BILL ANALYSIS
SB 1494
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Date of Hearing: June 28, 2010
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Anthony Portantino, Chair
SB 1494 (Committee on Revenue and Taxation) - As Amended: June
21, 2010
Majority vote.
SENATE VOTE : 33-0
SUBJECT : Property taxation.
SUMMARY : Makes several changes to the property tax law, repeals
duplicative provisions, and corrects erroneous cross-references.
Specifically, this bill :
1)Requires the State Board of Equalization (BOE) to accept a
registered warrant (RW) from a taxpayer, fee payer or
surcharge payer as a payment for any tax, surcharge, or fee
obligation owed to BOE, provided that the RW has been paid
directly to the taxpayer, surcharge or fee payer.
2)Corrects a drafting error inadvertently created by recent
amendments made by AB 3076, (Committee on Revenue and
Taxation), Chapter 634, Statutes of 2006 to Revenue and
Taxation Code (R&TC) Section 61, relating to change in
ownership provisions for certain leasehold interests.
3)Adds a trustee to the list of persons who can file claims for
the parent-child and grandparent-grandchild "change in
ownership" exclusion claims on behalf of eligible transferors
and transferees.
4)Authorizes a trustee to inspect otherwise confidential claims
for the exclusion previously filed.
5)Provides that, for purposes of the "base year value" transfer,
the definition of "person" includes an individual who is the
present beneficiary of a trust.
6)Establishes a general provision to preclude assessors from
revoking homeowners' exemptions for disaster-affected property
upon a declaration of disaster from the Governor, thereby
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avoiding the need for special purpose legislation for each
individual disaster.
7)Extends the use of the existing assessment valuation
methodology for inter-county pipeline rights-of-way that is
otherwise scheduled to sunset on January 1, 2011.
8)Clarifies that in the case of assessment appeals that have not
been decided yet, the two-year period before a property
owner's opinion of value becomes controlling applies to
supplemental and escape assessment appeals.
9)Repeals provisions of R&TC Sections 1624.3, 1636.2, and
1636.5, relating to assessment appeals board members and
hearing officers, that are duplicative of R&TC Sections 1612.5
and 1612.7.
10)Recasts R&TC Section 4831 to clarify provisions relating to
the statute of limitations on assessment roll corrections.
11)Corrects the cross-reference error in R&TC Section 5096,
relating to property tax refunds resulting from an assessment
appeal.
12)Amends both the Public Resources Code (PRC) and the R&TC to
reflect recent changes in the state government's
organizational structure.
EXISTING LAW :
1)Prescribes procedures for the issuance of registered warrants
and provides that a registered warrant is acceptable and may
be used as security for the performance of any public or
private trust or obligation.
2)Provides that all property is taxable unless explicitly
exempted by the California Constitution or federal law.
Limits ad valorem taxes on real property to 1% of the full
cash value of that property, as set forth in the California
Constitution. "Full cash value" is defined as the assessor's
valuation of real property as shown on the 1975-76 tax bill
or, thereafter, the appraised value of that real property when
purchased, newly constructed, or when "a change in ownership"
has occurred.
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3)Requires a reassessment of real property to current fair
market value upon a "change of ownership of that property,"
which means that the value of the property, for property tax
purposes, is redetermined based on current market value. The
value of the property established for property tax purposes
initially, or redetermined where appropriate, is referred to
as "base year value", which is subject to annual increases for
inflation, not to exceed 2%.
4)Defines the phrase "a change in ownership" as a transfer of a
present interest in real property, including the beneficial
use thereof, the value of which is substantially equal to the
value of the fee interest. (R&TC Section 60).
5)Provides that the creation, termination, and transfer of
certain leasehold interests with a term of 35 years or more
can be a change in ownership resulting in assessment. [R&TC
Section 61(c)].
6)Provides that a transfer between parents and their children of
a principal residence or other real property with the full
cash value of $1 million or less is eligible for the "change
in ownership" exclusion. (Proposition 58, 1986). This
exclusion also applies to transfers of real property from
grandparents to grandchildren, if the parents of the
grandchildren are deceased as of the date of transfer.
(Proposition 193, 1996). A property transferred under these
circumstances would retain its low Proposition 13 base year
value, subject to a maximum increase of only 2% a year. The
Legislature's authority to create statutory exemptions from
property tax reassessment was affirmed by the courts. [See,
e.g., Strong v. Board of Equalization (2007) 155 Cal.App.4th
1182].
