BILL NUMBER: SB 1203	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  JULY 2, 2014
	AMENDED IN SENATE  MAY 22, 2014
	AMENDED IN SENATE  APRIL 21, 2014

INTRODUCED BY   Senator Jackson
   (Coauthor: Senator DeSaulnier)

                        FEBRUARY 20, 2014

   An act to add Section 66009 to the Government Code, and to amend
Section 214 of the Revenue and Taxation Code, relating to taxation.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1203, as amended, Jackson. Property taxation: welfare
exemption: rental housing and related facilities:
payment-in-lieu-of-taxes agreement.
   Existing property tax law establishes a partial welfare exemption
for property used exclusively for rental housing and related
facilities that are owned and operated by either of any certain types
of nonprofit entities or veterans' organizations that meet specified
exemption requirements, if either of certain qualifying criteria are
met. Existing law requires the owner of the property, in order to be
eligible for the exemption, to certify that the funds that would
have been necessary to pay property taxes are used to maintain the
affordability of, or reduce rents otherwise necessary for, the units
occupied by lower income households.
    This bill would delete that certification requirement for
exemption eligibility. The bill would prohibit an assessor from
levying any escape or supplemental assessment as a result of the
certification requirement, because of a property owner's
certification concerning the use of funds that would have been
necessary to pay property taxes and a payment-in-lieu-of-taxes
agreement with a local government for which the assessor did not,
prior to January 1, 2015, levy any assessment. The bill would
establish a conclusive presumption that funds from payments under a
payment-in-lieu-of-taxes agreement dated before January 1, 2015, were
used in compliance with   the certification requirement.
 The bill would require any outstanding ad valorem tax,
interest, or penalty that was levied between January 1, 2012, and
January 1, 2015, inclusive, as a result of the certification
requirement, because of a property owner's certification concerning
the use of funds that would have been necessary to pay property taxes
and a payment-in-lieu-of-taxes agreement with a local government, to
be canceled. The bill would  prohibit   require
 a refund of tax, interest, or penalty, as so levied, that was
paid prior to January 1, 2015. The bill would define "related
facilities" for the purpose of the exemption.
   The bill would prohibit a local agency, on and after January 1,
2015, from entering into an agreement to charge, or newly impose, a
charge or fee on a housing development project described under the
exemption, unless the charge or fee is imposed pursuant to the
Mitigation Fee Act and does not prohibit or discriminate against the
housing development project, as specified, or the charge or fee is
for a specific service or product provided directly to the housing
development project, that is not provided to those developments not
charged, and does not exceed the actual cost of providing the service
or product.
   Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature finds and declares the following:
   (a) In Section 50001 of the Health and Safety Code, the
Legislature has long declared that the subject of housing is of vital
statewide importance to the health, safety, and welfare of the
residents of this state.
   (b) The lack of housing, and in particular the lack of decent,
safe, and sanitary housing that is affordable to low-income
households, is a critical problem that continues to threaten the
economic, environmental, and social quality of life in California.
   (c) The Legislature, in enacting subdivision (g) of Section 214 of
the Revenue and Taxation Code in 1987, determined that the funds
that were being paid in property taxes could better be used in
furtherance of the goals of providing low-income housing and that a
property tax exemption was necessary to ensure that low-income
housing properties with restricted rents would be able to provide the
residents with a livable community and remain financially feasible
over the life of the deed restrictions, generally 55 years.
  SEC. 2.  Section 66009 is added to the Government Code, to read:
   66009.  (a) Notwithstanding any other law, on and after January 1,
2015, a local agency shall not enter into an agreement to charge, or
newly impose, a charge or fee on a housing development project
described in subdivision (g) of Section 214 of the Revenue and
Taxation Code, unless the charge or fee meets one of the following
conditions:
   (1) The charge or fee meets both of the following criteria:
   (A) The charge or fee is imposed pursuant to this act.
   (B) The imposition of the fee or charge does not prohibit or
discriminate against the housing development project because of any
of the following:
   (i) The method of financing the development.
   (ii) The development is intended for occupancy by persons and
families of very low, low, or moderate income, as defined in Section
50093 of the Health and Safety Code, or persons and families of
middle income.
