BILL ANALYSIS Ó AB 1422 Page 1 Date of Hearing: May 9, 2011 ASSEMBLY COMMITTEE ON REVENUE AND TAXATION Henry T. Perea, Chair AB 1422 (Committee on Revenue and Taxation) - As Introduced: March 22, 2011 Majority vote. SUBJECT : Property taxation. SUMMARY : Makes several non-controversial changes to California's property tax law. Specifically, this bill : 1)Extends from 30 days to 6 months the period within which a homeowner, who is transferring a base year value from his/her principal residence to a newly purchased replacement home, must notify the county assessor of the completion of new construction on the replacement home. 2)Replaces obsolete statutory references to the "Civil Aeronautics Board of the United States" (which no longer exists) with the phrase the "Federal Aviation Administration" and deletes the obsolete statutory references to the "California Public Utilities Commission" in the definitions of "certificated aircraft," "air taxi," and "aircraft." 3)Clarifies the period within which a person filing an affidavit of interest must apply to the tax collector to have a parcel separately valued on the current roll for the purpose of paying property taxes. EXISTING LAW : 1)Provides that all property is taxable unless explicitly exempted by the California Constitution or federal law. The Constitution limits the maximum amount of any ad valorem tax on real property at 1% of full cash value, and the annual increases to that value are limited to the rate of inflation, not to exceed 2%. 2)Requires a reassessment of real property to current fair market value upon a change of ownership, but creates exceptions to numerous transfers. The value of the property AB 1422 Page 2 established initially for property tax purposes is generally referred to as "base year value", which is subject to annual increases for inflation, not to exceed 2%. 3)Allows property owners over 55 years of age or disabled persons once-in-a-lifetime opportunity to transfer the base year value of their principle residence, within two years from the sale of the original residence, to a replacement home of equal or lesser value within the same county (Proposition 60, 1988), or to a replacement home in counties that have adopted ordinances allowing the transfer (Proposition 90, 1990), provided certain conditions are met and the county assessor is properly notified. Currently, Alameda, Los Angeles, Orange, San Diego, San Mateo, Santa Clara, and Ventura Counties allow these out-of-county transfers. Base year transfers allow taxpayers to continue to pay property taxes at the amount and rate of growth of their previous home and prevent reassessments of their newly purchased homes to full market value. 4)Allows a homeowner, who has been granted a base year value transfer from his/her original residence to a replacement dwelling, to perform new construction on the replacement property subsequent to the transfer and exempts the new construction from assessment. The new construction must be completed within two years of the sale of the original property and its value may not exceed the sales price of the original property. Requires homeowners to notify the assessor in writing of the completion of new construction within 30 days in order for the new construction to be eligible for the property tax relief. 5)Provides that a county assessor may re-number or re-letter parcels or prepare new map pages to show combinations or divisions of parcels. ÝRevenue & Taxation Code (R&TC) Section 327]. 6)Allows any person filing an affidavit of interest to apply to the tax collector to have any parcel separately valued for the purpose of paying property taxes (R&TC Section 2821) and requires the assessor to determine the separate valuation of that individual interest in the parcel (R&TC Section 2823). 7)Requires that applications requesting separate assessment for the purpose of paying property taxes be made during the AB 1422 Page 3 current fiscal year - from July 1 until June 30; however, it authorizes a county board of supervisors to prohibit these applications during the 10 working days preceding each tax installment delinquency - December 10th and April 10th - and during the 10 working days preceding June 30 of each year. 8)Prohibits separate valuations after the lien date (January 1) immediately preceding the current fiscal year when the parcel is covered by a subdivision map filed for recordation with the county recorder. Allows a waiver of this prohibition, however, with respect to requests for separate valuation of new subdivision lots created after the lien date. 9)Provides that any subdivision of property for the purpose of sale, lease, or finance is subject to the Subdivision Map Act. Subdivisions into five or more parcels require local government approval of both a tentative subdivision map, which is discretionary, and a final subdivision map, which is ministerial once all of the conditions of the tentative map have been fulfilled. Subdivisions into four or fewer parcels require local government approval of a parcel map, which is discretionary. In either case, once a map is approved by the local government, the clerk of the council or board of supervisors must transmit the map to the county recorder for recordation. The county recorder has 10 days to accept or reject the map for recordation. FISCAL EFFECT : None COMMENTS : 1)The Purpose of the Bill . Sponsored by the California Assessors' Association (CAA), AB 1422 is a technical, non-controversial bill that improves local administration of property tax laws for the benefit of taxpayers and assessors alike. Consolidating the measures into a single bill negates the need for individual bills to enact each change. 2)Extension of Time to Notify the Assessor . Under existing law, homeowners who do not file a "base year value transfer" claim to notify the assessor within 30 days of completing the new construction are barred from receiving the full benefit of a base year value transfer to which they are otherwise entitled. This bill would amend R&TC Section 69.5(h)(4)(A) to increase from 30 days to 6 months the time that the property owner has AB 1422 Page 4 to notify the assessor when the additional construction is completed. Thus, this bill gives homeowners more time to include, under the initial base year value transfer, the value of new construction improvement made to the replacement home. The value of the improved replacement home still may not exceed the market value of the original property sold, as determined in the original claim for a base year value transfer. As noted by the Board of Equalization staff, the assessor already receives copies of all building permits issued in the county, and thus, this amendment would allow the assessor to extend automatically "the benefit of the base year value transfer to the new construction, when applicable, without any further action or paperwork from the property owner." 3)Separate Assessment Requests . This bill would authorize a board of supervisors to allow filing of applications for requests for separate assessments only between July 1 and March 31, which means that, in counties that approve this new timeline, applications for separate parcel assessment would not be accepted in the months of April, May, and June. According to the sponsor, this amendment is follow up legislation sponsored by the CAA in 2009 - ÝSB 822 (Committee on Revenue and Taxation), Chapter 204] - which allows assessors to create a separate valuation of five or more lots created after the lien date. Splitting parcels in five or more lots created after the lien date requires a preparation of separate tax bills that must be mailed by November 1. In order to allow enough time to process an application for separate assessments - from initial processing to the issuance of the tax bills - this bill proposes an application deadline of April 1. REGISTERED SUPPORT / OPPOSITION : Support California Assessors' Association (sponsor) Opposition None on file Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916) AB 1422 Page 5 319-2098