BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 2231
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          Date of Hearing:  April 9, 2014

                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
                           K.H. "Katcho" Achadjian, Chair
                    AB 2231 (Gordon) - As Amended:  March 24, 2014
           
          SUBJECT  :  State Controller: property tax postponement.

           SUMMARY  :  Reinstates the Senior Citizens and Disabled Citizens  
          Property Tax Postponement program to provide property tax  
          deferment to seniors and disabled persons.  Specifically,  this  
          bill  :  

          1)Reinstates the Senior Citizens' Property Tax Postponement  
            (PTP) program that provided property tax deferment to seniors  
            and disabled persons and eliminates, on July 1, 2015, the  
            current prohibition on any person filing a claim and the  
            Controller from accepting applications for the PTP program.   

          2)Establishes the Senior Citizens and Disabled Citizens Property  
            Tax Postponement Fund (Fund) within the State Treasury and  
            annually appropriates moneys in the Fund for the purposes of  
            paying costs and disbursements related to the postponement of  
            property taxes for eligible senior citizens and disabled  
            citizens.  

          3)Requires any loan repayments relating to the PTP Law to be  
            deposited into the Fund.  Repeals current law which requires  
            that all moneys in an impound account created pursuant to PTP  
            law are continually appropriated to the Controller.  Requires  
            all funds remaining in an impound account, at the end of the  
            six month period as specified, to be transferred to the Fund  
            instead of to the General fund (GF).  Makes other conforming  
            changes to delete the impound account from statue.  

          4)Requires the Controller to transfer any moneys in the Fund in  
            excess of $10 million to the GF.  

          5)Repeals the Senior Citizens Mobilehome Property Tax  
            Postponement Law.  Removes mobilehomes, houseboats, and  
            floating homes from the definition of "residential dwelling".   
            Makes conforming changes to remove references to the  
            postponement of property taxes for mobilehomes, houseboats,  
            and floating homes from statute.  









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          6)Repeals current law which allows the Controller to subordinate  
            the lien for postponed real property taxes, if the interests  
            of the state are adequately protected and if the Controller  
            deemed subordination to be appropriate.  Makes conforming  
            changes to remove specified authority for the Controller to  
            subordinate a lien.  

          7)Increases the amount of equity a claimant must possess in the  
            residential dwelling from 20% to 40% of the full value of the  
            property in order to be eligible for the PTP program.  Makes  
            conforming changes to the information required of each  
            claimant applying for the PTP program.  

          8)Deletes the options provided in current law when a claim has  
            been approved for the Controller to make payments directly to  
            a lender, mortgage company, or escrow company or to issue a  
            certificate of eligibility to a qualified claimant, and  
            instead, requires the Controller to make payments directly to  
            a county tax collector for the property taxes owed on behalf  
            of the qualified claimant.  Makes conforming changes to delete  
            requirements in existing law for the Controller in issuing the  
            certificates of eligibility to pay all delinquent taxes.  

          9)Adds to the existing list of circumstances when taxes are due  
            and payable in full to include 
          if the claimant is refinancing the residential dwelling and if  
            the claimant has elected to participate in a reverse mortgage  
            program for the residential dwelling.  

          10)Requires funds derived from the voluntary sale of a  
            residential dwelling, which has a lien placed on it due to the  
            PTP program, to be placed in the Fund, instead of an impound  
            account.  Repeals the option for a claimant whose residential  
            dwelling was voluntarily sold to draw upon the amount in the  
            account to purchase a new residential dwelling, secured by a  
            new lien.  Prohibits a claimant whose residential dwelling was  
            voluntarily sold from drawing upon the amount in the Fund.  

          11)Changes the requirement from 20% to 40% of the amount of  
            equity a claimant must possess if the Controller shall  
            subordinate the new lien against the new residential dwelling  
            that current law allows a claimant whose dwelling was sold or  
            condemned to purchase.  

          12)Establishes a 60-day timeframe for the county tax collector  








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            to notify the Controller of all property subject to a "Notice  
            of Lien for Postponed Property Taxes" recorded pursuant to  
            existing law.  Deletes the requirement for the tax collector  
            to notify the Controller if a property subject to a "Notice of  
            Lien for Postponed Property Taxes" becomes subject to those  
            collection procedures that are available for collection of  
            delinquent taxes or assessments on the unsecured roll.  

          13)Requires the Controller, upon request of the tax collector,  
            to provide to the tax collector information that is required  
            for the preparation and enforcement of the sale of property.   
            Allows this information to include social security numbers.   
            Requires the tax collector, or his or her designee, to certify  
            under penalty of perjury to the Controller that the  
            information requested is required for the preparation and  
            enforcement of the sale of property.  Specifies that any  
            information provided to the tax collector pursuant to this  
            subdivision is not public record and is not open to public  
            inspection.  

