BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



           ------------------------------------------------------------ 
          |SENATE RULES COMMITTEE            |                  SB 1494|
          |Office of Senate Floor Analyses   |                         |
          |1020 N Street, Suite 524          |                         |
          |(916) 651-1520         Fax: (916) |                         |
          |327-4478                          |                         |
           ------------------------------------------------------------ 
           
                                         
                                    CONSENT


          Bill No:  SB 1494
          Author:   Senate Revenue and Taxation Committee
          Amended:  As introduced
          Vote:     21

           
           SENATE REVENUE & TAXATION COMMITTEE  :  5-0, 4/14/10
          AYES:  Wolk, Walters, Alquist, Ashburn, Padilla


           SUBJECT  :    Property taxation

           SOURCE  :     Board of Equalization


           DIGEST  :    This bill, relating to property taxation, makes  
          the following changes including correcting a cross  
          reference and renumbering errors:  (1) allowing trustees to  
          apply for and inspect parent-child transfers and base year  
          value transfers, (2) enacting general language precluding  
          assessors from revoking homeowners' exemptions for  
          disaster-affected property upon a declaration of disaster  
          from the Governor, (3) extends the sunset on intercounty  
          pipeline valuation methodology, (4) clarifying language to  
          assessment appeals statutes, (5) providing clarifying  
          language to assessment appeals board conflict of interest  
          provisions, and (6) clarifying assessment roll statutes.

           ANALYSIS  :    This bill makes eight changes to property tax  
          law:

           I.Renumbering Error  .

                                                           CONTINUED





                                                               SB 1494
                                                                Page  
          2

          Existing law (California Constitution) provides that all  
          property is taxable unless explicitly exempted by the  
          Constitution or federal law, and imposes property tax on  
          all taxable real and personal property.  The Constitution  
          provides that taxation of "real" property (structures  
          affixed to the ground, etc.) is limited to the 1975  
          valuation adjusted for new construction plus an annual  
          inflation factor of no more than two percent.  When a  
          change in ownership takes place, or the property is newly  
          constructed, assessors revalue real property at full market  
          value as of the year the transaction or construction takes  
          place.

          Existing law provides that the creation, termination, and  
          transfer of certain leasehold interests with a term of more  
          than 35 years can be a change in ownership resulting in  
          reassessment.  

          This bill corrects a drafting error inadvertently created  
          by recent amendments made by Chapter 364, Statutes of 2006  
          (AB 3076, Revenue and Taxation Committee) by adding  
          paragraph designations (R&T 61).

           II.  Allowing Trustees to Apply for and Inspect  
            Parent-Child Transfers and Base Year Value Transfers.
           
          Existing law (California Constitution) provides an  
          exception to "change of ownership" for property transfers  
          between spouses under specified circumstances, for  
          transfers between parents and children (Proposition 58,  
          1986), and for transfers between grandparents and  
          grandchildren (Proposition 193, 1996), subject to certain  
          limits.   

          Existing law provides that a change of ownership has not  
          occurred when parents transfer the principal residence and  
          the first $1 million of full cash value of all other real  
          property to their children when a claim is filed.  Existing  
          law defines "children" as:

               A.     Any child born of the parent or parents except  
                 a child adopted by another person.

               B.     Any stepchild of the parent or parents and the  







                                                               SB 1494
                                                                Page  
          3

                 spouse of that stepchild while the relationship of  
                 stepparent and stepchild exists.

               C.     Any son or daughter-in-law of the parents.

               D.     Any child adopted by the parent or parents  
                 pursuant to statute.

          Claims for the parent-child change in ownership must be  
          filed, signed, and may be inspected only by the persons  
          specified above.  Trustees are not expressly listed;  
          however, the State Board of Equalization (BOE) has opined  
          that trustees may file for parent-child transfers as part  
          of their fiduciary duty.

          This bill adds a trustee of a trust to that list (R&T  
          63.1).

          Existing law allows homeowners over the age of 55 and  
          disabled persons one opportunity to transfer their base  
          year values to homes of equal or lesser value within the  
          same county (Proposition 60, 1988), or to homes in counties  
          that adopt ordinances allowing the transfer (Proposition  
          90, 1990), under specified conditions.  Currently, Alameda,  
          Los Angeles, Orange, San Diego, San Mateo, Santa Clara, and  
          Ventura Counties allow these out-of-county transfers.  Base  
          year transfers allow taxpayers to continue to pay property  
          taxes at the amount and rate of growth of their previous  
          home and prevent reassessments to the cash value of their  
          newly purchased home.  Coowners who are joint tenants, a  
          tenant in common, or a community property owner may claim a  
          base year value transfer.  BOE has opined that the present  
          beneficial owner of the trust, not the trustee, may claim  
          the base year value transfer. 