   (iii) The development is subsidized, financed, insured, or
otherwise assisted by the federal or state government or by a local
public entity as defined in Section 50079 of the Health and Safety
Code.
   (2) The charge or fee is for a specific service or product
provided directly to the housing development project, the service or
product is not provided to those developments not charged, and the
charge or fee does not exceed the actual cost of providing the
service or product.
   (b) The Legislature finds and declares that
payment-in-lieu-of-taxes agreements are an issue of statewide concern
because of the need to prevent arbitrary and discriminatory
financial barriers that prevent the construction of needed low-income
housing in the state. Therefore, restricting agreements with a local
agency as described in subdivision (a) is a matter of statewide
concern, and not a municipal affair, as that term is used in Section
5 of Article XI of the California Constitution.
  SEC. 3.  Section 214 of the Revenue and Taxation Code is amended to
read:
   214.  (a) Property used exclusively for religious, hospital,
scientific, or charitable purposes owned and operated by community
chests, funds, foundations, limited liability companies, or
corporations organized and operated for religious, hospital,
scientific, or charitable purposes is exempt from taxation, including
ad valorem taxes to pay the interest and redemption charges on any
indebtedness approved by the voters prior to July 1, 1978, or any
bonded indebtedness for the acquisition or improvement of real
property approved on or after July 1, 1978, by two-thirds of the
votes cast by the voters voting on the proposition, if:
   (1) The owner is not organized or operated for profit. However, in
the case of hospitals, the organization shall not be deemed to be
organized or operated for profit if, during the immediately preceding
fiscal year, operating revenues, exclusive of gifts, 
endowments   endowments,  and grants-in-aid, did
not exceed operating expenses by an amount equivalent to 10 percent
of those operating expenses. As used herein, operating expenses
include depreciation based on cost of replacement and amortization
of, and interest on, indebtedness.
   (2) No part of the net earnings of the owner inures to the benefit
of any private shareholder or individual.
   (3) The property is used for the actual operation of the exempt
activity, and does not exceed an amount of property reasonably
necessary to the accomplishment of the exempt purpose.
   (A) For the purposes of determining whether the property is used
for the actual operation of the exempt activity, consideration shall
not be given to use of the property for either or both of the
following described activities if that use is occasional:
   (i) The owner conducts fundraising activities on the property and
the proceeds derived from those activities are not unrelated business
taxable income, as defined in Section 512 of the Internal Revenue
Code, of the owner and are used to further the exempt activity of the
owner.
   (ii) The owner permits any other organization that meets all of
the requirements of this subdivision, other than ownership of the
property, to conduct fundraising activities on the property and the
proceeds derived from those activities are not unrelated business
taxable income, as defined in Section 512 of the Internal Revenue
Code, of the organization, are not subject to the tax on unrelated
business taxable income that is imposed by Section 511 of the
Internal Revenue Code, and are used to further the exempt activity of
the organization.
   (B) For purposes of subparagraph (A):
   (i) "Occasional use" means use of the property on an irregular or
intermittent basis by the qualifying owner or any other qualifying
organization described in clause (ii) of subparagraph (A) that is
incidental to the primary activities of the owner or the other
organization.
   (ii) "Fundraising activities" means both activities involving the
direct solicitation of money or other property and the anticipated
exchange of goods or services for money between the soliciting
organization and the organization or person solicited.
   (C) Subparagraph (A) shall have no application in determining
whether paragraph (3) has been satisfied unless the owner of the
property and any other organization using the property as provided in
subparagraph (A) have filed with the assessor a valid organizational
clearance certificate issued pursuant to Section 254.6.
   (D) For the purposes of determining whether the property is used
for the actual operation of the exempt activity, consideration shall
not be given to the use of the property for meetings conducted by any
other organization if the meetings are incidental to the other
organization's primary activities, are not fundraising meetings or
activities as defined in subparagraph (B), are held no more than once
per week, and the other organization and its use of the property
meet all other requirements of paragraphs (1) to (5), inclusive, of
this subdivision. The owner or the other organization also shall file
with the assessor a copy of a valid, unrevoked letter or ruling from
the Internal Revenue Service or the Franchise Tax Board stating that
the other organization, or the national organization of which it is
a local chapter or affiliate, qualifies as an exempt organization
under Section 501(c)(3) or 501(c)(4) of the Internal Revenue Code or
Section 23701d, 23701f, or 23701w.