          14)States that for the definition of "income" used by PTP law  
            that all losses and nonexpenses shall be converted to zero for  
            the purpose of determining whether the homeowner meets the PTP  
            requirement.  

          15)Defines "property taxes" to mean "property taxes for current  
            fiscal years for which the claim is made and excludes  
            delinquent taxes for prior fiscal years."  

          16)Requires, if a claimant's property taxes are paid by a lender  
            as specified, the tax collector to notify the auditor of the  
            claimant's duplicate amount of money transferred in an  
            electronic fund transfer to the tax collector.  Requires the  
            county auditor, treasurer, or disbursing officer to send a  
            check in the amount of money based on the electronic transfer  
            by the Controller, to the Controller within 60 days of the  
            replicated payment.  Deletes current law which made these  
            requirements optional, if the Commission on State Mandates  
            determined them to be a reimbursable mandate.  
          17)Allows, in the event of willful neglect, for a claimant to  
            use an electronic funds transfer for that current fiscal year  
            to pay delinquent taxes only if there are sufficient amounts  
            to pay all of the delinquent penalties, costs, fees, and  
            interest.  Authorizes the tax collector to return the  
            electronic funds transfer to the Controller to deny the  








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            postponement claim, if a sufficient amount is not received by  
            the tax collector within 30 days from the date of the  
            electronic funds transfer.  Requires the Controller to notify  
            the claimant in writing when the electronic funds transfer has  
            been submitted to the tax collector.  Requires, in the event  
            of willful neglect, the Controller to notify the claimant in  
            writing and provide a copy of the notification to the tax  
            collector, that a payment amount sufficient to pay all the  
            delinquent penalties, costs, fees, and interest must be  
            received by the tax collector within 30 days from the date of  
            the electronic funds transfer, and that if the payment is not  
            received, then the tax collector may return the transfer to  
            the Controller to deny the postponement claim.  Requires the  
            Controller to notify the claimant in writing when an  
            electronic funds transfer is made if a denial for postponement  
            claim is appealed and reversed pursuant to existing law.  

          18)Requires the claim for postponement to be filed after  
            September 1, instead of May 15, of the calendar year in which  
            the fiscal year for which postponement is claimed begins, and  
            on or before April 10, instead of December 10, of that fiscal  
            year.   

          19)Finds and declares that this measure imposes a limitation on  
            the public's right of access to the meetings of public bodies  
            or the writings of public officials and agencies, and that  
            this measure is necessary to protect against the risk of  
            identity theft.  

          20)States that no reimbursement is required for certain costs  
            that may be incurred by a local agency or school district  
            because this act creates a new crime or infraction, eliminates  
            a crime or infraction, or changes the penalty for a crime or  
            infraction.  However, if the Commission on State Mandates  
            determines this act contains other costs mandated by the  
            state, reimbursement to local agencies and school districts  
            for costs shall be made pursuant to current law governing  
            state-mandated local costs.  

           EXISTING LAW  :

          1)Establishes the Senior Citizens and Disable Citizens PTP Law,  
            the Senior Citizens Tenant-Stockholder PTP Law, the Senior  
            Citizens Mobilehome PTP Law, and the Senior Citizens  
            Possessory Interest Holder PTP Law, all of which allow the  








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            Controller to pay property taxes to county tax collectors on  
            behalf of individuals over the age of 62 or disabled persons  
            making less than $39,000 in income per year.  

          2)Suspends the PTP program and prohibits individuals from filing  
            new claims for property tax postponement, and the Controller  
            from accepting application, in the 2009 calendar year and  
            thereafter.  

          3)Requires a claimant to repay the Controller upon sale of the  
            home, which secures the property tax loan made by the  
            Controller.  

          4)Prohibits the filing of a claim and prohibits the Controller  
            from accepting applications to postpose the payment of ad  
            valorem property taxes under the Senior Citizens and Disabled  
            Citizens Property Tax Postponement Law.  

          5)Establishes the County Deferred Property Tax Program.  

           FISCAL EFFECT  :  This bill is keyed fiscal and contains an  
          appropriation.  

           COMMENTS  :   

           1)Purpose of this bill  .  This bill reinstates the PTP program to  
            provide property tax deferment to seniors and disabled persons  
            and eliminates, beginning July 1, 2015.  Though the funding  
            was eliminated in 2009 the statute remains.  This bill is  
            sponsored by the California Association of County Treasurers  
            and Tax Collectors.  

