BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 563
                                                                  Page  1

          CONCURRENCE IN SENATE AMENDMENTS
          AB 563 (Furutani)
          As Amended  August 29, 2011
          Majority vote
           
           ----------------------------------------------------------------- 
          |ASSEMBLY:  |52-27|(May 31, 2011)  |SENATE: |21-15|(August 31,    |
          |           |     |                |        |     |2011)          |
           ----------------------------------------------------------------- 
            
           Original Committee Reference:    REV. & TAX.  

           SUMMARY  :  Authorizes designated city employees to obtain 
          otherwise confidential information from the county assessor when 
          the city is conducting an investigation to determine whether the 
          documentary transfer tax (DTT) should be imposed.    

           The Senate amendments  :

          1)Require a city seeking certain appraisal information relating 
            to the DTT from the local county assessor to reimburse the 
            assessor for any costs incurred as a result of disclosing this 
            information. 

          2)Provide that the state is not required to reimburse local 
            agencies and school districts for specified reasons. 

           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)].  

          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)].  








                                                                  AB 563
                                                                  Page  2


           AS PASSED BY THE ASSEMBLY  , this bill:

          1)Required a county assessor to disclose information, furnish 
            abstracts, and permit access to all records in his/her office 
            to designated employees of a city's finance office that was 
            conducting an investigation to determine whether a DTT should 
            be imposed for an unrecorded change in control or ownership of 
            property. 

          2)Provided that, in order to receive otherwise confidential 
            information, a designated employee of a city's finance office 
            must submit a written request to the assessor certifying, 
            under penalty of perjury, that he/she needs the information to 
            assist with the preparation and enforcement of a DTT and that 
            confidential information would not become public record and 
            would not be open to public inspection. 

          3)Prohibited county assessors from disclosing social security 
            numbers. 

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

           FISCAL EFFECT  :  Unknown.

           COMMENTS  :   

           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."

           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 








                                                                  AB 563
                                                                  Page  3

          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 
          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 impose 
          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. 

           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
                                                                  Page  4

           
           AB 563 (Furutani) would further amend R&TC Section 408(b) to add 
          certain designated employees of a city's finance office 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.  It would also require the city to reimburse the assessor 
          for any costs associated with disclosing this information.  This 
          bill 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 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 an 
          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 (Furutani) 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.

           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, this bill 
          includes certain safeguards to ensure that the  information 
          acquired by city's employees from the county assessor will not 
          become public record and will not be open to public inspection, 
          provided that it is not public record and is not open to public 
          inspection when in the assessor's possession. 

           Similar legislation  .  









                                                                 AB 563
                                                                  Page  5

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


           Analysis Prepared by  :    Oksana Jaffe / REV. & TAX. / (916) 
          319-2098                                               FN: 
          0002098