BILL ANALYSIS Ó
AB 2231
Page 1
Date of Hearing: April 28, 2014
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Raul Bocanegra, Chair
AB 2231 (Gordon) - As Amended: April 21, 2014
2/3 vote. Fiscal committee.
SUBJECT : State Controller: property tax postponement
SUMMARY : Reinstates the Senior Citizens and Disabled Citizens
Property Tax Postponement (PTP) program to provide property tax
deferment to seniors and disabled persons. Specifically, this
bill :
1)Establishes the Senior Citizens and Disabled Citizens Property
Tax Postponement Fund (Fund) within the State Treasury and
annually appropriates funds for the purposes of paying costs
and disbursements related to the PTP program.
2)Reinstates the 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 State Controller (Controller) from accepting
applications for the PTP program.
3)Requires the Controller to transfer moneys in the Fund in
excess of $10 million to the General Fund (GF).
4)Requires that loan repayments related to the PTP program be
deposited into the Fund. Repeals current law that requires
that all moneys in an impound account created pursuant to the
PTP program be continually appropriated to the Controller.
Makes other conforming changes deleting the impound account in
the statute.
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 provisions referring to
mobilehomes, houseboats, and floating homes in the statute.
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6)Repeals current law allowing the Controller to subordinate
liens for postponement of real property taxes where the
Controller determines subordination is required, provided the
interests of the state are adequately protected. Makes
conforming changes to the authority of the Controller to
subordinate liens.
7)Provides that taxes shall become due and payable in full if,
in addition to current law, the claimant is refinancing the
residential dwelling and if the claimant has elected to
participate in a reverse mortgage program for the residential
dwelling.
8)Requires funds derived from the voluntary sale or condemnation
of a residential dwelling, which has a lien placed on it due
to the PTP program, to be placed in the Fund instead of the
impound account. Repeals the option for a claimant whose
residential dwelling was voluntarily sold or condemned to draw
upon the impound account to purchase a new residential
dwelling, secured by a new lien. Prohibits a claimant whose
residential dwelling was voluntarily sold or condemned from
drawing upon the amount in the Fund.
9)Provides in the case of a claimant whose property taxes are
paid by a lender, as specified, the tax collector to notify
the auditor of the claimant's name, address, and the duplicate
amount of money the Controller transferred to the tax
collector via an electronic fund transfer.
10)Requires the county auditor, treasurer, or disbursing officer
to send a check within 60 days to the Controller in an amount
based on the duplicated electronic transfer made by the
Controller. Deletes current law that made these requirements
optional if the Commission on State Mandates determined them
to be a reimbursable mandate.
11)Requires a county tax collector to notify the Controller
within 60 days, in a manner the controller shall direct, of
all property subject to a "Notice of Lien for Postponed
Property Taxes" that becomes tax defaulted subsequent to the
date of entry on the secure roll. Deletes current law
requiring notification when a "Notice of Lien for Postponed
Property Taxes" become subject to collection procedures that
are available for collection of delinquent taxes or assessment
on the unsecured roll.
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12)Requires the Controller, upon request of the tax collector,
to provide information that is required for the preparation
and enforcement of the sale of property. The tax collector or
designee shall certify to the Controller, under penalty of
perjury, that the information requested are necessary for the
preparation and enforcement of the sale of property. The
information provided to the tax collector is not public record
and is not open to public inspection.
13)Provides that for purposes of defining "income," all losses
and nonexpenses, as defined, shall be converted to zero for
the purposes of determining whether the homeowner meets the
PTP program requirements.
14)Increases the amount of equity necessary in a residential
dwelling from 20% to 40% of the full value of the property to
be eligible for the PTP program.