   (E) Nothing in subparagraph (A), (B), (C), or (D) shall be
construed to either enlarge or restrict the exemption provided for in
subdivision (b) of Section 4 and Section 5 of Article XIII of the
California Constitution and this section.
   (4) The property is not used or operated by the owner or by any
other person so as to benefit any officer, trustee, director,
shareholder, member, employee, contributor, or bondholder of the
owner or operator, or any other person, through the distribution of
profits, payment of excessive charges or compensations, or the more
advantageous pursuit of their business or profession.
   (5) The property is not used by the owner or members thereof for
fraternal or lodge purposes, or for social club purposes except where
that use is clearly incidental to a primary religious, hospital,
scientific, or charitable purpose.
   (6) The property is irrevocably dedicated to religious,
charitable, scientific, or hospital purposes and upon the
liquidation, dissolution, or abandonment of the owner will not inure
to the benefit of any private person except a fund, foundation, or
corporation organized and operated for religious, hospital,
scientific, or charitable purposes.
   (7) The property, if used exclusively for scientific purposes, is
used by a foundation or institution that, in addition to complying
with the foregoing requirements for the exemption of charitable
organizations in general, has been chartered by the Congress of the
United States (except that this requirement shall not apply when the
scientific purposes are medical research), and whose objects are the
encouragement or conduct of scientific investigation, research, and
discovery for the benefit of the community at large.
   The exemption provided for herein shall be known as the "welfare
exemption." This exemption shall be in addition to any other
exemption now provided by law, and the existence of the exemption
provision in paragraph (2) of subdivision (a) of Section 202 shall
not preclude the exemption under this section for museum or library
property. Except as provided in subdivision (e), this section shall
not be construed to enlarge the college exemption.
   (b) Property used exclusively for school purposes of less than
collegiate grade and owned and operated by religious, hospital, or
charitable funds, foundations, limited liability companies, or
corporations, which property and funds, foundations, limited
liability companies, or corporations meet all of the requirements of
subdivision (a), shall be deemed to be within the exemption provided
for in subdivision (b) of Section 4 and Section 5 of Article XIII of
the California Constitution and this section.
   (c) Property used exclusively for nursery school purposes and
owned and operated by religious, hospital, or charitable funds,
foundations, limited liability companies, or corporations, which
property and funds, foundations, limited liability companies, or
corporations meet all the requirements of subdivision (a), shall be
deemed to be within the exemption provided for in subdivision (b) of
Section 4 and Section 5 of Article XIII of the California
Constitution and this section.
   (d) Property used exclusively for a noncommercial educational FM
broadcast station or an educational television station, and owned and
operated by religious, hospital, scientific, or charitable funds,
foundations, limited liability companies, or corporations meeting all
of the requirements of subdivision (a), shall be deemed to be within
the exemption provided for in subdivision (b) of Section 4 and
Section 5 of Article XIII of the California Constitution and this
section.
   (e) Property used exclusively for religious, charitable,
scientific, or hospital purposes and owned and operated by religious,
hospital, scientific, or charitable funds, foundations, limited
liability companies, or corporations or educational institutions of
collegiate grade, as defined in Section 203, which property and
funds, foundations, limited liability companies, corporations, or
educational institutions meet all of the requirements of subdivision
(a), shall be deemed to be within the exemption provided for in
subdivision (b) of Section 4 and Section 5 of Article XIII of the
California Constitution and this section. As to educational
institutions of collegiate grade, as defined in Section 203, the
requirements of paragraph (6) of subdivision (a) shall be deemed to
be met if both of the following are met:
   (1) The property of the educational institution is irrevocably
dedicated in its articles of incorporation to charitable and
educational purposes, to religious and educational purposes, or to
educational purposes.
   (2) The articles of incorporation of the educational institution
provide for distribution of its property upon its liquidation,
dissolution, or abandonment to a fund, foundation, or corporation
organized and operated for religious, hospital, scientific,
charitable, or educational purposes meeting the requirements for
exemption provided by Section 203 or this section.
