Amended in Senate April 1, 2013

Senate Bill No. 499

Introduced by Senator Wyland

February 21, 2013

begin delete An act to amend Section 103 of the Revenue and Taxation Code, end delete begin delete relating to taxation. end delete begin insert A end insert begin insert n act to amend Sections 110 and 402.1 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. end insert

LEGISLATIVE COUNSEL’S DIGEST

SB 499, as amended, Wyland. Property taxation: begin delete property: definition. end delete begin insert assessment: affordable housing. end insert

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The California Constitution generally limits ad valorem taxes on real property to 1% of the full cash value of that property. For purposes of this limitation, existing property tax law defines “full cash value” as the assessor’s fair market value valuation of real property as shown on the 1975-76 tax bill under “full cash value” or, thereafter, the appraised value of that real property when purchased, newly constructed, or a change in ownership has occurred. Existing property tax law generally defines this “full cash value” of property as the property’s fair market value. Existing law rebuttably presumes that the fair market value of real property, other than possessory interests, is the purchase price paid in the transaction for the property. For purposes of this presumption, existing law defines “purchase price” as the total consideration provided by the purchaser or on the purchasers behalf, valued in money, whether paid in money or otherwise. Existing law requires the county assessor to consider, when valuing real property for property taxation purposes, the effect of any enforceable restrictions to which the use of the land may be subjected. Under existing law these restrictions include, but are not limited to, zoning, recorded contracts with governmental agencies, and various other restrictions imposed by governments.

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This bill would exclude from the meaning of purchase price, for purposes of the rebuttable presumption that the purchase price of real property is the fair market value of the property, the amount stated in a deed of trust, recorded in conjunction with an affordable housing unit purchased by its occupant, for which that occupant is the trustor and a nonprofit or governmental agency selling authority is the beneficiary, both have contracted that a periodic payment of principal and interest will not be required for at least 30 years, and a governmental restriction requiring the property to remain an affordable housing unit for at least 30 years has been recorded against the affordable housing unit. This bill would also require the county assessor to consider, when valuing real property for property taxation purposes, restrictions on the resale price of real property in a recorded real property deed or other recorded real property transfer document for real property that was purchased by its occupant through an affordable housing program operated by a city, a county, the state, or a nonprofit organization. By changing the manner in which county assessors assess property for property taxation purposes, this bill would impose a state-mandated local program.

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The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

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This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

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Section 2229 of the Revenue and Taxation Code requires the Legislature to reimburse local agencies annually for certain property tax revenues lost as a result of any exemption or classification of property for purposes of ad valorem property taxation.

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This bill would provide that, notwithstanding Section 2229 of the Revenue and Taxation Code, no appropriation is made and the state shall not reimburse local agencies for property tax revenues lost by them pursuant to the bill.

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This bill would take effect immediately as a tax levy.

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Existing property tax law defines property to include all matters and things, real, personal, and mixed, that are capable of private ownership.

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This bill would make technical, nonsubstantive changes to this provision.

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Vote: majority. Appropriation: no. Fiscal committee:  begin delete no end delete begin insert yes end insert . State-mandated local program:  begin delete no end delete begin insert yes end insert .

The people of the State of California do enact as follows:

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begin insert SECTION end insert begin insert 1 end insert begin insert . end insert   

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begin insert The Legislature finds and declares all of the
following: end insert

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(a) It is important to provide affordable housing in this state.

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(b) Affordable housing programs provide families with an
opportunity to better their lives and the lives of their children by
making available the American dream of home ownership.

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(c) Section 402.1 of the Revenue and Taxation Code already
requires county assessors to consider the effect of enforceable
restrictions on land when assessors value that land for property
taxation purposes.

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(d) This act would extend this existing practice of considering
the effect of enforceable restrictions placed on land pursuant to
an affordable housing program that assists families in purchasing
their own homes and silent second mortgages that may affect the
fair market value of that property.

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(e) Therefore, it is the intent of the Legislature in enacting this
act to further a state public policy of encouraging and maintaining
effective land use planning by ensuring that homes purchased
under an affordable housing program are valued for property
taxation purposes in a manner that reflects the restrictions on the
property.

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(f) It is also the intent of the Legislature, in enacting this act,
to make the necessary statutory changes to provide that, if a
homeowner is participating in an affordable housing program,
the purchase price for an affordable housing unit shall not include,
for purposes of taxation under the ad valorem property tax, the
amount secured by a deed of trust recorded in conjunction with
the purchase of an affordable housing unit.