7)Provides that a transfer of real property between parents and
children through the medium of a trust is eligible for the
exclusion from reassessment [R&TC Section 63.1(9)]; however,
it does not expressly list a trustee as the person who may
file and sign the claim for the exclusion.
8)Allows any person over the age of 55 years and any disabled
person to transfer the "base year value" of that person's
primary residence to a newly acquired or constructed
replacement residence. The definition of "person" means an
individual and expressly excludes any type of legal entity.
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9)Exempts from property tax the first $7,000 of the full value
of a dwelling when occupied by an owner as his/her principal
residence (so-called a 'homeowners' exemption'). [California
Constitution, Article XIII, Section 3(k); R&TC Section 218].
10)Requires county assessors to value inter-county pipeline
rights-of-way according to a codified assessment valuation
methodology, which applies to each tax year from the 1984-85
tax year to the 2010-11 tax year and is set to expire on
January 1, 2011. (R&TC Section 401.10).
11)Provides that the assessment appeals board must hear and
decide appeal applications within two years of the filing of
the application.
12)Bars certain county officials and employees from
representing, for compensation, property owners in assessment
appeal hearings in the county where they work.
13)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.
14)Requires that property taxes be refunded if the assessment
appeals board reduces an assessed value after an appeal.
15)Transfers, pursuant to the Governor's Reorganization Plan No.
1 of 2009, duties of the Division of Telecommunications in the
Department of General Services (DGS) to the Office of the
State Chief Information Officer (CIO), including duties
relating to implementing revenue generating procedures for the
911 emergency telephone system.
16)Abolishes the California Integrated Waste Management Board
and transfers specified duties of the board to the Department
of Resources Recycling and Recovery, including duties related
to electronic waste.
FISCAL EFFECT : The State Board of Equalization's staff
estimates that this bill will have no direct impact on state
revenue.
COMMENTS :
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1)The purpose of this bill . This bill, sponsored by the BOE, is
intended to improve the administration of property tax laws to
help both taxpayers and tax administration agencies and to
codify BOE's existing administrative practice and procedures
related to the transfer of real property from parents to
children and to the base year value transfers. According to
the author, this measure contains only items with universal
agreement; items that are controversial or problematic will be
removed from the bill.
2)RWs . Under state law, the State Controller is responsible for
issuing warrants drawn from the General Fund (GF) for payment
of obligations of the state. In instances where the amount
payable out of the GF is in excess of the balance remaining in
the GF after deducting amounts earmarked or reserved for
payment by law, the Controller can issue a "RW." A RW is a
warrant that carries a promise to pay the bearer the amount
shown on the warrant plus interest, by a date prescribed on
the warrant, usually within one year of the date of issuance.
Interest accumulates at the rate determined by the Pooled
Money Investment Account (PMIA).
Under current law, the Franchise Tax Board is required to accept
state-issued RWs in satisfaction of taxpayer obligations to
the state. However, BOE is not required, but only authorized,
to accept RWs at its own discretion. In July, 2009, the BOE
voted to accept RWs in satisfaction of obligations associated
with tax programs it administers. The BOE states that having
specific authority to accept RWs would eliminate any future
ambiguity and would allow its staff to implement plans to
accept and process any RWs immediately, if necessary. This
bill would also delete somewhat confusing language in
Government Code (GC) Section 17280(c) relating to interest
payable on a RW.
3)Leasehold Interests . Under existing law, the creation,
termination, and transfer of certain leasehold interests with
a term of 35 years or more may be a change in ownership
resulting in reassessment. AB 3076 (Committee on Revenue and
Taxation), Chapter 364, Statutes of 2006, amended R&TC Section
61(c) to codify the county assessor practice of reassessing
only the floating home, and not the berth, when a floating
home undergoes a change of ownership. However, the amendments
also mistakenly deleted the "(1)" at the beginning of the
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first sentence of subdivision (c). This bill corrects that
drafting error by adding paragraph and subparagraph
designations to the previously undesignated text to make
complete sentences for each provision.
4)Parent-child exclusion . Existing law provides that a transfer
of real property between parents and children through the
medium of a trust is eligible for the exclusion from
reassessment [R&TC Section 63.1(9)]; however, it does not
expressly list a trustee as the person who may file and sign
the claim for the exclusion. In its Letter to Assessors
2008/018, BOE has advised assessors that a trustee can sign a
claim form requesting a parent-child exclusion from
reassessment. The BOE reasoned that, since the trustee has
the fiduciary responsibility to carry out the terms of the
trust and can sign legal documents on behalf of the trust, it
follows that he/she/it is authorized to sign the parent-child
exclusion claim. Nonetheless, many practitioners and some
property owners are concerned that R&TC Section 63.1(d), which
lists persons who may sign the claim, does not expressly
include trustees.
