknowledges the difficulty in estimating the impact of this
bill on transfers of other property types. Factors that may
further limit the amount of property tax reductions are the date
of the reassessment, whether the property was held in joint
tenancy, and the number of RDPs who would claim the reversal of
reassessed value prior to the June 30, 2009 deadline.
Staff notes that pursuant to Proposition 98, the state General
Fund is required to backfill any reductions in property taxes to
K-12 schools. In 2005-06, schools received 38% of property
taxes statewide. If statewide property tax losses due to this
bill are $2.9 million, the state General Fund would be required
to backfill approximately $1.1 million in schools' losses.
Staff notes that to the extent that reductions in assessed
property values result in lower claims for property tax
deductions on income tax returns, this bill would result in
General Fund savings.