BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 816| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 816 Author: Ducheny (D) Amended: 4/28/09 Vote: 21 SENATE REVENUE & TAXATION COMMITTEE : 7-1, 4/22/09 AYES: Wolk, Alquist, Ashburn, Florez, Padilla, Runner, Wiggins NOES: Walters SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 SUBJECT : Property taxation SOURCE : Author DIGEST : This bill makes changes in the Documentary Transfer Tax law relative to: (1) city ordinances, (2) assessor records, and (3) change of ownership statements. ANALYSIS : Existing law (California Constitution, Article XIIIA, Section 4) prohibits transaction taxes or sales taxes on transfers of real property; however, the Revenue and Taxation Code authorizes counties to approve an ordinance to impose a documentary transfer tax (DTT), which applies to deeds of transfer of realty within that jurisdiction and is based on the value of the transfer. In counties, the rate is fifty-five cents ($0.55) for each five hundred dollars ($500) of value. All of California's 58 counties apply the tax, which is modeled after the CONTINUED SB 816 Page 2 repealed Federal Documentary Stamp Tax. Existing law also allows cities to enact ordinances to impose a DTT: 1.Noncharter cities within a County that impose a DTT may apply its tax at half of the rate of the county and applies as a credit against the county rate. 2.Charter cities may impose a DTT at a higher rate under the municipal affairs doctrine in the California Constitution (Article XI, Section 5). If they do so at a higher rate than the non-charter rate, then the city DTT does not serve as a credit against the county tax. Existing law provides several exemptions to the tax, including when any public agency acquires land, land acquired as a result of a plan of reorganization or adjustment such as bankruptcy, and certain transfers in lieu of foreclosure, among others. This bill allows DTT ordinances to include an administrative appeal process to resolve disputes. The measure additionally states that the when this administrative process or a court of law fixes the value of the property for purposes of applying the DTT, that determination does not bind the value for property tax purposes. Existing law provides that any information and records in the Assessor's office are not public documents and shall not be open to public inspection, unless specifically exempted by law. Exemptions include information for law enforcement agencies, county grand jury, or the Board of Supervisors. This bill requires the Assessor to disclose information, furnish abstracts, and permit access to all records to the County Recorder when conducting an investigation to determine whether the documentary transfer tax is imposed. Existing law requires the person acquiring ownership or control of a corporation, partnership, limited liability company, or other legal entity to submit a change in SB 816 Page 3 ownership statement to the Board of Equalization (BOE), signed under penalty of perjury, listing all the counties in which the firm operates. If the person fails to file the statement within 45 days of a written request from the BOE, a penalty applies of 10 percent of the taxes applicable to the new base year reflecting the change in ownership or control. However, the penalty is extinguished if the person files a change in ownership statement within 60 days of BOE notification of the penalty. This bill instead provides that the penalty applies if the person acquiring the corporation, partnership, limited liability company, or other legal entity does not file the change of ownership statement within the earlier of 45 days from the BOE request or 45 days from the date in change of control or ownership. The bill changes two sections of law, the first which applies to changes in control of a firm, the second which applies to changes in ownership. This bill also deletes the provision requiring the penalty to be extinguished if the person files the statement within 60 days of notification of the penalty. According to the author's office, "SB 816 requires that the existing 10 percent penalty be applied on taxes due for the year when a new business owner fails to file a change in ownership statement with the BOE within 45 days of a change of ownership or control. Under current law, the penalty is only applied after a written request for filing is sent from the BOE. This has resulted in multi-year delays in reassessments of business properties and losses of hundreds of millions in taxes to State and Local Governments." FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes SUPPORT : (Verified 5/11/09) California Assessors' Association Los Angeles County DLW:nl 5/11/09 Senate Floor Analyses SB 816 Page 4 SUPPORT/OPPOSITION: SEE ABOVE **** END ****