BILL ANALYSIS Ó AB 2231 Page 1 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. AB 2231 Page 2 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 AB 2231 Page 3 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 AB 2231 Page 4 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 AB 2231 Page 5 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 AB 2231 Page 6 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 AB 2231 Page 7 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; AB 2231 Page 8 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 AB 2231 Page 9 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 : AB 2231 Page 10 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