BILL ANALYSIS Ó
SB 507
Page 1
Date of Hearing: August 17, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 507 (DeSaulnier) - As Amended: July 1, 2011
Policy Committee: Revenue and
Taxation Vote: 6-3
Urgency: No State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill extends from 45 days to 90 days the deadline for new
owners of real property and certain legal entities to submit a
change-in-ownership (COS) or a change-in-control statement and
increases the penalty for failure to file a change-in-ownership
statement in the case of real property transfers that must be
reported to the local county assessor. Specifically, this bill:
1)Increases the maximum penalty for failure by a new property
owner to timely file a COS, upon request from the assessor.
2)Establishes procedures that the assessor must follow for
processing changes in ownership and provides for penalty
abatements for specified reasons.
FISCAL EFFECT
The Board of Equalization (BOE) will incur minor and absorbable
costs.
The bill appears to be a reimbursable mandate. The amount of
any reimbursements should be minor. Counties may save money if
larger penalties lead to increased compliance or more revenues.
In some instances, there is an extended period for owners to
comply, which could reduce administrative costs.
COMMENTS
1)Purpose . The author states that, "A property owner's failure
to report changes in ownership, willful or not, has greatly
SB 507
Page 2
reduced the ability of county assessors and the BOE to
efficiently process these changes. It is time to increase the
penalty for non-compliance so as to encourage timely response
to requests for information, should a preliminary change in
ownership be incomplete or when the county assessor or BOE
requires additional information for processing."
The author states the purpose of this legislation is not to
generate revenue for assessors' offices, rather the proposed
penalty increase is an attempt to encourage timely filing of
the Change of Ownership Statement (COS). The author argues
that taxpayers often view the small penalty as an opportunity
to postpone timely filing of the COS to delay paying
appropriate property taxes. The increase in the penalty is an
attempt to eliminate the financial advantage of late filing
and to facilitate timely payment of property taxes.
2)Background. Assessors revalue property at current, full
market value for property tax purposes whenever it changes
ownership or there is new construction. When ownership
changes, the new owner must file a change in ownership
statement. However, there is no penalty for failure to file
the statement unless the assessor makes a written request for
the statement and the owner subsequently fails to file the
statement within 45 days. Additionally, persons who acquire
control or ownership of legal entities that own property must
file a change in ownership statement with BOE, but again, no
penalty applies for failing to file the statement with BOE.
BOE then makes a written request to the person for the
statement, and assessors may then apply the penalty if the
person does not respond to the BOE written request.
3)Prior legislation . SB 507 is similar to AB 843 (Eng, 2007)
and AB 926 (Chu, 2006), measures vetoed by Gov.
Schwarzenegger, who stated in vetoing AB 926 that while a
reasonable argument existed for raising the penalty cap, he
was concerned that taxpayers did not actually receive requests
and penalty notices from assessors in a timely manner. AB 843
responded to the veto message and extended the time period
from 45 days to 60 days before the assessor levies penalties
for failing to respond and also clarifies communications with
taxpayers. However, Gov. Schwarzenegger was not convinced by
the changes, stating his reservation in his AB 843 veto
message, "that the notification procedures in this measure do
not adequately ensure that property owners actually receive
SB 507
Page 3
requests from county assessors in a timely manner."
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081