BILL ANALYSIS                                                                                                                                                                                                    Ó

                                                                  AB 563
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          Date of Hearing:  April 4, 2011

                                Henry T. Perea, Chair

                AB 563 (Furutani) - As Introduced:  February 16, 2011

          Majority vote.  Fiscal committee.

           SUBJECT  :  Property taxation:  assessor:  disclosure: appraisal 

           SUMMARY  :  Authorizes city employees to obtain or access 
          otherwise confidential information from the county assessor when 
          the city is conducting an investigation to determine whether the 
          documentary transfer tax (DTT) is imposed.  Specifically,  this 
          bill  :  

          1)Requires a county assessor to disclose information, furnish 
            abstracts, and permit access to all records in his/her office 
            to employees of a city that is conducting an investigation to 
            determine whether a DTT is to be imposed. 

          2)Imposes a state-mandated local program and states that, if the 
            Commission on State Mandates determines that this bill 
            contains mandates by the state, reimbursement to local 
            agencies and school districts for the costs shall be made 
            pursuant to the statutory provisions.  

           EXISTING LAW  :

          1)Requires assessors to keep certain information confidential.  
            ŬRevenue and Taxation Code (R&TC) Section 408(a)].

          2)Provides an exception to the general rule of confidentiality 
            for certain governmental agencies or representatives.  
            Requires the county assessor to disclose information, furnish 
            abstracts, or permit access to all records in his/her office 
            to law enforcement agencies, the county grand jury, and other 
            specified entities, including the county recorder in the case 
            of an investigation to determine whether a DTT is imposed.  
            ŬR&TC Section 408(b)].  


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          3)Allows charter cities to levy a DTT pursuant to a local 
            ordinance and their authority. The locally imposed DTT is 
            generally collected by the county recorder.  ŬR&TC Part 6.7 of 
            Division 2 (Sections 11901-11935)].  

           FISCAL EFFECT  :   None.

           COMMENTS  :   

           1)The Author's Statement  .  The author states that, "AB 563 would 
            allow for information sharing between County Assessor's 
            Offices' and cities to identify change of ownership legal 
            entity transfers and other real property transfers that may 
            not be currently captured.  Enactment of the proposed 
            legislation is estimated to result in improved and increased 
            collection of the Documentary Transfer Tax at a time of fiscal 
            crisis for local governments."

           2)Arguments in Support  .  The City of Los Angeles, sponsor of AB 
            563, believes that "an information sharing program, modeled 
            after the AB 63/SB 1146 program that was initiated in the Fall 
            of 2001 would prove successful in capturing tax owed to local 
            governments, while maintaining taxpayer confidentiality 
            protections." The sponsor states that, "At a time of fiscal 
            crisis for local governments, this type of program would help 
            result in improved and increased collection of an existing 
            revenue source."

           3)DTT  .  The California Constitution (Article XIIIA, Section 4) 
            prohibits transaction taxes or sales taxes on transfers of 
            real property.  However, the DTT law, enacted in 1967, allows 
            cities and counties to enact, by ordinance, taxes on documents 
            that serve to transfer real property.  The DTT applies to 
            deeds of transfer of realty within the jurisdiction that 
            imposes a DTT and is based on the value of the transfer.  The 
            tax may be used for general or specific purposes, although all 
            DTTs levied thus far are general taxes.  The tax is 
            administered by county recorders who cannot, by law, record 
            the property transfer until the tax is paid.  Counties collect 
            the tax but remit the city tax to the appropriate city.   

          All of California's 58 counties impose the tax, which is modeled 
            after the repealed Federal Documentary Stamp Tax. Hundreds of 


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            California cities also levy the tax, ranging from the general 
            law city rate of $.55 for each $500 of value up to $7.50 in 
            the City of Oakland.  Non-charter cities within a county that 
            imposes a DTT may impose its tax at half of the rate of the 
            county, which works as a credit against the county rate.  
            Charter cities may impose a DTT at a higher rate under the 
            municipal affairs doctrine in the California Constitution 
            (Article XI, Section 5).  If they do so at a higher rate than 
            the non-charter rate, then the city DTT does not serve as a 
            credit against the county tax.  Existing law provides several 
            exemptions to the tax, including when any public agency 
            acquires land, land acquired as a result of a plan of 
            reorganization or adjustment such as bankruptcy, and certain 
            transfers in lieu of foreclosure, among others.

