BILL ANALYSIS Ó
SENATE COMMITTEE ON VETERANS AFFAIRS
Senator Ben Hueso, Chair
BILL NO: SB 1113 HEARING DATE: 4/8/14
AUTHOR: Knight
VERSION: As amended, 4/1/14
FISCAL: Yes
VOTE: 21
SUBJECT
Disable veterans property tax exemption: refunds: statute of
limitations
DESCRIPTION
Existing law:
1.Provides for the exemption from property taxation of specified
amounts of the assessed value of the home of a disabled
veteran or a veteran's spouse under certain qualifying
conditions.
2.Requires - in cases where a claimant was unable to take
advantage of the exemption due to the claimant's inability to
receive a timely disability rating from the United States
Department of Veterans Affairs (VA) - that a refund must be
provided retroactively so long as the claimant meets certain
filing requirements.
3.Existing law requires property taxes to be refunded upon the
filing of a refund claim within four years after making the
relevant tax payment.
This bill:
Provides that -- for refund claims filed on or after January 1,
2015 - the refund application window is extended to eight years
after making the relevant tax payment.
BACKGROUND
The disabled veterans' exemption (DVE) is available for
qualified veterans to reduce their property tax liability. The
program originally provided a basic $100,000 exemption to a
disabled veteran or a $150,000 exemption for a disabled veteran,
who also meets specified low-income criteria.
More specifically, the basic option exempts from property
taxation that portion of the property's full value, as adjusted
for the relevant assessment year, up to a maximum of $100,000
(adjusted annually for inflation). The low-income option exempts
that portion of the property's full value, up to a maximum of
$150,000 (adjusted annually for inflation), when the veteran's
household income does not exceed $40,000, as adjusted for the
relevant assessment year.
Veteran disability qualifications
A qualified veteran must have been honorably discharged from one
of the military services and served during one of several
specified time periods. In addition, the veteran must have
incurred an injury during that military service, which resulted
in at least one of the following:
Blind in both eyes, or
Lost the use of two or more limbs, or
Designated as having a 100% disability rating by either
(1) the federal VA or (2) the military service from which
the veteran was discharged.
The unmarried surviving spouse of a DVE-qualified veteran may
continue to claim an exemption under the program. If the
surviving spouse married, he or she loses the exemption
privilege. However, upon the death of or divorce from the new
spouse, the once-qualified surviving spouse of a qualified
veteran is eligible again to receive the exemption.
Property eligibility
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In order for property to qualify for the DVE, the property must
be used as the principal place of residence of the veteran or
the unmarried surviving spouse of a qualified disabled veteran.
One exception to this requirement occurs when the claimant is
confined to a hospital or other care facility and the property
would be that claimant's principal place of residence were it
not for such confinement, provided that the residence is not
rented or leased. The property may be owned by the veteran, the
veteran's spouse, or the veteran and spouse jointly.
No other property tax exemption may be granted to a residence
which has been granted a DVE exemption. However, if two or more
qualified veterans own a property in which they reside, each is
entitled to the DVE to the extent of his or her interest.
Annual adjustments
Existing law provides that two aspects of the DVE disabled
veterans' exemption may be adjusted annually for inflation.
[Revenue and Taxation Code section 205.5, subdivisions (g) and
(h)]
The exemption amount for both the basic and low-income
exemption; and
The household income limit for the low-income disabled
veterans' exemption.
For each assessment year, both the exemption amount and the
income limit are compounded annually by an inflation factor
based upon the California Consumer Price Index (CCPI). The State
Board of Equalization (BOE) annually provides the exemption
amounts and household income limits for the upcoming year and
prior years in a Letter to Assessor, which may be found at the
Board's website in the applicable year.
The BOE reports that, for 2014, the following amounts are
effective:
Exempted property tax amounts
Basic option: amount exempted: $124,932
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Low-income option: amount exempted: 187,399
Income limit
Low-income household income limit: $56,101
Impact of VA-rating delays
California law specifies that a home becomes eligible for the
exemption as of the effective date of the veteran's 100%
disability rating. However, because disabled veterans can
encounter significant time delays until the federal VA
determines their ratings, they can lose thousands of dollars in
property tax savings.
Some disabled veterans receive initial ratings that are
incorrect, but the processing mistakes are discovered years
later and the rating is increased. In these cases, veterans are
entitled to claim a refund for taxes overpaid for up to four
years of back taxes paid. This is especially useful when the
disability rating is granted retroactively, however some
certifications may be back-dated 20 years.
