BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 703 (Gordon)
Hearing Date: 08/15/2011 Amended: 05/24/2011
Consultant: Mark McKenzie Policy Vote: G&F 9-0
_________________________________________________________________
____
BILL SUMMARY: AB 703 would extend the property tax exemption for
specified land acquired by nonprofit organizations for natural
resource preservation and open-space purposes until 2022.
_________________________________________________________________
____
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Property tax exemption up to $2,000 up to $4,000up to
$4,000 General*
(foregone revenues)
____________
* Revenue loss represents state backfill of property tax that
would go to schools if the exemption were allowed to expire
(assumes a total statewide property tax impact of up to $10
million, and 40% apportionment to schools).
_________________________________________________________________
____
STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
Existing law, Article XIII Section 4(b) of the California
Constitution, allows the Legislature to grant exemptions from
the property tax for property owned by nonprofit organizations
for religious, hospital, or charitable purposes. When the
Legislature enacted the "welfare exemption" in 1945 to implement
the Constitutional provision, property used for scientific
purposes was included in the property tax exemption. In 1971,
special session legislation was enacted to expand the welfare
exemption to include land owned by specified nonprofit
organizations that is open to the general public and used
exclusively for the preservation of native plants or animals,
biotic communities, geological or geographical formations of
scientific or educational interest, and open space lands used
solely for recreation and for the enjoyment of scenic beauty.
The original exemption expired in 1982 and has been extended
AB 703 (Gordon)
Page 1
five times, most recently by SB 198 (Chesbro), Chapter 533 of
2001, which extended the operative date of the exemption to
January 1, 2012, and the repeal date to January 1, 2013.
AB 703 would extend the operative date of this property tax
exemption for natural resource preservation and open space lands
to January 1, 2022, and the repeal date to January 1, 2023.
The exemption is currently claimed for hundreds of properties in
the state. If the exemption were to expire, these lands would
be subject to taxation and the resulting revenues would benefit
local entities, including school districts. The Board of
Equalization (BOE) estimates the total current exempt value for
these properties does not exceed $1 billion. At the basic 1%
property tax rate, the annual revenue loss associated with
extending this exemption would be up to $10 million,
approximately 40% of which would otherwise go to schools. The
state General Fund backfills any revenue losses to schools.
Notwithstanding the public policy conservation benefits, the
revenue loss associated with this exemption grows annually by
the Proposition 13 inflation factor and as more lands are
preserved as a result of the exemption. For example, revenue
loss estimates associated with the exemption have nearly doubled
since the last extension in 2001.
Staff notes that if the exemption were not renewed, some of the
property currently owned by nonprofit organizations may be
transferred to the state. State-owned property is not subject
to the property tax, and any land transferred to the state would
result in increased land management and administrative costs.