          This bill adds present beneficial trustees to the list of  
          eligible base year value claimants.

          III.  Relieving the Disaster of Disaster Relief  .

          Existing law provides a homeowners' exemption from property  
          taxes equal to $7,000 in assessed value (at a one percent  
          property tax rate, the exemption reduces property taxes by  
          roughly $70) for owner-occupied homes.  Once granted,  







                                                               SB 1494
                                                                Page  
          4

          homeowners' exemptions are generally permanent.  However,  
          an Assessor may deny a homeowner's exemption if the  
          property becomes vacant or is under construction as of the  
          January 1st lien date.  The homeowners' exemption is  
          disallowed if, on the January 1 lien date, a home  
          previously receiving the exemption has been totally  
          destroyed and has not been rebuilt and reoccupied by its  
          owners.  However, when there is a Governor declared state  
          of emergency for a natural disaster, legislation is usually  
          enacted for each disaster to allow the exemption to remain,  
          the Code now contains 22 separate protections for taxpayers  
          from the assessor revoking the homeowners' exemption in  
          such a case, occasionally referred to as "the sadistic  
          assessor provision."

          This bill enacts general language precluding assessors from  
          revoking homeowners' exemptions for disaster-affected  
          property upon a declaration of disaster from the Governor,  
          thereby avoiding the need for special purpose legislation  
          for each individual disaster.

           IV.Extending Sunset on Intercounty Pipeline Valuation  
            Methodology  .  
           
          Existing law requires that assessors value intercounty  
          pipeline rights-of-way according to a codified assessment  
          valuation methodology (AB 1286, Takasugi, 1996), codifying  
          an agreement between assessors and intercounty pipeline  
          right-of-way owners after litigation transferred the  
          assessment duty from BOE to assessors in 1993 (  Southern  
          Pacific Pipe Lines, Inc. v. State Board of Equalization  , 14  
          Cal.App.4th 42).  Essentially, assessors determine value  
          based on the density classification of the pipeline on a  
          per-mile basis, and that value is rebuttably presumed to be  
          correct.  The Legislature has once before extended the  
          methodology (AB 2612, Brewer, 2000).

          This bill extends this methodology for use to the 2015-16  
          fiscal year. 

           V.Cleanup to Assessment Appeals Statutes  .

          Existing law provides that assessment appeals boards must  
          hear and decide appeal applications within two years of the  







                                                               SB 1494
                                                                Page  
          5

          filing of the application.  If the two-year time period is  
          not met, then the taxpayer's opinion of value will be  
          enrolled for the tax year covered by the appeal and in some  
          cases will remain in effect until the appeals board makes a  
          final determination.  

          This bill makes clarifying nonsubstantive amendments  
          identified by a working group of the Tax Section of the  
          California State Bar.
           
          VI.Cleanup to AB 824, Assessment Appeals Board Conflict of  
            Interest  .

          Existing law bars certain county officials and employees  
          from representing, for compensation, property owners in  
          assessment appeal hearings in the county where they work.   
          Last year, the Legislature consolidated all affected  
          individuals into one section of law (AB 824, Harkey, 2009).

          This bill repeals provisions in R&T 1624.3, 1636.2, and  
          1636.5 rendered outdated and duplicative in AB 824.

           VII.Cleanup to Roll Correction Statutes  .

          Existing law states that incorrect entries on the  
          assessment roll that has been completed by the county  
          assessor and delivered to the county auditor may be  
          corrected within certain time limits depending upon the  
          nature of the error or omission. 

          This bill makes clarifying nonsubstantive amendments  
          identified by a working group of the Tax Section of the  
          California State Bar.

           VIII.Deletes Erroneous Cross Reference  .

          Existing law requires that property taxes paid must be  
          refunded if the assessment appeals board reduces an  
          assessed value after an appeal, under R&T 1613.  However,  
          R&T 1613 was repealed and its provisions imported into  
          R&T1610.8 (SB 1063, Committee on Revenue and Taxation,  
          2003)

          This bill corrects the cross reference error.







                                                               SB 1494
                                                                Page  
          6


           Purpose of the Bill
          
          SB 1494 consolidates eight items that make minor, technical  
          changes to property tax law sponsored by BOE.  The bill  
          improves the administration of property tax laws to help  
          both taxpayers and tax administration agencies.   
          Consolidating the measures into a single bill negates the  
          need for individual bills to enact each change.   
          Additionally, the measure only contains items with  
          universal agreement.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No    
          Local:  No

           SUPPORT  :   (Verified  4/14/10)

          Board of Equalization (source) 


          DLW:nl  4/15/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

                                ****  END  ****