          The courts have consistently held that a DTT is an excise tax 
            for the privilege of exercising one of the incidents of 
            property ownership, its conveyance.  It is not a property tax 
            because it is imposed solely on the privilege of disposing of 
            one's property and realizing its actual value.  Fielder v. 
            City of Los Angeles, 14 Cal.App.4th 137; Fisher v. Alameda 
            County, 20 Cal. App. 4th 120. 

           4)Access to Records in the County Assessor's Office  .  Existing 
            law provides that any information and records in the county 
            assessor's office are not public documents and shall not be 
            open to public inspection, unless specifically exempted by 
            law.  Exemptions include sharing of information with law 
            enforcement agencies, county grand jury, or the board of 
            supervisors.  In 2009, the list of enumerated exemptions was 
            expanded to allow a county recorder access to all records in 
            the assessor's office for purposes of determining whether a 
            DTT is due.  ŬR&TC Section 408(b)].  The DTT is administered 
            at the local level by the county recorder, so providing access 
            to assessor information helps recorders to determine whether 
            the DTT applies to certain changes of ownership. 
             AB 563 would further amend R&TC Section 408(b) to add city 
            employees to the list of agencies that may have access to all 
            records in the assessor's office for purposes of determining 
            whether a DTT is due.  AB 563 is sponsored by the City of Los 
            Angeles, a charter city.  According to the State Board of 
            Equalization's (BOE) analysis of this bill, the City of Los 


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            Angeles has an agreement with the Los Angeles County for the 
            collection of taxes between the city and county.  Apparently, 
            the agreement provides that, if the County is unable to, or 
            does not, collect the DTT when the instrument or writing is 
            presented for recordation, the City has the responsibility to 
            collect the DTT.  In order to determine whether the DTT is 
            due, the City may have to conduct investigation and/or perform 
            audits of city revenues related to DTTs, which may require 
            access to assessor's records.  
            Currently, both California and many cities face difficult 
            budget times.  AB 563 aims to increase taxpayer compliance at 
            the local level, thereby generating more revenue to help close 
            budget gaps, consistent with the state's own efforts to close 
            the tax gap.

           5)Taxpayer Confidentiality  .  Generally, critics of information 
            sharing between government entities are concerned about 
            possible unlawful disclosure or inspection of confidential tax 
            information.  Thus, often, provisions allowing information 
            sharing contain safeguards against, and penalties for, 
            unlawful disclosure of confidential taxpayers' information.  
            For example, an existing information sharing program between 
            the Franchise Tax Board (FTB) and cities provides for criminal 
            sanctions for unlawful disclosure or inspection of such 
            information, which supplements FTB's institutional commitment 
            to taxpayer information confidentiality.  The information 
            possessed by the county assessor's office is considerably less 
            sensitive than the information found on income tax returns.  
            Nonetheless, the Committee may wish to consider amending AB 
            563 to include some sort of safeguards against unlawful 
            disclosure of information acquired by city's employees from 
            the county assessor. 

           6)Similar Legislation.

           SB 816 (Ducheny), Chapter 622, Statutes of 2009, made changes in 
            the DTT law relative to city ordinances, assessor records, and 
            change of ownership statements, including allowing county 
            recorders to assess the county assessors' records when 
            investigating if a DTT is due. 

            SB 1146 (Cedillo), Chapter 345, Statutes of 2008, extended the 


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            sunset date for the program that allows the FTB to share 
            information with tax officials of any city in California until 
            December 31, 2014.

            SB 1374 (Cedillo), Chapter 513, Statutes of 2006, extended the 
            program that allows the FTB to provide information to tax 
            officials of any city in California until December 31, 2011.

            AB 63 (Cedillo), Chapter 915, Statutes of 2001, extended the 
            circumstances under which the FTB may disclose tax information 
            to tax officials of any city, until December 31, 2008.  


          California Tax Reform Association
          The City of Los Angeles, Office of the Mayor Antonio R. 
          Villaraigosa (sponsor)

          None on file
          Analysis Prepared by :  Oksana Jaffe / REV. & TAX. / (916)