BILL ANALYSIS Ó
AB 2046
Page A
ASSEMBLY THIRD READING
AB 2046 (Allen and Huffman)
As Amended May 21, 2012
Majority vote. Tax levy
REVENUE & TAXATION 6-2 APPROPRIATIONS 12-5
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|Ayes:|Lara, Beall, Charles |Ayes:|Fuentes, Blumenfield, |
| |Calderon, Cedillo, | |Bradford, Charles |
| |Fuentes, Gordon | |Calderon, Campos, Davis, |
| | | |Gatto, Ammiano, Hill, |
| | | |Lara, Mitchell, Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Harkey, Nestande |Nays:|Harkey, Donnelly, |
| | | |Nielsen, Norby, Wagner |
| | | | |
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SUMMARY : Revises the definition of a "change in ownership" to
create an exclusion from property reassessment for specified
transfers of a floating home marina. Specifically, this bill :
1)Provides that a purchase of a floating home marina, as
defined, by an eligible entity formed by the marina's tenants,
does not trigger a reassessment of the marina's real property
to current fair market value for property tax purposes.
2)Specifies that both of the following requirements must be met
in order for the transfer to qualify for the exclusion from
reassessment:
a) A transfer of a floating home marina is made to a
non-profit corporation, stock cooperative corporation,
limited equity stock cooperative, or other entity formed by
the tenants of a floating home marina for the purpose of
purchasing the marina; and,
b) The individual tenants who were renting at least 51% of
the berths in the floating home marina prior to the
transfer participate in the transaction through the
ownership of at least 51% of the voting stock of, or other
ownership or membership interest in, the entity that
acquires the floating home marina.
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3)States that, if the transfer of a floating home marina has
been excluded from reassessment and the marina has not been
converted to a condominium, stock cooperative ownership, or
limited equity cooperative ownership, then any subsequent
transfer of shares or interests in the entity that acquired
the marina shall be subject to reassessment for property tax
purposes.
4)Requires a floating home marina that does not utilize recorded
deeds to transfer ownership interest in the berths to file a
report, by February 1 of each year, with the county assessor's
office, as specified.
5)Requires a new resident owner or other purchaser of a floating
home within a floating home marina, which does not utilize
recorded deeds to transfer ownership interest in the berths,
to file a change in ownership statement, under penalty of
perjury, within 30 days of a change in ownership.
6)Defines "floating home marina," by reference to Civil Code
Section 800.4, as an area where five or more floating home
berths are rented, or held out for rent, to accommodate
floating homes. Excludes from this definition:
a) A marina where 10% or fewer of the berths are leased or
held out to lease to floating homes; and,
b) A marina or harbor i) which is managed by a nonprofit
organization; ii) the rules and regulations of which are
set by majority vote of the berth holders thereof; and,
iii) which contains berths for fewer than 25 floating
homes.
7)Defines "pro rata portion of the real property" as the total
real property of the floating home marina multiplied by a
fraction, the numerator of which is the number of transferred
shares of voting stock, or other ownership or membership
interests, and the denominator is the total number of
outstanding shares of voting stock, or other ownership
interests in, the entity that acquired the floating home
marina, as provided.
8)Specifies that the state will not reimburse any local agency
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for any property tax revenues lost by it pursuant to this
bill.
9)States that no reimbursement for costs that may be incurred by
a local agency or school district is required for specified
reasons, but provides that, if the Commission on State
Mandates determines that this act contains other costs
mandated by the state, reimbursement shall be made pursuant to
Government Code Title 2, Division 4, Part 7 (commencing with
Section 17500).
10)Takes effect immediately as a tax levy.
FISCAL EFFECT : The Board of Equalization (BOE) staff estimates
that this bill would result in an annual loss of $212,000.
COMMENTS :
The Purpose of this Bill. According to the author, "the
reassessment of floating home properties upon transfer is much
more similar to that of mobile homes than it is to fixed
structures and should be reflected this way in the law. The
ultimate goal Ýof this bill] is to give floating homes marinas
the ability to be purchased by a neighborhood association," by
excluding the transfer of a floating home marina from the
definition of a "change of ownership."
Property Taxes: Background. The property tax is one of the
major general revenue sources for local governments in
California. It applies to all classes of property, is imposed
on property owners and is based on the value of the property.
