BILL ANALYSIS Ó SENATE GOVERNANCE & FINANCE COMMITTEE Senator Lois Wolk, Chair BILL NO: AB 188 HEARING: 7/6/11 AUTHOR: Block FISCAL: Yes VERSION: 6/29/11 TAX LEVY: Yes CONSULTANT: Grinnell VETERAN'S PROPERTY TAX EXEMPTION Provides that the exemption applies when an unmarried surviving spouse is confined to a health care facility. Background and Existing Law The California Constitution (Article XIII, Section One) provides that all property is taxable unless explicitly exempted by the Constitution or federal law. The Constitution limits the maximum amount of any ad valorem tax on real property at 1% of full cash value, plus any locally-authorized bonded indebtedness. Assessors reappraise property whenever it is purchased, newly constructed, or when ownership changes. The Constitution (Article XIII, Section Four) additionally allows the Legislature to partially or wholly exempt from property taxes the value of a disabled veteran's home if the veteran has lost one or more limbs, is totally blind, or is totally disabled, as a result of a service-connected injury, known as the "disabled veterans' exemption." The Constitution allows taxpayers to apply the disabled veterans' exemption, currently provided by statute at the inflation adjusted value of either $115,060 or $172,592 depending on the taxpayer's income, but not in addition to the veterans or homeowners' exemption. The Constitution additionally allows the exemption for unmarried surviving spouses of persons who die while on active duty, or subsequently die as a result of service-connected injuries. Generally, when taxpayers no longer use a property as a principal place of residence, they sacrifice any exemptions, including the disabled veterans' exemption; however, taxpayers may continue to receive the disabled veterans' exemption if they are confined to a hospital or AB 188 -- 6/29/11 -- Page 2 other care facility if that property were to be his or her residence but for the confinement and the property is not rented to a third party that is not a family member. Currently, four sections of the Revenue and Taxation Code detail the relevant time periods for taxpayers to receive the disabled veterans' exemptions: §75.22 provides 90 days from the date of the change of ownership for the taxpayer to apply for an exemption from supplemental assessments. §205.5 states that the property is eligible for the exemption on the date the taxpayer purchases the property. §276.1 allows taxpayers to claim the exemption within 30 days of receipt of the disability rating from the United States Department of Veterans' Af-fairs. §279 states that the exemption remains in effect until the title of the property changes, the property is altered to no longer be a dwelling, the veteran-an is no longer disabled, or until the owner no longer occupies the property, subject to certain exceptions. Proposed Law Assembly Bill 188 provides that the disabled veterans' exemption continues to apply to unmarried surviving spouses who are confined to a hospital or other care facility if that property were to be his or her residence but for the confinement and the property is not rented to a third party that is not a family member. The measure takes effect in the 2012-13 fiscal years. The bill also imports the appropriate timelines and effective dates from the three other sections into §279, and adds a claimant spouse remarrying to the list of dis-qualifying events State Revenue Impact The State Board of Equalization estimates a negligible revenue effect. AB 188 -- 6/29/11 -- Page 3 Comments 1. Purpose of the bill . According to the author, "AB 188 removes an inequity in current law identified by the Board of Equalization. In 2003, legislation was enacted to ensure that a disabled veteran who must leave his or her home to enter an assisted living facility would continue to receive the exemption, provided the home is not leased out to a third party and would be the principal place of residence for the veteran. However, inadvertently the original legislation failed to extend these provisions to surviving spouses that haven't remarried. This bill corrects this error. This measure will allow a surviving spouse that hasn't remarried who receive the benefit to continue to receive the benefit on their home should they need to enter an assisted living facility. Spouses of soldiers killed in active duty would be entitled to receive the tax exemption on their home should they need to enter an assisted living facility as well. It only makes sense to extend this benefit to the spouse entering an assisted living facility." 2. Upcoming Features . AB 946 (Butler) also contains identical changes to the appropriate timelines and effective dates for the exemption, and adds a claimant spouse remarrying to the list of disqualifying events. The Committee will also hear this measure at its July 6, 2011 hearing. Assembly Actions Assembly Revenue and Taxation 9-0 Assembly Appropriations 16-0 Assembly Floor 60-0 Support and Opposition (6/30/11) Support : State Board of Equalization; AMVETS-Department of California; California Association of County Veterans Service Officers; California State Commanders Veterans Council; Military Officers Association of America-California Council of Chapters; Vietnam Veterans of America-California State Council; American Federation of State, County and Municipal Employees (AFSCME), AFL-CIO; AB 188 -- 6/29/11 -- Page 4 California Assessor's Association; California Assisted Living; California State Commanders Veterans Council; Veterans of Foreign Wars (VFW), Department of California. Opposition : Unknown.