BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | SJR 20|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
CONSENT
Bill No: SJR 20
Author: Alquist (D)
Amended: 5/5/10
Vote: 21
SENATE REVENUE & TAXATION COMMITTEE : 4-0, 5/12/10
AYES: Wolk, Alquist, Ashburn, Padilla
NO VOTE RECORDED: Walters
SUBJECT : Taxation: sale of principal residence: senior
citizens
SOURCE : California Senior Legislature
DIGEST : This resolution urges the Congress and the
President of the United States to enact legislation that
increases the amount of gain that a senior citizen 65 years
of age and older and who pays for long-term care costs is
allowed to exclude from income, from $250,000 to $500,000,
and from $500,000 to $750,000 for joint returns, from the
sale of the qualifying principal residence of the senior
citizen.
ANALYSIS : Existing federal and state law allows
taxpayers to exclude up to $250,000 single/$500,000 joint
in income resulting from the sale of their principal
residence. Additionally, taxpayers may adjust the basis of
inherited property upward to fair market value at the time
of the decedent's death. Therefore, any appreciation in
the property's value that occurred prior to the decedent's
CONTINUED
SJR 20
Page
2
death is exempted from capital gains taxation.
A senior citizen who is 65 years of age or older is equally
subject to capital gains taxes on the sale of his/her
principal residence even if he/she will be moving into a
unit within an assisted living facility, continuing care
retirement community, or similar, where there may be heavy
upfront fees.
FISCAL EFFECT : Fiscal Com.: No
SUPPORT : (Verified 5/17/10)
California Senior Legislature (source)
OPPOSITION : (Verified 5/17/10)
California Tax Reform Association
ARGUMENTS IN SUPPORT : According to the author's office
most seniors do not sell their principal residence to move
into another comparable home. Rather, seniors often sell
in order to downsize into a senior apartment because they
can no longer financially and physically care for their
larger home. They also use the equity to pay for long-term
health care costs, like long-term care insurance, home and
community based services, or institutionalized care. For
the many seniors who have lived a lifetime in the same
home, or whose home value has skyrocketed in recent
decades, the current exclusion amounts of $250,000/$500,000
are too small. These insufficient exclusion amounts create
a disincentive for seniors to sell their homes as they try
to financially prepare for their long-term health care
needs. This resolution urges Congress and the President of
the United States to enact legislation to increase the
amount of gain a senior citizen, who is 65 years of age or
older and who pays for long-term care costs, is allowed to
exclude from income, from $250,000 to $500,000, and from
$500,000 to $750,000 for joint returns, from the sale of
the qualifying principal residence of the senior citizen.
The author's office states, such an increase in the amount
a senior could exclude from taxation as a capital gain
would incentivize seniors to do the right thing, and plan
for their future, long-term health care needs, rather than
SJR 20
Page
3
to stick their heads in the sand and to stay in a home that
is too expensive for them to care for and too big for them
to manage. In short, this resolution enables seniors to
become better equipped to plan for their long-term care
needs as they grow older.
ARGUMENTS IN OPPOSITION : The California Tax Reform
Association opposes this resolution, they write, "As your
resolution points out, taxpayers are already allowed to
exclude from income, up to $250,000 or $500,000 for joint
returns, of gain from the sale of a qualifying principal
residence. Most seniors in California have already
benefited, for many years, from the state and federal
mortgage interest deduction and Prop. 13's cap on property
taxes. Furthermore, these taxpayers are likely to have
already accrued significant equity in their home on a tax
free basis, can roll over any equity into another house,
and, as noted, already are free from a very large portion
of capital gains. We do not see a justification for
providing this class of taxpayers with additional tax
relief, especially given the large federal budget
deficits."
DLW:do 10/25/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****