Much of the law pertaining to property taxation is prescribed by
Articles XIII and XIII A (commonly known as Proposition 13) of
the California Constitution. Proposition 13 was added to the
California Constitution in June 1978 and was most recently
amended by Proposition 26 in 2010. It was designed to provide
real property tax relief by imposing a set of interlocking
limitations upon the assessment and taxing powers of state and
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local governments.<1>
Section 1 of Article XIII A of the California Constitution
states that, as a general rule, the maximum amount of any ad
valorem tax on real property may not exceed 1% of the property's
full cash value, as adjusted for the lesser of inflation or 2%
per year. The term "full cash value" means the "county
assessor's valuation of real property as shown on the 1975-1976
tax bill" or, thereafter, "the appraised value of real property
when purchased, newly constructed, or a change in ownership has
occurred after the 1975 assessment" (emphasis added) ÝCalifornia
Constitution, Article XIII A, Sections 1 and 2]. In other
words, the California Constitution requires that real property
be reassessed to its current fair market value whenever a
"change in ownership" has occurred.
What is a "Change in Ownership"? The definition of a "change in
ownership" was not included in Proposition 13, but rather, was
left to implementing legislation. Shortly after the passage of
Proposition 13, the Assembly Revenue and Taxation Committee
appointed a special Task Force - a broad-based 35-member panel
that included legislative and State BOE staff, county assessors,
attorneys in the public and private sectors, and trade
associations - to suggest a statutory scheme for implementing
Proposition 13, including applicable "change in ownership"
provisions. Following the Task Force's recommendations, the
Legislature defined the term as a transfer of a present interest
in real property, including the beneficial use thereof, the
value of which is substantially equal to the value of the fee
interest. (Revenue and Taxation Code Section 60). For policy
reasons, the Legislature has, over the years, exempted various
transfers from the "change in ownership" definition. The
exempted transfers, such as, for example, a transfer of real
property between spouses or a purchase of a mobilehome park by
its residents, among others, do not trigger a reassessment of
property to current fair market value. Instead, the property
retains its prior base year value.
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<1> Since any tax savings resulting from the real property tax
limitations provided in Sections 1 and 2 of Article XIII A could
be effectively eliminated through the imposition of additional
state and local taxes, Sections 3 and 4 place additional
restrictions upon the imposition of any such taxes. See Amador
Valley Joint Union High Sch. Dist. v. State Bd. of Equalization ,
(1978) 22 Cal.3d 208.
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The Mobilehome Park Resident Occupancy Program (MPROP). In
1984, the Legislature enacted MPROP in order "to facilitate
conversions of mobilehome parks to tenant ownership, thereby
maintaining affordable housing for the tenants." ÝStrong v.
Board of Equalization (2007) 155 Cal. App.4th 1194]. The
program allows mobilehome park residents to apply for
low-interest loans to finance the conversion of mobilehome parks
to resident ownership. It is funded through a $5 fee that
certain mobilehome owners pay along with their annual
registration fee, as well as through loan repayment. The
Department of Housing and Community Development (HCD) states on
its Web site that, currently, approximately $8 million is
available under MPROP.
As part of the MPROP, the Legislature excluded a direct or
indirect transfer of a mobilehome park to an entity formed by
the tenants from the definition of a "change of ownership,"
provided that 51% of the entity is owned by the tenants renting
at least 51% of the spaces in the park prior to the transfer.
As a result, the tenants retain the prior base-year value in the
mobilehome park, since the transfer does not trigger a
reassessment of the property. Once the park has been purchased
by the residents and the purchase was not subject to
reassessment, any subsequent pro-rata change of ownership in
resident-owned mobilehome parks is subject to reassessment. In
other words, when a resident who participated in the original
purchase of the park sells or otherwise transfers his/her
ownership interest in the park, a pro-rata share of the park's
real property would be reassessed to its current fair market
value.
According to the Senate Select Committee on Mobile and
Manufactured Homes (Select Committee), there are approximately
4,822 mobilehome parks and manufactured communities in the
California, with an estimated 700,000 residents living in them.
In the vast majority of parks, mobilehome residents own their
homes but rent the spaces on which their homes are installed
from the park on a month-to-month or long-term lease agreement.
