BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1700|
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THIRD READING
Bill No: AB 1700
Author: Butler (D)
Amended: 4/17/12 in Assembly
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 8-1, 6/20/12
AYES: Wolk, Dutton, DeSaulnier, Hernandez, Kehoe, La
Malfa, Liu, Yee
NOES: Fuller
SENATE APPROPRIATIONS COMMITTEE : 7-0, 7/2/12
AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price,
Steinberg
ASSEMBLY FLOOR : 48-23, 5/7/12 - See last page for vote
SUBJECT : Property taxation: change in ownership:
exclusion:
cotenancy interest
SOURCE : Equality California
DIGEST : This bill excludes from property tax
reassessment a transfer of cotenancy interest in a
principal residence if the principal residence was owned by
two individuals and was transferred to one of those
individuals upon the death of the other, with the survivor
obtaining sole ownership of that property.
ANALYSIS : The California Constitution (Article XIIIA)
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limits reassessment and annual property value increases for
property tax purposes to two percent per year but requires
reassessment of real property to current fair market value
upon change of ownership (Proposition 13, 1978). The State
Constitution provides an exception to "change in ownership"
for property transfers between spouses, domestic partners,
parents and children (Proposition 58, 1986), and
grandparents and grandchildren (Proposition 193, 1996),
subject to specified limits.
State law also provides other exclusions from reassessment
for changes in ownership. Generally, a change of
ownership does not include any situation where one person
continues to own or reside in the home, such as placing
property in a trust, creating a life estate, or purchasing
the land under a mobile home. However, when more than one
unrelated persons owns a property, and an owner dies, that
owner's share is generally reassessed to fair market value.
A notable exception exists when unrelated persons jointly
own a property as joint tenants; the property is not
reassessed for any transfers among owners who have
"original transferor status," including deaths.
This bill exempts from change of ownership transfers
between two tenants in common beginning on January 1, 2013,
when one of the owners dies and:
The co-owners together own 100% of the property in joint
tenancy, or as tenants in common,
As a result of the death of one co-owner, the surviving
owner holds 100% interest in the property,
Both tenants were co-owners of record and continuously
resided at the property for the one-year period prior to
the death,
The property was the principal place of residence for
both co-owners immediately prior to the death, and
The surviving tenant signs an affidavit under penalty of
perjury certifying that the co-owners continuously
resided at the property for the one-year period prior to
the death.
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The transfer takes place upon death of the co-owner
pursuant to a will or trust, intestate succession, or by
operation of law. This bill specifies that its exclusion
shall not apply to any transfer for which a separate
exclusion applies, and provides definitions for "cotenancy
interest" and "principal residence."
Comments
According to state law and Board of Equalization (BOE) rule
462.040, joint tenancy is characterized by the four
"unities" of interest, title, time, and possession, plus
the right of survivorship. Owners must be on the same
title, and have the same ownership interest, starting at
the same time. Joint tenancy is created by:
A joint tenancy deed from the owner to two or more other
parties,
Owners deeding to an intermediary and taking back a joint
tenancy deed, or
Owners directly transferring the property to themselves
as joint tenants.
In any of the above events, the words "joint tenancy" must
be written on the transfer document given to the county
recorder to ensure that the assessor does not reassess the
property because the owners are creating a joint tenancy.
If the owners fail to write the words, or if the ownership
shares are not equal, BOE rule and state law state that
instead of a joint tenancy, a different relationship
exists, one of "tenants in common." The difference is
significant - transfers between tenants in common are
always subject to reassessment, even in the event of death.
Prior Legislation
SB 153 (Migden, 2008) was vetoed by Governor
Schwarzenegger. His veto message stated: "Existing law
already provides that real property transferred between
spouses and registered domestic partners, or between
parents, grandparents, and children, is exempt from
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reassessment. Further,
co-owners not covered by any of these exemptions have the
option of changing a real property title to a joint
tenancy, thus ensuring that a reassessment does not occur
upon the death of one joint tenant. Given these exemptions
and options provided under existing law, this bill is not
necessary."
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
BOE estimates that the bill will result in a statewide
reduction in property tax revenues of approximately
$108,000 annually. Assuming 50% of the statewide
property tax revenues offset General Fund obligations to
schools pursuant to Proposition 98, the State General
Fund impact would be approximately $54,000 due to
increased state backfill provided to schools. Actual
costs would depend upon the difference between the
factored base year value and current market value of
homes subject to the new exclusion, and the number of
exclusions claimed as a result of the bill.
Likely minor reimbursable mandate costs related to the
imposition of new duties on local tax officials related
to the new change in ownership exclusion. (General Fund)
SUPPORT : (Verified 7/3/12)
Equality California (source)
Antonio Villaraigosa, Mayor of the City of Los Angeles
Betty Yee, Board of Equalization Member
California Apartment Association
California Association of Realtors
California National Organization of Women
Congress of California Seniors
Santa Clara County Assessor
Los Angeles Gay and Lesbian Center
San Francisco County Assessor-Recorder
San Luis Obispo County Assessor
ARGUMENTS IN SUPPORT : According to the author, "AB 1700
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protects surviving co-owners from the financial hardship of
property reassessment when a loved one passes away. People
who live and own a home together and are unmarried, whether
by choice or because of the law, should be treated equally
to married couples."
ASSEMBLY FLOOR : 48-23, 5/7/12
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block,
Blumenfield, Bonilla, Bradford, Buchanan, Butler, Charles
Calderon, Campos, Carter, Cedillo, Chesbro, Davis,
Dickinson, Eng, Feuer, Fong, Fuentes, Galgiani, Gatto,
Gordon, Hayashi, Roger Hernández, Hill, Huber, Hueso,
Huffman, Lara, Bonnie Lowenthal, Ma, Mendoza, Mitchell,
Monning, Pan, Perea, V. Manuel Pérez, Skinner, Solorio,
Swanson, Torres, Wieckowski, Williams, Yamada, John A.
Pérez
NOES: Achadjian, Bill Berryhill, Conway, Cook, Donnelly,
Beth Gaines, Garrick, Grove, Hagman, Halderman, Harkey,
Jeffries, Jones, Knight, Logue, Mansoor, Morrell,
Nielsen, Norby, Silva, Smyth, Valadao, Wagner
NO VOTE RECORDED: Brownley, Fletcher, Furutani, Gorell,
Hall, Miller, Nestande, Olsen, Portantino
AGB:m 7/5/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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