15)Repeals from the definition of "property taxes," property
taxes that become delinquent after the claimant became 62
years of age or after the claimant became blind or disabled,
and instead, 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)Repeals current law allowing the Controller, upon approval of
the claimant, to make payments directly to a lender, mortgage
company, or escrow. Instead, the Controller, upon approval of
the claimant, is limited to making payments directly to the
county tax collector for the property taxes owed. Repeals
current law allowing the Controller to issue a certificate of
eligibility to pay delinquent taxes.
17)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.
18)Provides, in cases of willful neglect, that an electronic
funds transfer for that current fiscal year can be used to pay
delinquent taxes only if accompanied by sufficient amounts to
pay all of the delinquent penalties, costs, fees, and
interest. If a sufficient amount is not received by the tax
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collector within 30 days from the date of the electronic funds
transfer, the tax collector may return the electronic funds
transfer to the Controller to deny the postponement claim.
The Controller shall notify the claimant in writing of when
the electronic funds transfer has been submitted to the tax
collector. In the event of willful neglect, the Controller
shall also notify the claimant in writing and provide a
notification to the tax collector, that a payment amount
sufficient to pay all of 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 sufficient payment is not received, the tax
collector can return the electronic funds transfer and deny
the postponement claim. The Controller shall notify the
claimant in writing when an electronic funds transfer has been
made if a postponement claim is reversed after appeal.
19)Finds and declares that this bill imposes a limitation on the
public's right to access to the meetings of public bodies or
the writings of public officials and agencies, and that this
measure is necessary to protect against identity theft.
20)Provides 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, changes the penalty for a crime or
infraction, or changes the definition of a crime. However, if
the Commission on State Mandates determines that this act
contains other costs mandated by the state, reimbursement to
local agencies and school districts for those costs shall be
made.
EXISTING LAW
1)Establishes the Senior Citizens and Disabled Citizens
Postponement Law, the Senior Citizens Tenant-Stockholder
Postponement Law, the Senior Citizens Mobilehome Postponement
Law, and the Senior Citizens Possessory Interest Holder
Postponement Law in the R&TC, all of which allow the
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. (R&TC Sections 20581- 20641.)
2)Establishes the Senior Citizens Homeowners and Renters
Property Tax Assistance Law, administered by the Franchise Tax
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Board (FTB), which is a direct grant program to income
eligible senior citizens. (R&TC Sections 20501 - 20561.)
3)Establishes the County Deferred PTP for Senior and Disabled
Citizens, with participating counties, to pay property taxes
to county tax collectors on behalf of individuals over the age
of 62 or disabled persons making less than $35,500. (R&TC
Sections 20800 - 20825.)
4)Prohibits the filing of a claim and prohibits the Controller
from accepting applications to postpone the payment of ad
valorem property taxes under the Senior Citizens Property Tax
Assistance and Postponement Law. (R&TC Section 20623.)
5)Provides that a tax collector has the power to sell
residential property 5 or more years after the property has
become tax defaulted. (R&TC Section 3691.)
6)Provides that a tax lien on real property and improvement
assessments declared to be a lien on real property have
priority over all other liens on the property, regardless of
the time of their creation. (R&TC Section 2192.1.)
FISCAL EFFECT : Unknown
COMMENTS :
1)The Author Statement . The author explains that "AB 2231 would
reinstate the property-tax postponement program and
incorporate several changes to increase the sustainability of
the program, giving qualified seniors and disabled
Californians some much needed financial flexibility.
Additionally, the proposed program changes in AB 2231 will go
a long way to helping secure the PTP Fund and to ensuring the
long-term sustainability of the program. Over the 30 years it
was in operation, this property tax postponement program
helped almost 6,000 California seniors and disabled citizens.
After five years of non-payment, the homes of some former
participants in this program are now at risk of tax sale. For
those living on fixed incomes where a tax bill may mean losing
their home, AB 2231 will provide welcome relief."
