BILL ANALYSIS                                                                                                                                                                                                    




            SENATE REVENUE & TAXATION COMMITTEE

            Senator Lois Wolk, Chair

                                                   AB 157 - Anderson

                                                  Amended: May 20, 2009

                                                                       

            Hearing: July 8, 2009      Tax Levy         Fiscal: Yes




            SUMMARY: Property tax: Transfer of base year value -  
            disaster relief

                 EXISTING LAW (California Constitution) required the  
            Legislature to allow taxpayers to transfer the base-year  
            value of property that is substantially damaged or  
            destroyed by a disaster, as declared by the Governor, to  
            comparable property within the same county that is acquired  
            or newly constructed as a replacement for the substantially  
            damaged or destroyed property (Proposition 50, 1986).

                 EXISTING LAW implements this constitutional  
            requirement, but limits the transfer of base-year value to  
            replacement property acquired or newly constructed within  
            the same county to five years after the disaster (to the  
            extent that the replacement property does not exceed 120%  
            of the fair market value of the old property immediately  
            prior to the disaster).  In 2006, the Legislature extended  
            the deadline from three to five years for disasters  
            occurring on or after July 1, 2003 (AB 1890, Mountjoy).   
            The deadline applies only when the taxpayer acquires a new  
            property or rebuilds in a different location than the site  
            of the disaster; taxpayers may retain the base-year  
            transfer an unlimited amount of time to retaining the  
            base-year value when rebuilding on the site of the disaster  
            because the Constitution exempts real property that is  
            reconstructed after a disaster from the definition of "new  
            construction" requiring reassessment









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                 EXISTING LAW (California Constitution) allows similar  
            treatment for taxpayers seeking to transfer their base-year  
            value to a replacement property acquired or newly  
            constructed in a different county for three years.  

                 THIS BILL extends the deadline for taxpayers to  
            transfer of base-year value to replacement property  
            acquired or newly constructed within the same county from  
            five years to seven years for disasters occurring on and  
            after October 1, 2007.   The measure similarly extends the  
            deadline for taxpayers affected by the Cedar Fire in San  
            Diego County in 2003.  AB 157 also makes legislative  
            findings and declarations.


            


            FISCAL EFFECT: 

                 According to the Board of Equalization (BOE), AB 157  
            results in annual property tax revenue losses of  
            approximately $10,000.


            COMMENTS:

            A.   Purpose of the Bill

                 "Assembly Bill 157 is a disaster relief bill that  
            would extend the timeframe for survivors of the devastating  
            2003 Cedar Fire to replace their fire-destroyed properties.  
             Nothing will ever be the same again for survivors of these  
            catastrophic fire events, but we can help.  The time it  
            takes to rebuild homes and lives cannot be underestimated,  
            and for many, restoration is an ongoing challenge.  Even  
            now, property owners struggle              to resolve the  
            necessary but time-consuming issues surrounding the  
            replacement of their [homes].  I introduced Assembly Bill  
            157 as a simple way to ensure a realistic timetable for  
            addressing the losses that survivors have suffered."









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            B.   Costs and Benefits

                 California voters and the Legislature allowed  
            base-year value transfers for taxpayers affected by  
            disasters to prevent these taxpayers from facing higher  
            property taxes when rebuilding or buying another property  
            after a disaster.  Without this treatment, a taxpayer with  
            a base-year value of $100,000 from 1976 (and $1,000 in  
            property taxes due at the one per cent rate), would instead  
            pay 1% of the acquisition price of the new property, likely  
            resulting in a significant property tax increase.   
            Taxpayers also may apply for a reassessment of  
            disaster-affected property to reflect its post-disaster  
            value; the state even enacts legislation for every Governor  
            declared disaster to reimburse local agencies for  
            first-year revenue losses resulting from these  
            reassessments as sure as the sun rises in the East.

                 While AB 157 is a modest measure that likely will  
            grant benefits for taxpayers who have not yet acquired a  
            replacement property, is the measure really necessary?  The  
            Constitution allows the Legislature to provide whatever  
            timeline it wishes, unlike for base-year transfers to  
            different counties, and after starting at two years, has  
            extended the time period three times: after the Oakland  
            Hills Fire, after the Northridge Earthquake, and again  
            following the Cedar Fire.  BOE estimates that fewer than  
            ten taxpayers per year will benefit from AB 157.  With  
            state and local agencies under intense fiscal stress,  
            should the Legislature enact a measure that extends a tax  
            benefit to such a small set of San Diego County taxpayers?   
            Additionally, while the impact upon individuals and  
            families of being displaced by a disaster destroying  
            property is difficult to underestimate; why should the  
            Legislature extend this benefit more than five years after  
            a disaster?


            Support and Opposition









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                 Support:Board of Equalization; California Association  
            of Realtors; California Department of Insurance; 



                 Oppose:None received.

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            Consultant: Colin Grinnell