BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Kevin de León, Chair SB 1113 () - Property Taxation: Disabled Veterans' Exemption Refund: Statute of Limitations Amended: April 1, 2014 Policy Vote: G&F 7-0 Urgency: No Mandate: Yes Hearing Date: May 5, 2014 Consultant: Robert Ingenito This bill meets the criteria for referral to the Suspense File. Bill Summary: SB 1113 would extend from four years to eight years the period of time during which a taxpayer may claim a refund under the disabled veterans' property tax exemption. Fiscal Impact: This measure is estimated to result in reduced local property taxes of about $332,000 annually. Under Proposition 98, this reduction in local property tax revenues would lead to an increase in state General Fund support for K-14 education of approximately 40 to 50 percent, or potentially $166,000 annually. The exact amount would depend on the specific factors which determine the annual Proposition 98 minimum funding guarantee. BOE would incur minor costs (less than $10,000) to inform and advise county assessors and the public of the law changes and address implementation issues. Background: Current law provides qualified disabled veterans and their unmarried surviving spouses with a property tax exemption that applies to their home's assessed value. Exemption eligibility provisions require that the claimant obtain a United States Department of Veterans Affairs (USDVA) disability rating that either (1) rates the veteran's disability at 100 percent or (2) rates the veteran's disability compensation at 100 percent because the veteran is unable to secure and maintain gainful employment. For 2014, the exemption amount is $124,932. The exemption amount increases to $187,399 for households with incomes under $56,101. Each year, 31,055 homes in California receive the disabled veterans' exemption and 5.5 million homes receive the SB 1113 (Knight) Page 1 homeowners' exemption in the lesser amount of $7,000. Proposed Law: This measure would extend the deadline for county tax collectors to refund taxes for the disabled veterans' exemption from four to eight years. The bill also corrects an erroneous cross reference. Staff Comments: Current law affects disabled veterans by curtailing their ability to claim the exemption if their disabled status is under review at the federal level, or if they are appealing or litigating their rating. If these actions take longer than four years, veterans lose the ability to claim the full exemption when they received their disabled status. While this bill allows four additional years of refunds, the BOE cites evidence that situations requiring the full four years would be infrequent. Specifically, discussions with counties that have the greatest number of disabled veterans' exemption claims suggest that annually, 116 disabled veterans (2 per county) would be able to receive a refund for two additional years of property taxes paid. BOE reports that the average disabled veterans' exemption is $110,000 ($103,000 when the $7,000 homeowners' exemption previously granted on the same property is backed out). Consequently, $103,000 in assessed value is subject to additional exemption. BOE reports that the average statewide property tax rate in 2012-13 was 1.139 percent. When all the factors are multiplied together, the local property tax revenue loss associated with this measure would be about $332,000. .