BILL ANALYSIS Ó
SB 825
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Date of Hearing: August 12, 2013
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Raul Bocanegra, Chair
SB 825 (Committee on Governance and Finance) - As Amended:
August 5, 2013
Majority vote. Fiscal committee.
SENATE VOTE : 37-0
SUBJECT : Property tax: government finance.
SUMMARY : Makes changes to property tax laws. Specifically,
this bill :
1)Clarifies the types of payments that a public agency must
accept for designated obligations to include a corporate
check, cashier's check, money order, or other draft method.
2)Allows a public agency to impose a charge for any type of
authorized payment that is not honored in an amount that does
not exceed the agency's actual processing and collection
costs. Specifies that this charge may be added to any
underlying obligation, other than a lien on a real property,
and that a different method of payment for that payment and
future payments by the same person may be prescribed.
3)Requires a developer of a residential subdivision that
qualifies for an automatic exclusion from the supplemental
assessment for property tax purposes to notify the assessor
when, and if, the developer becomes ineligible for the
exclusion, as specified.
4)Liberalizes the rules allowing certain contiguous tracts of
land, which are owned by the same person but located in two or
more revenue districts, to be combined into one assessment, by
increasing the full value of a parcel that may be combined
with another parcel, as specified, from $25,000 to $50,000.
5)Requires the county tax collector to include additional
information relating to the penalty relief limitation in each
county tax bill.
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6)Extends the time period for a county tax collector to report a
sale of a tax-defaulted property to the assessor from 10 days
to 30 days after the sale.
7)Suspends the notice requirement for the
Gonsalves-Deukmejian-Petris Senior Citizens Property Tax
Assistance Law [Revenue and Taxation Code (R&TC) Chapter 1
(commencing with Section 20501) of Part 10.5 of Division 2],
and for the Senior Citizens and Disabled Citizens Property Tax
Postponement Law [R&TC Chapter 2 (commencing with Section
20581) of Part 10.5 of Division 2].
8)Provides that if the Commission on State mandates determines
this bill contains costs mandated by the state, reimbursements
for those costs shall be made pursuant to these statutory
provisions.
EXISTING LAW:
1)Requires a public agency to accept payment for designated
obligations by personal check and authorizes acceptance of a
credit card, debit card, or electronic funds transfer, subject
to approval by the governing body of the agency or other
appropriate entity, as provided.
2)Allows a public agency to impose a charge not to exceed the
agency's actual cost if an authorized payment method is not
honored.
3)Requires a supplemental assessment of property to be made when
new construction is completed. Authorizes a builder who
constructs property for resale to claim an exemption from a
supplemental assessment for the completed construction, but
requires the builder to notify the assessor within 45 days,
once the builder is ineligible for the delayed reassessment.
4)Allows the assessor to grant an automatic exclusion from a
supplemental assessment in the case of a builder that
constructs homes in residential subdivisions, but does not
impose a notification requirement on the builder if the
builder of residential subdivisions becomes ineligible for the
exclusion.
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5)Authorizes the assessor to combine certain contiguous pieces
of property under the same ownership into the same parcel, as
follows:
a) If the full value of any parcel is less than $25,000,
that parcel may be combined with the contiguous parcel
under the same ownership with the greatest assessed
valuation;
b) If the tract of land is being used for a single-family
residence and constitutes 45,000 square feet or less, the
smallest parcel may be combined with the largest contiguous
parcel.
6)Requires the county tax collector to include specified
information as part of the property tax bill such as, for
example, information regarding the taxpayer's right to request
an informal review of the assessor's valuation of the property
and to apply to the assessment appeals board for a reduction
in valuation if the taxpayer does not agree with the valuation
after the informal review.
7)Establishes the Senior Citizens and Disabled Citizens
Postponement Law, allowing the State Controller (SC) 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). Establishes the
Senior Citizens Homeowners and Renters Property Tax Assistance
Law, administered by the Franchise Tax Board (FTB), which is a
direct grant program to income eligible senior citizens.
(R&TC Sections 20501 - 20561).
8)Requires the FTB to prepare a notice regarding property tax
assistance and postponement for senior citizens under the
Senior Citizens Property Tax Assistance Law (also known as the
Senior Citizens Homeowners and Renters Assistance Law) and the
Senior Citizens Postponement Law. (R&TC Section 2615.6)
9)Requires a county, when it sends a tax bill to any person, to
include the notice regarding property tax assistance and
postponement programs, as prepared by the FTB. (R&TC Section
2615.6).
10)Suspends funding for the assistance and postponement programs
indefinitely.
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11)Requires the county tax collector to report the sale of a tax
defaulted property to the assessor within 10 days of the sale.
12)Requires the state to reimburse local agencies and school
districts for certain costs mandated by the state.
FISCAL EFFECT : Unknown, but probably none.
COMMENTS :
1)The Purpose of this Bill . SB 825 is a Senate Governance and
Finance Committee bill that proposes minor, technical changes
to the Property Tax Law. This measure is sponsored by the
California Association of County Treasurer-Tax Collectors and
the California Assessors' Association (CAA). According to the
Senate Committee on Governance and Finance, SB 825 is needed
to improve the administration of property tax laws to help
both taxpayers and counties.
2)The Types of Authorized Payments . The R&TC specifies the
forms of payment that county tax collectors may accept.
However, the Government Code (GC) does not include all of the
forms of payment specified in the R&TC. SB 825 would update
the GC provisions to conform to the provisions of the R&TC and
would extend the authority of a county tax collector to charge
a fee equal to the reasonable costs whenever the payment is
not honored.
