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