           2)PTP program  .  California has several property tax programs  
            benefiting elderly and disabled individuals, including  
            property tax reappraisal relief, property tax assistance, and  
            the PTP program.  Unlike the property tax assistance program  
            that refunds a percentage of property taxes paid, the PTP  
            program allows eligible homeowners to defer payment of all or  
            a portion of the property taxes on their residences.  The  
            program was enacted in 1977, after the passage of a  
            constitutional amendment authorizing the postponement of  
            property taxes (California Constitution, Article XIII, Section  
            8) and is administered by the Controller's Office.  The  
            constitutional amendment was in response to concerns that  
            senior homeowners on fixed incomes could lose their homes  








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            because of the inability to pay rising property tax bills.   
            Originally designed for persons over 62 years of age, the  
            program is now also available to eligible blind and disabled  
            persons, regardless of age.  

           3)Suspension of the PTP program  .  On February 20, 2009, the PTP  
            Program was indefinitely suspended as part of the budget  
            reductions to the state's General Fund (GF) programs 
          [SBx3 8 (Ducheny), Chapter 4, Statutes of 2009].  The funding  
            for the program was eliminated and the Controller was  
            prohibited from accepting any new applications after February  
            20, 2009.  

            According to the sponsor, "In these five intervening years,  
            county treasurers have fielded hundreds, if not thousands, of  
            panicked calls from low income seniors and disabled people,  
            asking for some help to pay their taxes.  The statute is clear  
            regarding when and how property taxes must be paid, and what  
            penalties are accrued when they are not paid timely.  Without  
            this program, it is very likely that a huge number of  
            properties owned by seniors and disabled persons' homes will  
            become eligible for tax sale in 2014, due to five years of  
            non-payment."  

           4)Suspended PTP program vs. this bill  .  Under existing law the  
            PTP program required some loan repayments to go to the General  
            Fund and some repayments to go to the program's impound  
            account.  Those latter amounts were transferred to the General  
            Fund after six months.  Appropriations were made from the  
            General Fund to pay the postponed property taxes, as opposed  
            to the revolving fund concept embodied in this bill.   

              a)   Home equity  .  Under the current PTP program senior and  
               disabled claimants must meet criteria, including 20% equity  
               in their homes and annual household income of $39,000 or  
               less.  This bill increases the threshold of equity from 20%  
               to 40%.  

              b)   Filing date  .  Current law requires claimants to file  
               applications annually with the Controller's Office, between  
               May 15th and December 10th of each calendar year for the  
               fiscal year (FY) beginning July 1 of that year.  This bill  
               requires applications to be filed after September 1,  
               instead of May 15, of the calendar year in which the fiscal  
               year for which postponement is claimed begins, and on or  








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               before April 10, instead of December 10, to coincide with  
               the property tax installment date.  

              c)   Payments by the Controller  .  Upon approval of the claim,  
               the Controller either made payments directly to the county  
               tax collector or issued certificates of eligibility to the  
               claimant.  A certificate constituted a written promise of  
               the state to pay all or part of the property taxes on the  
               home.  This bill removes the option for the Controller to  
               make payments by issuing a certificate of eligibility and  
               requires the Controller to make payments directly to a  
               county tax collector by electric funds transfer.  

              d)   Definition of property taxes  .  The current definition of  
               "property taxes" included everything on the claimants'  
               secured property tax bill, including special assessment,  
               charges, and user fees, in addition to ad valorem taxes.   
               However, special assessments levied independently of the  
               county tax bill were ineligible for postponement.  This  
               bill amends the term property taxes to only include  
               property taxes for the current year FY's delinquent taxes.   


              e)   Loan terms  .  Under the current program, in exchange for  
               paying a claimant's property taxes, the state placed a lien  
               on the property for which state funding was used.  The loan  
               was secured by the property and was repaid, with interest,  
               when the property owner died, sold the home, moved, or  
               allowed a "senior lien" to become delinquent.  Each year,  
               interest accrued on the amount that the state paid to the  
               county on behalf of the property owner.  The claimant must  
               repay the Controller upon sale of the home, who secures the  
               loan by recording a lien.  Loans do not become due and  
               payable if the claimant or the claimant's spouse continues  
               to occupy the home secured by the lien.  This bill adds to  
               the requirements when a loan for postponement is due and  
               payable to include if a claimant is refinancing the  
               property or doing a reverse mortgage.  

              f)   Tax lien  .  Current law allows a county to issue a tax  
               lien against property when an owner is late on paying  
               property taxes, and provides that a judgment is satisfied,  
               and the tax lien removed when the property tax is paid, or  
               the property is sold to satisfy the lien.  Upon sale, tax  
               liens are paid out of proceeds in the order recorded;  








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               however, property tax and special assessment liens have  
               priority over all other liens regardless of the time of its  
               creation.  Under current law the Controller's lien for a  
               property tax postponement loan is not afforded "super  
               priority" status.  This bill does not change that.  