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begin insert SEC end insert begin insert . 2. end insert   

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begin insert Section 110 of the end insert begin insert Revenue and Taxation Code end insert begin insert is
amended to read: end insert

110.  

(a) Except as is otherwise provided in Section 110.1, “full
cash value” or “fair market value” means the amount of cash or
its equivalent that property would bring if exposed for sale in the
open market under conditions in which neither buyer nor seller
could take advantage of the exigencies of the other, and both the
buyer and the seller have knowledge of all of the uses and purposes
to which the property is adapted and for which it is capable of
being used, and of the enforceable restrictions upon those uses and
purposes.

(b) For purposes of determining the “full cash value” or “fair
market value” of real property, other than possessory interests,
being appraised upon a purchase, “full cash value” or “fair market
value” is the purchase price paid in the transaction unless it is
established by a preponderance of the evidence that the real
property would not have transferred for that purchase price in an
open market transaction. The purchase price shall, however, be
rebuttably presumed to be the “full cash value” or “fair market
value” if the terms of the transaction were negotiated at arms length
between a knowledgeable transferor and transferee neither of which
could take advantage of the exigencies of the other. “Purchase
price,” as used in this section, means the total consideration
provided by the purchaser or on the purchaser’s behalf, valued in
money, whether paid in money or otherwise begin insert , but, beginning with
the lien date for the 2014-15 fiscal year and for each fiscal year
thereafter, does not include the amount secured by a deed of trust,
recorded in conjunction with the purchase of an affordable housing
unit by its occupant, for which that occupant is the trustor and a
nonprofit organization or governmental agency selling authority
is the beneficiary, both have contracted that a periodic payment
of principal and interest will not be required for at least 30 years,
and a governmental restriction requiring the property to remain
an affordable housing unit for at least 30 years has been recorded
against the affordable housing unit. end insert . There is a rebuttable
presumption that the value of improvements financed by the
proceeds of an assessment resulting in a lien imposed on the
property by a public entity is reflected in the total consideration,
exclusive of that lien amount, involved in the transaction. This
presumption may be overcome if the assessor establishes by a
preponderance of the evidence that all or a portion of the value of
those improvements is not reflected in that consideration. If a single
transaction results in a change in ownership of more than one
parcel of real property, the purchase price shall be allocated among
those parcels and other assets, if any, transferred based on the
relative fair market value of each.

(c) For real property, other than possessory interests, the change
of ownership statement required pursuant to Section 480, 480.1,
or 480.2, or the preliminary change of ownership statement
required pursuant to Section 480.4, shall give any information as
the board shall prescribe relative to whether the terms of the
transaction were negotiated at begin delete “arms length.” end delete begin insert “arm’s length. end insert begin insert ” end insert In
the event that the transaction includes property other than real
property, the change in ownership statement shall give information
as the board shall prescribe disclosing the portion of the purchase
price that is allocable to all elements of the transaction. If the
taxpayer fails to provide the prescribed information, the rebuttable
presumption provided by subdivision (b) shall not apply.

(d) Except as provided in subdivision (e), for purposes of
determining the “full cash value” or “fair market value” of any
taxable property, all of the following shall apply:

(1) The value of intangible assets and rights relating to the going
concern value of a business using taxable property shall not
enhance or be reflected in the value of the taxable property.

(2) If the principle of unit valuation is used to value properties
that are operated as a unit and the unit includes intangible assets
and rights, then the fair market value of the taxable property
contained within the unit shall be determined by removing from
the value of the unit the fair market value of the intangible assets
and rights contained within the unit.

(3) The exclusive nature of a concession, franchise, or similar
agreement, whether de jure or de facto, is an intangible asset that
shall not enhance the value of taxable property, including real
property.

(e) Taxable property may be assessed and valued by assuming
the presence of intangible assets or rights necessary to put the
taxable property to beneficial or productive use.

(f) For purposes of determining the “full cash value” or “fair
market value” of real property, intangible attributes of real property
shall be reflected in the value of the real property. These intangible
attributes of real property include zoning, location, and other
attributes that relate directly to the real property involved.

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begin insert SEC. 3. end insert   

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begin insert Section 402.1 of the end insert begin insert Revenue and Taxation Code end insert begin insert is
amended to read: end insert

402.1.  

(a) In the assessment of land, the assessor shall consider
the effect upon value of any enforceable restrictions to which the
use of the land may be subjected. These restrictions shall include,
but are not limited to, all of the following:

(1) Zoning.

(2) Recorded contracts with governmental agencies other than
those provided in Sections 422 and 422.5.