2)Arguments in Support . Proponents of this bill state "[t]he
original program was enacted in 1977, after the passage of a
constitutional amendment authorizing the postponement of
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property taxes, which was in response to concerns that senior
homeowners on fixed incomes could lose their homes because of
the inability to pay property tax bills. The program was
indefinitely suspended in February of 2009, but a 2011 law was
enacted to allow counties the option to implement their own
starting January 1, 2012. Reinstituting this program
statewide would help all elderly and disabled Californians
take advantage of this benefit to help them stay in their
homes. Reinstitution would also extend relief to those who
abruptly lost the ability for postponement when the program
was suspended in 2009."
3)Background . California has several property tax programs
benefiting the elderly and disabled individuals, including
property tax reappraisal relief, property tax assistance, and
property tax postponement. The assistance program provides a
direct grant to qualifying seniors and disabled individuals
who own or rent a residence. The assistance program, which is
administered by the FTB, was established in 1967 to provide
direct property tax relief to seniors living on a fixed
income. The program was later expanded to include renters who
meet the income requirement, and to homeowners who are blind
and or disabled, regardless of their age.
Unlike the assistance programs that refund a percentage of
property taxes paid, the postponement program allows eligible
homeowners to defer payment of all, or a portion, of the
property taxes on their residence. The program was enacted in
1977, after the passage of a constitutional amendment
authorizing the postponement of property taxes (California
Constitution, Article 13, 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 because of the inability to pay raising
property tax bills. Originally designed for individuals over
62 years of age, the program is now also available to eligible
blind and disabled persons, regardless of age.
The State has not provided funding for the assistance program
since the 2007-08 Budget; as such, California has not paid
claims more recently than those made in 2008. On February 20,
2009, the postponement program was indefinitely suspended as
part of the budget reductions to the state's GF programs.
[SBx3 8 (Ducheny), Chapter 4, Statutes of 2009.] The funding
of the program was eliminated and the Controller was
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prohibited from accepting new applications after February 20,
2009.
In response to the suspension of the postponement program,
Governor Brown signed AB 1090 (Blumenfield), Chapter 369,
Statutes of 2011, creating the County Deferred PTP for Senior
Citizens and Disabled Citizens. Under this new program,
counties may join the program by adopting a resolution
indicating the county's intention to participate.
Participating counties must establish a Property Tax Deferral
Fund within its Treasury, which will be used to make payments
equivalent to the amount of deferred property taxes. Payments
from the Property Tax Deferral Fund will be made to the county
and will be processed in the same manner as all other property
tax payments. Since the enactment of the County Deferred
Property Tax program, only one county has adopted a resolution
indicating its intention to participate.
4)What does the bill do ? As explained by the author, the
purpose of this bill is to reinstate the PTP program but also
improve the long term sustainability of the program. To that
end, this bill increases the amount of equity required in the
home from 20% to 40%, and eliminates mobilehomes, houseboats,
and floating homes from the definition of "residential
dwelling." Increasing the necessary equity in the home will
help ensure that California is made whole in case of
foreclosure or forced sale. Also, the Controller's office has
suggested eliminating mobilehomes from the definition of
residential dwelling because mobile homes tend to depreciate
over time, leaving very little value to pay off the lien.
Additionally, this bill modernizes and streamlines payment
methods by establishing the Senior Citizens and Disabled
Citizens PTP Fund within the State Treasury, utilizing
electronic fund transfer in place of certificates and
eliminating the impound account. Finally, this bill
eliminates the ability of a claimant to borrow against the
impound fund in order to purchase a new residential property.
5)Impact of PTP Program Suspension . The PTP program helped
thousands of low- and moderate-income elderly, blind and
disabled individuals to remain in their homes. Historically,
the loan repayments, with few exceptions, have equaled or
exceeded the annual program expenditures and administrative
costs. Over the long-term, the program has been
self-supporting. For example, in 2007-08 Fiscal Year (FY) and
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2008-09 FY, the Controller's Office collected less money than
it disbursed in loans. However, the overall cumulative fiscal
impact of the program has been positive: the PTP program
collected $41 million more in PTP loan repayments than it
disbursed in PTP loans. In addition to allowing program
participants to remain in their homes, the PTP program has
also reduced county property tax default rates and increased
county tax collection revenues.