According to the Select Committee, of the 4,822 parks, most are
privately owned by investor groups or owner/operators and an
estimated 150 are owned by resident organizations or non-profit
organizations. Contrary to their name, mobilehomes generally
are not mobile. Once installed in a park, they are rarely ever
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moved. Between 1985 and 2001, MPROP provided loans to assist
with conversion in 66 mobilehome parks around the state. Since
2002, new loan activity under the program has slowed and
activity continues to decline. The program had no successful
applications in 2010 and only two in 2011. The HCD indicates
that the increasing cost and complexity of park conversions are
two of the primary reasons for the reduction in the number of
loan applications.
What Does This Bill Do? AB 2046 allows tenants of a floating
home marina to purchase the marina without triggering a
potential reassessment of the marina for property tax purposes.
Similarly to the exclusion for purchases of mobilehome parks,
the marina's tenants must form a non-profit corporation, stock
cooperative corporation, limited equity stock cooperative, or
other entity to purchase the marina. This bill further limits
the availability of the proposed exclusion by requiring
individual tenants who were renting at least 51% of the berths
in the floating home marina prior to the transfer to participate
in the transaction and own at least 51% of the voting stock or
membership interests of the entity that acquires the floating
home marina.
Should a Transfer of a Floating Home Marina Be Treated the Same
as a Transfer of a
MobileHome Park for Property Tax Purposes ? Generally, the
residents of a mobilehome park, like the tenants of a floating
home marina, do not own the land underneath their homes where
they reside. Instead, they rent a space in a mobilehome park
from the owner or operator of the park, or, in the case of a
floating home, a berth from the marina's owner or operator.
Functionally, the ownership structure of a mobile home is
comparable to that of a floating home. But the tax benefit - an
exclusion from reassessment for property tax purposes - is only
available for purchases of mobilehome parks, and not floating
home marinas, by the tenants. Should this benefit be extended
to the tenants of a floating home marina?
A floating home is considered to be real property, not a vessel.
It stays in a permanent location, just like a regular home,
except the location is on the water. A floating home is subject
to property tax and usually is connected to utilities and other
services, such as cable or satellite TV, and Internet. Many
people use floating homes as their principal residences, just
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like owners of mobile homes. Proposition 13 provides protection
from a reassessment of property until a "change in ownership"
has occurred. Arguably, it is unfair, or excessively
burdensome, to treat a purchase of a floating home marina by the
tenants as a "change in ownership," since the tenants presently
use and occupy the marina as renters. Furthermore, the
"underlying purpose and chief aim of Proposition 13 was real
property tax relief" ÝBoard of Supervisors v. Lonergan (1980) 27
Cal.3d 855, 863], ensuring that people are protected from being
"taxed" out of their homes because of increasing property taxes.
Finally, owners of mobile homes - who are similarly situated -
are allowed to purchase the mobilehome park in which they reside
without triggering an increase in the amount of property tax
associated with the park.
It is important, however, to look at the legislative intent
underlying the creation of the exclusion for conversions of a
mobilehome park into resident-owned, in order to determine if
the same rationale would apply in the case of floating home
marina conversions. In the mid-1980s, as a result of increasing
park rents for low- and moderate-income residents and the
closure of some parks and displacement of residents, the concept
of resident-owned parks, where residents form a homeowners
association to purchase a park and convert it to a mobilehome
subdivision, condominium, stock co-operative, or non-profit
ownership, gained popularity. In response, the Legislature
enacted a number of laws, including the MPROP, to assist
mobilehome residents with the conversion costs in order to
provide the residents with an opportunity to obtain management
and financial control over the park. A price of a mobilehome
park is not cheap, and, for the most part, residents of those
parks tend to be low- or moderate-income people. The
low-interest loan program and the exemption from reassessment
for property tax purposes were envisioned as a subsidy, part of
financing for conversions of mobilehome parks into
resident-owned parks. In fact, most of those conversions would
not have taken place in the absence of these subsidies,
including the tax benefit, provided by the state. On average, a
price of a manufactured home tends to be lower than that of a
floating home. An average price of a mobilehome park is also
lower than the price of a floating home marina. Thus, arguably,
the rationale for creating a tax benefit for mobilehome park
purchases by its residents, i.e., a need to provide financial
assistance to residents in order to effectuate those
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conversions, may not necessarily apply in the case of floating
home marinas.
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098
FN: 0003884