5)Base Year Value Transfer . A person over the age of 55, or a
disabled person of any age, may sell his/her principal
residence and transfer its base year value to a replacement
principal residence within the same county or another county
that accepts inter-county transfers. In its Letter to
Assessors 2006/010, BOE has advised that the individual who
has the present beneficial interest in a trust is considered a
claimant for purposes of the base year value transfer, if all
of otherwise applicable requirements are met. However,
existing law - R&TC Section 69.5 - does not expressly address
trusts and, therefore, causes uncertainty and confusion among
property owners and practitioners. Hence, this bill is
necessary to clarify existing law and to eliminate that
uncertainty and confusion.
6)Disaster Relief - Homeowners' Exemption . Existing law
provides a homeowners' exemption from property taxes equal to
$7,000 in assessed value for owner-occupied homes. An
assessor may deny this exemption if the property becomes
vacant or is under construction as of the January 1st lien
date. For example, a home destroyed on or before January 1,
2010 is not eligible for the exemption for the 2010-11 year.
When a Governor has declared a state of emergency for a
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natural disaster, legislation is usually enacted to allow the
exemption to apply to homes that are damaged or destroyed in
the disaster. This bill would establish a general rule
precluding assessors from revoking the homeowner's exemption
for disaster-affected property upon a Governor's declaration
of disaster, thus avoiding the need for special purpose
legislation for each individual disaster. Specifically, this
bill addresses eligibility for the exemption under three
different scenarios. A dwelling that has been partially
destroyed or damaged in a disaster would continue to be
eligible for the exemption if the owner's absence is temporary
and the owner intends to return to the home. Similarly, a
dwelling that has suffered total destruction in a
Governor-declared disaster would continue to be eligible for
the exemption. However, a dwelling that was previously
eligible for the exemption but no longer exists on the lien
date because it was totally destroyed in a disaster that was
not a Governor-declared disaster would not be eligible for the
exemption until the structure is replaced and occupied.
According to the sponsor, this provision codifies current BOE
guidance and administrative practices and is consistent with
legislation enacted in 2008 for the disabled veterans'
exemption. Furthermore, this bill improves efficiency and
saves on legislative bill printing costs by avoiding the need
for double- and triple-joining language in years with multiple
disasters.
7)Inter-county Pipeline Rights-of-Way . The valuation
methodology for inter-county pipeline rights-of-way was first
established in 1996 by AB 1286 (Takasugi), Chapter 801,
Statutes of 1996. It codified an agreement reached between
county assessors and inter-county pipeline rights-of-way
owners after litigation had transferred the assessment duty
from the BOE to local county assessors. (Southern Pacific
Pipe Lines, Inc. v. State Board of Equalization, 14
Cal.App.4th 42). The use of the methodology was extended by
AB 2612 (Brewer), Chapter 607, Statutes of 2000, until January
1, 2011, and this bill is intended to do the same through the
2015-16 fiscal years. The BOE sponsored the extension of the
existing methodology at the request of both the California
Assessors' Association and taxpayer representatives.
8)State Government's Organizational Structure . This bill would
correct responsible state agency references in the Emergency
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Telephone Users Surcharge Act (R&TC Section 41001 et seq.) to
conform to the Governor's Reorganization Plan No. 1 of 2009,
which transferred duties of the Division of Telecommunications
in the DGS to the Office of the State CIO. It would also
correct responsible state agency references in the Integrated
Waste Management Fee Law (R&TC Section 45001 et seq.) to
conform to SB 63 (Strickland), Chapter 21, Statutes of 2009,
which abolished the California Integrated Waste Management
Board and transferred its duties to the Department of
Resources Recycling and Recovery within the California Natural
Resources Agency. Finally, SB 1494 would delete the obsolete
definition of "board" contained in the Electronic Waste
Recycling Act of 2003 (PRC Section 42460 et seq.).
9)Related Legislation .
AB 230 (Charles Calderon), introduced in the 2009-10 legislative
session, would authorize a trustee to sign a claim for the
parent-child "change in ownership" exclusion and would provide
that principal residences held in trust are eligible for base
year value transfers. AB 230 is currently pending with the
Senate Committee on Revenue and Taxation.
REGISTERED SUPPORT / OPPOSITION :
Support
State Board of Equalization (sponsor)
Opposition
None on file
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098