BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                   SB 507|
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                              UNFINISHED BUSINESS


          Bill No:  SB 507
          Author:   DeSaulnier (D)
          Amended:  7/1/11
          Vote:     21

           
           SENATE GOVERNANCE & FINANCE COMMITTEE  :  6-2, 4/27/11
          AYES:  Wolk, DeSaulnier, Hancock, Hernandez, Kehoe, Liu
          NOES:  Fuller, La Malfa
          NO VOTE RECORDED:  Huff

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8

           SENATE FLOOR  :  21-13, 5/31/11
          AYES:  Alquist, Calderon, Corbett, De León, DeSaulnier, 
            Evans, Hancock, Hernandez, Kehoe, Leno, Lieu, Liu, 
            Lowenthal, Padilla, Pavley, Price, Simitian, Steinberg, 
            Vargas, Wolk, Yee
          NOES:  Anderson, Blakeslee, Cannella, Correa, Dutton, 
            Emmerson, Fuller, Gaines, Harman, Runner, Strickland, 
            Walters, Wyland
          NO VOTE RECORDED:  Berryhill, Huff, La Malfa, Negrete 
            McLeod, Rubio, Wright

           ASSEMBLY FLOOR  :  Not available


           SUBJECT  :    Property taxation:  change in ownership 
          statement

           SOURCE  :     California Assessors Association


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           DIGEST  :    This bill increases the penalty for new owners 
          failing to file a Change in Ownership Statement upon 
          request from the assessor or the Board of Equalization 
          (BOE) from $2,500 to $5,000 for property eligible for the 
          homeowners' exemption, and from $5,000 to $20,000 for 
          property not eligible for the homeowners' ex-emption.  This 
          bill extends the deadline from 45 days to 90 days for new 
          owners to file a change of ownership statement with either 
          the assessor or BOE, and to comply with the request without 
          penalty.  This bill applies to statements law requires new 
          owners file with assessors for locally-assessed property, 
          or with BOE, which collects the statement when a legal 
          entity changes ownership or control.  

           Assembly Amendments  (1) authorize the county board of 
          equalization or assessment appeals board, instead of the 
          county board of supervisors to order the penalty abated, 
          and (2) make clarifying changes.

           ANALYSIS  :    Assessors revalue property at current, full 
          market value for property tax purposes whenever it changes 
          ownership or is newly constructed.  Whenever 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.

          The penalty for failing to file a Change in Ownership 
          Statement (COS) after receiving a request from the assessor 
          is 10 percent of the tax, up to a maximum of $2,500, if the 
          violation was not willful.  The county board of supervisors 
          may abate the penalty due to reasonable cause, provided the 
          taxpayer filed an application for abatement within 60 days 
          after the assessor's notification of the penalty.

          This bill extends from 45 days to 90 days the deadline for 

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          new owners of real property and certain legal entities to 
          submit a change-in-ownership 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. Extends from 45 days to 90 days the time period to file: 


             A.    A COS required to be filed by a new property owner 
                for real property transfers that must be reported to 
                the local county assessor; 

             B.    A Legal Entity Ownership Program (LEOP) COS or a 
                change-in-control statement required to be mailed by 
                a legal entity to the State Board of Equalization 
                (BOE); or, 

             C.    A response to a BOE written request for a legal 
                entity to file a LEOP COS or change in control 
                statement. 

          2. Increases the maximum penalty for failure by a new 
             property owner to timely file a COS, upon request from 
             the assessor from: 

             A.    $2,500 to $5,000 for all property eligible for the 
                homeowners' exemption; and

             B.    $2,500 to $20,000 for property not eligible for 
                the homeowners' exemption. 

          3. Clarifies that the penalty imposed on a legal entity for 
             failure to file a LEOP COS with the BOE is to be levied 
             by the assessor. 

          4. Requires the assessor to identify, in his/her written 
             request for a COS, the real property or manufactured 
             home for which the statement is required to be filed and 
             requires the notice of penalty to identify the parcel or 
             parcels for which the penalty is assessed. 

          5. Clarifies that the penalty applies if either the new 

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             owner or a legal entity submits an incomplete form and 
             does not supply missing information upon a second 
             request from the assessor or BOE, whichever is 
             applicable. 

          6. Provides that a penalty imposed on a legal entity for 
             failure to file a LEOP COS may be abated by the county 
             assessor responsible for assessing the penalty, if the 
             entity, within 60 days of the notice of penalty, 
             notifies both the BOE and the assessor that the request 
             was based on erroneous information. Authorizes the 
             county BOE or assessment appeals board, instead of the 
             county board of supervisors, to order the penalty 
             abated, as provided, and makes related changes. 

          7. Specifies all of the following: 

             A.    The address to which the assessor must mail 
                his/her request for a COS statement or a notice of a 
                penalty for failure to file such statement.

             B.    That the 90-day period, within which a new owner 
                is required to file the statement, begins with the 
                date of the mailing, rather than the date of the 
                written request. 

             C.    That the postmark date will serve as the date on 
                which the property owner is deemed to have filed the 
                statement. 

          8. Imposes a state-mandated local program and provides 
             that, if the Commission on State Mandates determines 
             that this bill contains costs mandated by the state, 
             reimbursement for those costs shall be made as 
             specified. 

           Prior legislation  .  AB 843 (Eng), 2007-08 Session, and AB 
          926 (Chu), 2005-06 Session, were both vetoed by Governor 
          Schwarzenegger.  In his veto message of AB 843, the 
          Governor stated:  "This bill would raise the cap on the 
          penalty for non-willful failures to file a Change in 
          Ownership Statement (Statement) with the county assessor.  
          While this measure's provisions are an improvement over AB 
          926, which I vetoed last year, I am still concerned that 

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          the notification procedures in this measure do not 
          adequately ensure that
          property owners actually receive requests from county 
          assessors in a timely manner.  Slightly different from AB 
          926, this bill merely provides for an additional 15 days to 
          respond to requests and expands the number of addresses 
          where a request may be sent.  Thus, this bill continues to 
          assume that new property owners actually receive such 
          requests from county assessors in a timely manner.  I 
          encourage the proponents of this bill and property owners 
          to develop procedures to ensure requests are appropriately 
          delivered and received before penalties for failure to 
          respond are levied."

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes   
          Local:  Yes

           SUPPORT  :   (Verified  8/29/11)

          California Assessors' Association (source)
          California State Association of Counties
          California Tax Reform Association


           ARGUMENTS IN SUPPORT  :    According to the author, "A 
          property owner's failure to report changes in ownership, 
          willful or not, has greatly 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 
          should a county assessor or the BOE require additional 
          information for processing. The purpose of this legislation 
          is not to generate revenue for assessors' offices; rather 
          the penalty increase is an attempt to encourage timely 
          filing of the Change of Ownership Statement (COS). 
          Taxpayers often view the low 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."


          AGB:mw  8/29/11   Senate Floor Analyses 

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                         SUPPORT/OPPOSITION:  SEE ABOVE

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