BILL ANALYSIS SB 816 Page 1 Date of Hearing: July 8, 2009 ASSEMBLY COMMITTEE ON APPROPRIATIONS Kevin De Leon, Chair SB 816 (Ducheny) - As Amended: June 26, 2009 Policy Committee: Revenue and Taxation Vote: 6-3 Urgency: No State Mandated Local Program: Yes Reimbursable: Yes SUMMARY This bill modifies the imposition of an existing penalty on businesses that fail to file a change in ownership statement following the transfer of property, and implements various other changes to administration of property tax law. Specifically, the bill: 1)Imposes a penalty for the failure to file such a statement within 45 days of the date in which the change of ownership or control occurs. Currently the penalty is only applied upon failure to respond by the specified date contained in a written request by the Board of Equalization. 2)Deletes an existing-law provision that extinguishes the penalty if the business files a complete statement within 60 days of notification of the penalty. Instead allows the county board of supervisors to abate the penalty in cases where it is established that the failure to remit the change-of-ownership document was due to reasonable cause. 3)Provides that any ordinance adopted pursuant to the Documentary Transfer Tax Act may include an administrative appeal process for resolution of disputes that are related to the documentary transfer tax. 4)Specifies that, whether the amount of documentary transfer tax is determined by an administrative appeal process or established by a court, the value of the property established for purposes of determining the amount of documentary transfer tax due shall not be binding on the determination of the value of that property for property tax purposes. SB 816 Page 2 FISCAL EFFECT No change in tax liabilities. However, the bill may result in increased penalties and property tax collections. The latter would occur to the extent that the penalty modifications result in more timely filings of change-of-ownership documents. COMMENTS 1)Background . Under Proposition 13, real property is reassessed when it is sold or transferred. Whenever a change in ownership is recorded, the county recorder provides the assessor with a copy of the transfer ownership document as soon as possible. Assessors discover most changes in ownership of real property via grant deeds or other documents that are recorded with the county recorder. However, with respect to property owned by a legal entity (such as corporation, LLC, or partnership), a change of control or ownership may not result in a grant deed or other document being recorded that might alert the assessor that the property should be reassessed. Thus, discovery of these types of changes in ownership is dependent on self reporting. Existing law requires that, whenever there is a change in control or ownership of a legal entity, the party acquiring ownership or control must file a signed change in ownership statement with the BOE. There is no penalty for failing to self-report the change. A penalty (equal to 10% of assessed taxes) is only assessed if the entity fails to report the change of ownership following a written request by BOE. Consequently, there is no consequence for failing to self-report a change of ownership in a timely manner. 2)Purpose . This bill is sponsored by the County Assessors Association as a means to improve the discovery of changes in ownership, resulting in more timely receipt of increased property taxes. Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081