BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 2207 HEARING: 6/27/12
AUTHOR: Gordon FISCAL: Yes
VERSION: 5/7/12 TAX LEVY: Yes
CONSULTANT: Grinnell
WELFARE EXEMPTION FROM PROPERTY TAX
Provides that specified revenues won't cause a property to
lose its open space exemption
Background and Existing Law
The California Constitution (Article XIII, Section One)
provides that all property is taxable unless explicitly
exempted by the Constitution or federal law. The
Constitution limits the maximum amount of any ad valorem
tax on real property at 1% of full cash value, plus any
locally-authorized bonded indebtedness. Assessors
reappraise property whenever it is purchased, newly
constructed, or when ownership changes. Property owned by
state and local agencies is exempt from the property tax,
but Assessors may assert possessory interests held by
private entities on public lands.
First enacted as an initiative in 1944, the Constitution
additionally allows the Legislature to exempt property used
for charitable purposes, and owned by nonprofit entities
organized and operated for charitable purposes, none of
whose income inure to the benefit of any private
shareholder or individual. The Legislature subsequently
enacted this exemption, commonly known as the "welfare
exemption."
The Legislature additionally enacted a welfare exemption
from property tax for property that is used exclusively for
the preservation of native plants and animals, biotic
communities, geological or geographical formations of
scientific or educational interest, or open-space lands
used solely for recreation and for enjoyment of scenic
beauty (AB 1264, Biddle and AB 185, Bagley, 1971). The
land must be open to the general public subject to
reasonable restrictions, and owned and operated by a
AB 2207 - 5/7/12 -- Page 2
scientific or charitable fund, foundation, limited
liability company, or corporation, the primary interest of
which is to preserve the land. The Legislature extended
the exemption until January 1, 2023 last year (AB 703,
Gordon). According to BOE, properties exempt pursuant to
this section include qualified properties owned by
nonprofit organizations such as the Nature Conservancy, the
Trust for Public Land, Anza-Borrego Foundation, Big Sur
Land Trust, Peninsula Open Space Trust, Napa County Land
Trust, Save the Redwoods League, Santa Catalina Island
Conservancy, and Mountains Restoration Trust.
Assessors determine whether a property is eligible for the
welfare exemption, which is generally restricted to
property:
irrevocably dedicated to religious, hospital,
scientific, or charitable purposes,
owned by an organization not organized or operated
for profit,
where no part of the net income derived from it
inures to the benefit of a private shareholder or
individual, and
used for the actual operation of the exempt
activity.
Proposed Law
Assembly Bill 2207 provides for the purposes of determining
whether the property is eligible for the welfare exemption
for land used exclusively preservation of native plants and
animals, biotic communities, geological or geographical
formations of scientific or educational interest, or
open-space lands used solely for recreation and for
enjoyment of scenic beauty, consideration shall not be
given to property for the use of property for either:
Activities resulting in direct or in-kind revenues,
provided that the activities further the conservation
objectives of the property as provided in a qualified
conservation management plan, including, but not
limited to, revenue from grazing leases, fees for
events or recreational activities, or fees for
permits.
Any lease that furthers the conservation objectives
of the property in a qualified conservation management
plan that identifies:
AB 2207 - 5/7/12 -- Page 3
o Identifies the foremost purpose and use
of the property is for preservation of native
plants and animals, biotic communities,
geological or geographical formations of
scientific or educational interest, or open-space
lands used solely for recreation and for
enjoyment of scenic beauty,
o Points out the overall conservation
management goals, including, but not limited to
identification of permitted activities, and
actions necessary to achieve the goals,
o Describes the natural resources and
recreational attributes of the property,
o Designates the potential threats to the
conservation values or areas of special concern,
and
o Contains a timeline for planned
management activities and for regular inspections
of the property, including existing structures
and improvements.
AB 2207 provides that should any of the above activities
and leases may not generate unrelated business income. The
measure applies in the 2013-14 fiscal year.
State Revenue Impact
According to the Board of Equalization, AB 2207 results in
a property tax revenue loss of $295,000.
Comments
1. Purpose of the bill . According to the author, "AB 2207
provides the needed clarifying language concerning the
state's property tax exemption for lands held by nonprofit
organizations for habitat, open space and recreational
uses. It directs that such activities do not disqualify
the nonprofit from the exemption so long as the activity is
consistent with the management plan for the property. If
AB 2207 is successfully passed, the result will be an
important clarification of the law, properties throughout
California will be treated similarly for the purposes of
this law, and the purpose for which the exemption was
created will be advanced."
2. Tell me what to do . California's property tax system
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is based on the Constitution, state law, regulation, and
local practice, and administered by county assessors, with
redress for taxpayers to assessment appeals boards or
county boards of equalization. The Constitution charges
assessors with appraising all property at fair market value
unless exempt. Assessors generally adhere to exceptions in
state law and regulation, and enforce the terms,
conditions, and processes for taxpayers to claim them.
Additionally, as Assessors are independently elected in
each of California's 58 counties, differences in
administration inevitably exist, and the state exercises no
tangible, direct power to overrule assessors'
determinations. As such, the property tax is a uniquely
locally-administered state tax, despite the state receiving
no direct tax revenue. AB 2207 seeks to ensure uniform
application for the welfare exemption for open-space by
ensuring non-profits don't lose the exemption for allowing
specified uses to take place on the land, so long as the
uses "further" the conservation objectives as detailed in
their qualified conservation management plan. The more
specific the bill's direction to assessors, the fewer
disagreements will exist between assessors and the owners
of these lands as a result.
3. The great wide open ? AB 2207 directs assessors to
ignore revenues from specified activities when determining
whether a property meets the conditions for exemption.
However, the bill lists revenues from a few activities, but
leaves the door open other, undefined uses by not
specifically spelling out the distinct activities that give
rise to allowed revenue. Committee staff suggest the
following amendment to ensure that property owners and
assessors know exactly what's allowed and what isn't:
On page 3, line 30, strike out "may include, but
are not limited to, revenues" and insert "include
those"
On page 3, line 31, strike out "fees for events or
recreational activities, or fees for permits," and
insert "hunting and camping permits, rents from
persons performing caretaking activities who reside in
dwellings on the property, and admission fees
collected for purposes of public enjoyment of the
property."
Assembly Actions
AB 2207 - 5/7/12 -- Page 5
Assembly Revenue and Taxation Committee: 8-0
Assembly Appropriations Committee:17-0
Assembly Floor: 75-0
Support and Opposition (6/20/12)
Support : Bodega Land Trust, Big Sur Land Trust, California
Council of Land Trusts, Catalina Island Conservancy,
Elkhorn Slough Foundation, Land Trust of Santa Cruz County,
Marin Agricultural Land Trust, Mendocino Land Trust, Ojai
Valley Land Trust, Peninsula Open Space Trust, Redwood
Coast Land Trust, Save Mount Diablo, Save the Redwoods,
Sierra Foothill Conservancy, Solano Land Trust, Trust for
Public Land, Wildlife Heritage Foundation.
Opposition : Unknown.