Over the last 30 years, the PTP program has provided
assistance to more than 200,000 homeowners. Nearly every
county has at least one program participant, and most counties
have several dozen participants. Los Angeles County accounts
for 21% of program participants. San Diego, San Bernardino,
Riverside, and Orange counties have 28%, and the nine San
Francisco - Bay Area counties have approximately 19% of the
program participants.
According to the survey conducted by the Controller's Office
in recent years, the program suspension has had a direct
negative impact not only on the program participants but also
on the counties. The suspension of the PTP program, coupled
with the elimination of the FTB's Homeowners and Renters
Assistance program, has created a tremendous financial
hardship for low-income senior, blind, and disabled
homeowners. The program participants have expressed fear of
losing their homes to tax-default sales and foreclosures by
lenders because of the failure to pay property taxes directly
or through an impound account initiated by the lender.
Participants have also expressed concerns about becoming
homeless or dependent on family members and not being able to
afford basic necessities. Many claimants have been in the
program for over 20 years and have been counting on the loan
program to pay their property taxes. More than 50% of the
program participants are 75 years of age or older, and 208
claimants approved for FY 2008-09 were older than 90 years of
age.
Furthermore, the counties have also been negatively impacted
by the program suspension. In 2010, the county tax collectors
reported a decrease in revenue due to higher delinquencies
rates, an increase in related workload, including the number
of properties that the counties were forced to sell as
tax-defaulted, and an increased strain on county services by
displaced homeowners.
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6)Lien Priority . The PTP program is operated by the Controller,
which is still required to collect on outstanding PT
Postponement loans. Under that program, PTP loans are
assigned "judgment lien" status, which place them in line
based on the date they were recorded relative to other liens.
In general, PTP judgment liens are paid off after liens
recorded before them, but before liens recorded after them.
Property tax and special assessment liens, however, have
priority over all other liens, regardless of the time of its
creation, so-called "super-priority" lien status.
In 2011, AB 1090 attempted to provide counties with a
"super-priority" lien status for postponed property taxes.
Proponents maintained that counties strongly endorsed the
"super-priority" lien status that comes from utilizing
property taxes and assessments because it ensured repayment of
postponed property taxes at the county level. As noted
earlier, the State-administered PTP program has always
maintained a "judgment lien" status on PTP loans, and still
does. The State, therefore, is responsible for property taxes
collected by local governments and bears all of the liability.
If the author's intent is to improve the long term
sustainability of the PTP program, the author may wish to
provide "super-priority" liens on property in exchange for the
postponement of property taxes.
7)Double-referral . This bill was double-referred to the
Assembly Committee on Local Government, and passed out of the
Committee on a 9 - 0 vote on April 16, 2013. For additional
discussion of this bill's provisions, please refer to that
committee's analysis.
8)Related Legislation . AB 1322 (Patterson) reinstates the
Senior Citizens' PTP program that provided property tax
deferment to seniors and disabled persons. This bill was held
in the Assembly Appropriations Committee.
9)Prior Legislation :
a) AB 1090 (Blumenfield), Chapter 369, Statutes of 2011,
established the County Deferred Property Tax Program for
Senior Citizens and Disabled Citizens and allowed each
county to elect to participate in the program.
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b) ABx1 34 (Budget Committee), introduced in the 2011-12
Legislative Session, reinstates the Senior Citizens' PTP
program that provided property tax deferment to seniors and
disabled persons. ABx1 34 was vetoed by the Governor
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."
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of County Treasurers and Tax Collectors
(Sponsor)
California State Association of Counties
California Taxpayers Association
Opposition
None on file
Analysis Prepared by : Carlos Anguiano / REV. & TAX. / (916)
319-2098