3)Limited Relief from Penalties for Nonpayment of Property Tax .
Current law limits penalty relief when a taxpayer has failed
to pay taxes on an assessment that is the subject of a pending
assessment appeal. Specifically, the relief is provided only
from penalties, which would otherwise apply, based on the
difference between the county board of supervisor's final
determination of value and the value on the assessment roll
for that fiscal year. (R&TC Section 4895.3). According to
the legislative history, Section 4895.3 was designed to
discourage taxpayers from intentionally understating the value
of their property when filing an assessment appeal and paying
only the tax due on this unreasonably low amount by imposing
a penalty equal to 10% of the tax due on the difference
between the amount of tax paid for the period covered by an
assessment appeal and the amount of tax owed on the value
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contained in the final determination issued by an assessment
appeals board or court of competent jurisdiction.
With the passage of AB 2643 (Ma), Chapter 161, Statutes of
2012, a similar limitation applies to penalty relief in cases
where a taxpayer has failed to pay taxes on an assessment that
is the subject of a pending informal review due to a decline
in property value as a result of the damage, destruction,
depreciation, obsolescence, removal of property, or other
causes. The penalty relief applies only to the difference
between the county assessor's final determination of value and
the value on the assessment roll for that fiscal year. AB
2643 created consistency in the penalty calculations by making
it the same for both types of valuation reductions and, thus,
removing the incentive for taxpayers to pay tax bills late
when an appeal is filed with the assessor for informal review.
SB 825 would require the county tax collector to include in
each property tax bill an explanation of the limitations that
apply to penalty relief.
4)The Builder's Exclusion from Supplemental Assessment . Under
existing law, the county assessor is required to assess a
property for tax purposes on the lien date of January 1st and
to reassess a property to issue a supplemental assessment, if
warranted, when new construction is completed later in the
year. The supplemental assessment is made in addition to the
regular annual property tax to reflect the increase in the
property value as of the completion date. Builders who
construct property for resale may claim an exemption from a
supplemental assessment by filing an application with the
assessor within 30 days of commencing construction. However,
the builder is required to notify the assessor within 45 days
of renting, selling, using the property, or any other event
that will make the builder ineligible for the exclusion.
The law contains a special provision for builders who construct
homes in a residential subdivision - the assessor may grant
the exclusion automatically without the need for the builder
to file a claim for each home in the subdivision. Thus, if
the property has been subdivided into more than five parcels
in accordance with the subdivision Map Act, it is rebuttably
presumed that the owner of those parcels does not intend to
occupy or use the property. Unlike other builders, the owner
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of those parcels is not required to notify the assessor within
45 days of selling, using, occupying, or renting the property.
SB 825 would extend that application of the notification
requirement to a residential subdivision builder that
currently receives an automatic exclusion from a supplemental
assessment. The sponsor of this provision argues that it is
necessary to ensure that any owner who receives the builders'
exclusion notify the assessor of changes in eligibility,
regardless of whether or not the exclusion is automatically
granted.
5)Contiguous Parcels . Under existing law, any tract of land
that is situated in two or more revenue districts (tax rate
areas), must be separately assessed by each district.
However, when two or more contiguous parcels are situated in
two or more revenue districts and the value of any parcel is
$25,000 or less, that parcel may be combined with the parcel
with the greatest assessed valuation. The smallest parcel in
a tract of land used for single-family residences of less than
45,000 square feet may also be combined with the largest
contiguous parcel. Allowing contiguous parcels under the same
ownership to be more easily combined into one assessment is
intended to reduce the number of tax bills sent to property
owners whose holdings lie in more than one tax rate area. SB
825 proposals would increase the dollar threshold for combing
parcels in separate tax rate areas to $50,000. According to
the California Assessor's Association sponsoring this
provision, property owners typically request that the assessor
combine contiguous parcels to reduce per parcel special
assessment and special taxes.
6)Property Tax Postponement Programs . 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
Senior Citizens Homeowners and Renters Property Tax Assistance
(Assistance) Law program provides a direct grant to qualifying
seniors and disabled individuals who own or rent a residence.
This program, administered by the FTB, was established in 1967
to provide direct property tax relief to seniors living on a
fixed income. It was later expanded to include renters who
meet the income requirement, and to homeowners who are blind
or disabled, regardless of their age.
Unlike the Assistance program that refunds a percentage of
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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 SC'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, so the state 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 General Fund programs.
[SBx3 8 (Ducheny), Chapter 4, Statutes of 2009]. The funding
of the program was eliminated and the SC was prohibited from
accepting new applications after February 20, 2009.
The governor signed AB 1090 (Blumenfield), Chapter 369,
Statutes of 2011, creating the County Deferred Property Tax
Program 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. As of the enactment of the program, only one
county adopted a resolution indicating its intention to
participate but the program is not currently operative.
The current postponement notice, as required by law, creates
unnecessary work for the SC's Office. Specifically, it
requires the SC to answer a flood of inquiries about a program
that has not been funded since 2009. Since notice is required
by law, taxpayers receive information about the program,
prompting questions. SB 825 would suspend the notice
requirement of both the assistance program and the Senior
Citizens Postponement program, as long as they remain
unfunded. Therefore, suspension of the notice requirement in
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R&TC Section 2615.6 would also eliminate the additional
workload created by property owners interested in the program.
REGISTERED SUPPORT / OPPOSITION :
Support
California Assessors' Association
California Association of County Treasurer-Tax Collectors
Opposition
None on file
Analysis Prepared by : Nicole Naddy / Oksana Jaffe / REV. &
TAX. / (916) 319-2098