BILL ANALYSIS                                                                                                                                                                                                    




                     SENATE GOVERNANCE & FINANCE COMMITTEE
                            Senator Lois Wolk, Chair
          

          BILL NO:  AB 563                      HEARING:  6/29/11
          AUTHOR:  Furutani                     FISCAL:  Yes
          VERSION:  5/11/11                     TAX LEVY:  No
          CONSULTANT:  Grinnell                 

                       PROPERTY TAX APPRAISAL INFORMATION
          

            Assessors must disclose information to cities to collect 
                          the documentary transfer tax


                           Background and Existing Law  

          The California Constitution (Article XIIIA, Section 4) 
          prohibits the state from levying transaction taxes or sales 
          taxes on transfers of real property; however, the 
          Documentary Transfer Tax (DTT), enacted in 1967, allows 
          cities and counties to enact taxes on deeds of transfer of 
          realty within that jurisdiction.  Counties or cities may 
          use proceeds of the tax for general or specific purposes, 
          although all DTTs levied thus far are general taxes.  
          County recorders administer the tax, and cannot record the 
          property transfer until the purchaser pays the tax.  
          Counties collect the tax but remit the city tax to the 
          appropriate city.  All of California's 58 counties and 
          hundreds of cities levy the tax, ranging from the general 
          law city rate of fifty-five cents per $1000 of value up to 
          $15.00 per $1,000 in the City of Oakland.  In counties, the 
          rate is fifty-five cents ($0.55) for each five hundred 
          dollars ($500) of value.  The DTT is largely modeled after 
          the repealed Federal Documentary Stamp Tax.

          Generally, any information and records in the Assessor's 
          office are not public documents and are not open to public 
          inspection, unless allowed by law.  Exemptions include 
          information for law enforcement agencies, county grand 
          jury, or the Board of Supervisors.  Two years ago, the 
          Legislature required the Assessor to disclose information, 
          furnish abstracts, and permit access to all records to the 
          County Recorder when conducting an investigation to 
          determine whether the documentary transfer tax is due (SB 
          816, Ducheny, 2008).  The City of Los Angeles wants the 
          Assessor to share this information with city financial 




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          officials to help assess the DTT.


                                   Proposed Law  

          Assembly Bill 563 requires the Assessor to disclose 
          information, furnish abstracts, or permit access to all 
          records in his or her office to designated employees of a 
          city's finance office when conducting an investigation to 
          determine whether a documentary transaction tax should be 
          imposed for an unrecorded change in control or ownership of 
          property.  Upon request, the Assessors shall provide the 
          information to the designated employee, who must certify to 
          the assessor that the information is necessary to assist 
          with the preparation and enforcement of the DTT, and is not 
          a public record that is open to public inspection.  The 
          measure states that any information provided cannot include 
          social security numbers.  


                               State Revenue Impact
           
          No estimate.


                                     Comments  

          1.   Purpose of the bill  .  According to the Author, "AB 563 
          would allow for information sharing between County 
          Assessor's Offices' and cities to identity 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.   Give an inch, take a mile  ?  In 2001, the Legislature 
          allowed local officials to obtain taxpayer information from 
          the Franchise Tax Board (FTB) to enforce their local 
          business license taxes, pursuant to a written agreement (AB 
          63, Cedillo).  In 2006, the Legislature extended the 
          program until 2011 (SB 1374, Cedillo).  In 2008, the 
          Legislature extended the program until 2014, and required 
          local agencies to share its business license tax 
          information with the FTB to help it administer the Personal 
          Income and Corporation Tax Laws (SB 1146, Cedillo).  Cities 





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          routinely cite these programs as effective revenue 
          generators; however, the City of Los Angeles, the sponsor 
          of this bill, has been particularly aggressive using the 
          FTB information for local tax enforcement.  The City of Los 
          Angeles sends threatening letters to any person within the 
          city who included any business income on a Schedule C with 
          FTB, stating they faced significant penalties and interest 
          unless they obtained a business license and remitted the 
          appropriate tax.  Collections agents followed up with phone 
          calls.  While information sharing helps tax enforcement 
          agencies ensure that taxpayers are paying the correct 
          amount, will the fiscally distressed City of Los Angeles 
          use DTT information authorized by this bill in potentially 
          aggressive ways, similar to the past?  The Committee may 
          wish to consider the manner in which cities plan on using 
          the information, and whether the possible enhancements for 
          tax enforcement and revenues will negatively affect 
          taxpayers.  

          3.   Do it yourself  .   Currently, the City of Los Angeles 
          relies on Los Angeles County to collect the DTT on its 
          behalf.  However, because the County receives less of a 
          share of the tax owed than the City does for real estate 
          transactions in the City, the City wants to collect some of 
          the money itself.  However, they require the County 
          Assessor's information to do so, giving rise to AB 563.


                                 Assembly Actions  

          Assembly Revenue and Taxation 6-3
          Assembly Appropriations                 12-5
          Assembly Floor                     52-27


                         Support and Opposition  (6/23/11)

           Support  :  Office of Mayor Antonio Villaraigosa, City of Los 
          Angeles, City of Lakewood, California Assessors 
          Association, California Nurses Association, California Tax 
          Reform Association

           Opposition  :  Unknown.   








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