Changing the statute from four to eight years parallels the
provisions of law requiring eight years of back taxes to be
collected from taxpayers for escape assessments related to
unrecorded changes in ownership.
COMMENT
1.Committee staff comments :
a. SB 1113 would extend the statute of limitations on DVE
refunds in cases where the federal government retroactively
issues the veteran a 100% disability rating. Specifically,
the change would allow the disabled veteran to receive a
refund on property taxes paid within the last eight years,
instead of the four years provided under existing law.
According to the author, this change would parallel other
provisions of law that require eight years of back taxes to
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be collected from taxpayers for escape assessments related
to unrecorded changes in ownership.
b. From BOE staff analysis (3/13/14): "Most first-time
claimants for the disabled veterans' exemption with
back-dated disability effective dates are not negatively
impacted. This is because either the taxes were paid within
the existing 4-year limitations period or, as first-time
homeowners, they have no property taxes."
2.Related Legislation :
AB 188 (Block, Ch. 202, Stats. 2011) provides that the DVE
applies when an unmarried surviving spouse is confined to a
health care facility.
AB 2314 (Block & Knight, Ch. 150, Stats. 2010) extends the
time period for a disabled veteran, who has not yet received a
disability rating from the federal VA, to file a DVE claim,
and deletes a requirement for the disabled veteran to have a
"pending" application with the VA.
AB 2568 (Houston, held Assembly Rev & Tax, 2008) : Relative to
the DVE, this bill would have (1) removed the existing maximum
exemptions of $100,000 and $150,000 (for low-income persons);
(2) eliminated existing increases for the change in the
California Consumer Price Index to both the exemption amount
and the income limitation - for purposes of determining
low-income homeowners; (3) expanded application of the
exemption to unmarried surviving spouses of veterans that died
from an injury that was determined to be service-related by
the United States Department of Consumer Affairs; (4) applied
for property tax lien dates for fiscal year (FY) 2009-10 and
each FY thereafter.
SB 1637 (Comm on Veterans Affairs, Ch. 677, Stats. 2006) makes
several small, technical changes to the DVW. Provides some
small enhancements that could be of significant benefit to
disabled veterans. The bill increases taxpayer privacy by
providing that documents that contain an applicant's name,
address, and social security number are not accessible to the
public.
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AB 322 (Parra, Ch. 278, Stats. 2003 ) ensures that a disabled
veteran, who is confined to a hospital or other care facility,
will continue to receive the DVE.
SB 2092 (Comm on Rev & Tax, Ch. 775, Stats. 2002 ) makes
various administrative changes in the property tax laws,
including the following to the DVE: (1) corrects a reference
for refund claim statute of limitations; (2) provides a
reasonable time for claimant to file with assessor; (3) allows
the exemption on existing property owned by claimant; (4)
other technical corrections.
SB 1362 (Poochigian, Ch. 1085, Stats. 2000) revises provisions
related to the DVE: (1) Deletes the distinction between
veterans who are totally blind or lost the use of two or more
limbs and those who are totally disabled; (2) eliminates the
January 2001 sunset for the increased veterans' exemption for
totally disabled veterans; (3) increases the income threshold
for lower income veterans to $40,000 for the year 2001 and
would provide an inflation factor for fiscal years thereafter;
(4)Permits full retroactive exemption for veterans that are
awaiting a disability rating from the U. S. Department of
Veterans Affairs; (5)Permits partial retroactive exemption for
any eligible person that did not file a claim; (6) terminates
the exemption when a veteran sells their principal place of
residence and immediately transfers the exemption to the new
residence.
AB 2562 (Brewer, Ch. 922, Stats. 2000) permits retroactive
disabled veterans' exemptions, increases the amount of the
partial exemption granted on claims that are filed late and
permit the exemption to be granted immediately on a new home
purchased by a disabled veteran.
AB 2092 (Reyes, Ch. 575, Stats. 2000) allows a disabled
veteran to retroactively file for disabled veterans' benefits,
including the disabled property tax exemption, if the filing
is due to the federal government delaying in issuing a
disability rating.
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POSITIONS
Sponsor: George Runner, Member, State Board of Equalization
Support:
American Legion, Department of California
AMVETS, Department of California
California Association of County Veterans Service Offices
(CASVSO)
California State Commanders Veterans Council
Veterans of Foreign Wars, Department of California (VFW)
Vietnam Veterans of American, California State Council (VVA)
California Taxpayers Association (CalTax)
Veterans Caucus of the California Democratic Party
Oppose: None on file.
Analysis by: Wade Cooper Teasdale
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