(3) Permit authority of, and permits issued by, governmental
agencies exercising land use powers concurrently with local
governments, including the California Coastal Commission and
regional coastal commissions, the San Francisco Bay Conservation
and Development Commission, and the Tahoe Regional Planning
Agency.

(4) Development controls of a local government in accordance
with any local coastal program certified pursuant to Division 20
(commencing with Section 30000) of the Public Resources Code.

(5) Development controls of a local government in accordance
with a local protection program, or any component thereof, certified
pursuant to Division 19 (commencing with Section 29000) of the
Public Resources Code.

(6) Environmental constraints applied to the use of land pursuant
to provisions of statutes.

(7) Hazardous waste land use restriction pursuant to Section
25240 of the Health and Safety Code.

(8) A recorded conservation, trail, or scenic easement, as
described in Section 815.1 of the Civil Code, that is granted in
favor of a public agency, or in favor of a nonprofit corporation
organized pursuant to Section 501(c)(3) of the Internal Revenue
Code that has as its primary purpose the preservation, protection,
or enhancement of land in its natural, scenic, historical, agricultural,
forested, or open-space condition or use.

(9) A solar-use easement pursuant to Chapter 6.9 (commencing
with Section 51190) of Part 1 of Division 1 of Title 5 of the
Government Code.

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(10) Beginning with the lien date for the 2014-15 fiscal year
and for each fiscal year thereafter, restrictions on the resale price
of real property in a recorded real property deed or other recorded
real property transfer document for real property that was
purchased by its occupant through an affordable housing program
operated by a city, a county, a city and county, the state, or a
nonprofit organization.

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(b) There is a rebuttable presumption that restrictions will not
be removed or substantially modified in the predictable future and
that they will substantially equate the value of the land to the value
attributable to the legally permissible use or uses.

(c) Grounds for rebutting the presumption may include, but are
not necessarily limited to, the past history of like use restrictions
in the jurisdiction in question and the similarity of sales prices for
restricted and unrestricted land. The possible expiration of a
restriction at a time certain shall not be conclusive evidence of the
future removal or modification of the restriction unless there is no
opportunity or likelihood of the continuation or renewal of the
restriction, or unless a necessary party to the restriction has
indicated an intent to permit its expiration at that time.

(d) In assessing land with respect to which the presumption is
unrebutted, the assessor shall not consider sales of otherwise
comparable land not similarly restricted as to use as indicative of
value of land under restriction, unless the restrictions have a
demonstrably minimal effect upon value.

(e) In assessing land under an enforceable use restriction wherein
the presumption of no predictable removal or substantial
modification of the restriction has been rebutted, but where the
restriction nevertheless retains some future life and has some effect
on present value, the assessor may consider, in addition to all other
legally permissible information, representative sales of comparable
lands that are not under restriction but upon which natural
limitations have substantially the same effect as restrictions.

(f) For the purposes of this section the following definitions
apply:

(1) “Comparable lands” are lands that are similar to the land
being valued in respect to legally permissible uses and physical
attributes.

(2) “Representative sales information” is information from sales
of a sufficient number of comparable lands to give an accurate
indication of the full cash value of the land being valued.

(g) It is hereby declared that the purpose and intent of the
Legislature in enacting this section is to provide for a method of
determining whether a sufficient amount of representative sales
information is available for land under use restriction in order to
ensure the accurate assessment of that land. It is also hereby
declared that the further purpose and intent of the Legislature in
enacting this section and Section 1630 is to avoid an assessment
policy which, in the absence of special circumstances, considers
uses for land that legally are not available to the owner and not
contemplated by government, and that these sections are necessary
to implement the public policy of encouraging and maintaining
effective land use planning. Nothing in this statute shall be
construed as requiring the assessment of any land at a value less
than as required by Section 401 or as prohibiting the use of
representative comparable sales information on land under similar
restrictions when this information is available.

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begin insert SEC. 4. end insert   

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If the Commission on State Mandates determines that
this act contains costs mandated by the state, reimbursement to
local agencies and school districts for those costs shall be made
pursuant to Part 7 (commencing with Section 17500) of Division
4 of Title 2 of the Government Code.

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begin insert SEC. 5. end insert   

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Notwithstanding Section 2229 of the Revenue and
Taxation Code, no appropriation is made by this act and the state
shall not reimburse any local agency for any property tax revenues
lost by it pursuant to this act.

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begin insert SEC. 6. end insert   

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This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.

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SECTION 1.  

Section 103 of the Revenue and Taxation Code
is amended to read:

103.  

“Property” includes all those matters and things, real,
personal, and mixed, that are capable of private ownership.

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