           5)Author's statement  .  According to the author, "Many California  
            seniors and individuals living with disabilities are on fixed  
            incomes.  Those who are property owners are increasingly faced  
            with tax bills they cannot afford. As a result [of the PTP  
            program indefinite suspension], thousands of seniors and  
            disabled Californians were left with a difficult choice  
            between buying food and medications or suddenly having to pay  
            previously deferred property tax bills.  This bill would fix  
            this problem by reinstating the program and establishing the  
            Senior Citizens and Disabled Citizens PTP Fund incorporating  
            several changes to increase the sustainability of the program,  
            [and] giving qualified seniors and disabled Californians some  
            much needed financial flexibility."   

          6)County Deferred Property Tax Program  .  In response to the  
            negative impacts of the suspension of the PTP program, AB 1718  
            (Blumenfield) of 2010 was introduced.  AB 1718 would have  
            established the County Deferred Property Tax Program for  
            Senior Citizens and Disabled Citizen, but was vetoed by  
            Governor Schwarzenegger.  Subsequently, the Legislature  
            enacted AB 1090 (Blumenfield), Chapter 369, Statutes of 2011,  
            creating the County Deferred Property Tax Program.  AB 1090  
            was substantially similar to AB 1718, except that it did not  
            allow the county treasurer-tax collector to secure the  
            deferral with a superior priority status lien.  

            In contrast to the PTP program that was funded exclusively by  
            GF moneys, the County Deferred PTP program is self-financing  
            and not reliant on an annual GF appropriation.  It is funded  
            by a participating county through a fund to be established  
            within its treasury.  Upon adoption of a resolution by the  
            county's governing body, and with the consent of the county  
            treasurer, excess county funds are deposited in the fund for  
            the purpose of providing property tax postponement loans to  
            qualified claimants.  AB 1090 established uniform statewide  
            eligibility criteria for the claimants and certain rules and  
            guidelines for a County Deferred Property Tax program.  

            Since the passage of AB 1090, the Committee is only aware of  








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            one county (Santa Cruz County) that has implemented the  
            optional program.  Supporters of this bill argue that while  
            the County Deferred Property Tax Program provides a county  
            with an option to defer property taxes for homeowners residing  
            within the county, it nonetheless leaves many low-income  
            homeowners without assistance in counties that choose not to  
            participate in the program.  Additionally, without the ability  
            to place a priority lien on the property to ensure repayment  
            of deferred property taxes, counties are limited in the  
            ability to finance such a program.  
             
          7)Previous legislation to reinstate the PTP program  .  Several  
            bills have sought to reinstate the PTP program including AB  
            1029 (Blumenfield) of 2010 and AB 1322 (Patterson) of 2013,  
            which both died in the Assembly Appropriations Committee.   
            ABx1 34 (Budget Committee) of 2011 was vetoed by Governor  
            Brown stating, "Given the very significant cuts to state and  
            local core public services that are occurring, the state  
            cannot afford the $19.3 million that the Department of Finance  
            estimates this bill would cost during the 2011-2012 fiscal  
            year or the continuing estimated annual revenue cost of $30  
            million.  For this reason I am unable to sign the bill."   
                 
            8)Arguments in support  .  Supporters argue that for more than 30  
            years, the PTP program helped thousands of low- and  
            moderate-income elderly, blind and disabled individuals to  
            remain in their homes and that this bill will reinstate the  
            critical program.  

           9)Arguments in opposition  .  None on file.  

           10)Two-thirds vote  .  The bill requires a two-thirds vote of each  
            house because of the continuous appropriation.  

           11)Committee amendments  :  For uniformity purposes the Committee  
            may wish to ask the author to take amendments to strike out  
            additional references to mobilehomes, the impound account, the  
            ability for a claimant to re-borrow from the account, and the  
            option for the Controller to subordinate a lien in order to be  
            consistent with the changes made by this bill.  
           12)Double-referral  .  This bill is double-referred to the Revenue  
            and Taxation Committee.

           REGISTERED SUPPORT / OPPOSITION  :   









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          Support 
           
          California Association of County Treasurers and Tax Collectors  
          [SPONSOR]
          California Association of Realtors
          California Taxpayers Association
          Howard Jarvis Taxpayers Association  
          Marin County Board of Supervisors  
          Rural County Representatives of California 
          Sonoma County

           Opposition 
           
          None on file
           
          Analysis Prepared by  :    Misa Yokoi-Shelton / L. GOV. / (916)  
          319-3958