   (f) Property used exclusively for housing and related facilities
for elderly or handicapped families and financed by, including, but
not limited to, the federal government pursuant to Section 202 of
Public Law 86-372 (12 U.S.C. Sec. 1701q), as amended, Section 231 of
Public Law 73-479 (12 U.S.C. Sec. 1715v), Section 236 of Public Law
90-448 (12 U.S.C. Sec. 1715z), or Section 811 of Public Law 101-625
(42 U.S.C. Sec. 8013), and owned and operated by religious, hospital,
scientific, or charitable funds, foundations, limited liability
companies, or corporations meeting all of the requirements of this
section shall be deemed to be within the exemption provided for in
subdivision (b) of Section 4 and Section 5 of Article XIII of the
California Constitution and this section.
   The amendment of this paragraph made by Chapter 1102 of the
Statutes of 1984 does not constitute a change in, but is declaratory
of, existing law. However, no refund of property taxes shall be
required as a result of this amendment for any fiscal year prior to
the fiscal year in which the amendment takes effect.
   Property used exclusively for housing and related facilities for
elderly or handicapped families at which supplemental care or
services designed to meet the special needs of elderly or handicapped
residents are not provided, or that is not financed by the federal
government pursuant to Section 202 of Public Law 86-372 (12 U.S.C.
Sec. 1701q), as amended, Section 231 of Public Law 73-479 (12 U.S.C.
Sec. 1715v), Section 236 of Public Law 90-448 (12 U.S.C. Sec. 1715z),
or Section 811 of Public Law 101-625 (42 U.S.C. Sec. 8013), shall
not be entitled to exemption pursuant to this subdivision unless the
property is used for housing and related facilities for low- and
moderate-income elderly or handicapped families. Property that would
otherwise be exempt pursuant to this subdivision, except that it
includes some housing and related facilities for other than low- or
moderate-income elderly or handicapped families, shall be entitled to
a partial exemption. The partial exemption shall be equal to that
percentage of the value of the property that is equal to the
percentage that the number of low- and moderate-income elderly and
handicapped families occupying the property represents of the total
number of families occupying the property.
   As used in this subdivision, "low and moderate income" has the
same meaning as the term "persons and families of low or moderate
income" as defined by Section 50093 of the Health and Safety Code.
   (g) (1) Property used exclusively for rental housing and related
facilities and owned and operated by religious, hospital, scientific,
or charitable funds, foundations, limited liability companies, or
corporations, including limited partnerships in which the managing
general partner is an eligible nonprofit corporation or eligible
limited liability company, meeting all of the requirements of this
section, or by veterans' organizations, as described in Section
215.1, meeting all the requirements of paragraphs (1) to (7),
inclusive, of subdivision (a), shall be deemed to be within the
exemption provided for in subdivision (b) of Section 4 and Section 5
of Article XIII of the California Constitution and this section and
shall be entitled to a partial exemption equal to that percentage of
the value of the property that the portion of the property serving
lower income households represents of the total property in any year
in which any of the following criteria applies:
   (A) The acquisition, rehabilitation, development, or operation of
the property, or any combination of these factors, is financed with
tax-exempt mortgage revenue bonds or general obligation bonds, or is
financed by local, state, or federal loans or grants and the rents of
the occupants who are lower income households do not exceed those
prescribed by deed restrictions or regulatory agreements pursuant to
the terms of the financing or financial assistance.
   (B) The owner of the property is eligible for and receives
low-income housing tax credits pursuant to Section 42 of the Internal
Revenue Code of 1986, as added by Public Law 99-514.
   (C) In the case of a claim, other than a claim with respect to
property owned by a limited partnership in which the managing general
partner is an eligible nonprofit corporation, that is filed for the
2000-01 fiscal year or any fiscal year thereafter, 90 percent or more
of the occupants of the property are lower income households whose
rent does not exceed the rent prescribed by Section 50053 of the
Health and Safety Code. The total exemption amount allowed under this
subdivision to a taxpayer, with respect to a single property or
multiple properties for any fiscal year on the sole basis of the
application of this subparagraph, shall not exceed twenty thousand
dollars ($20,000) of tax.
   (D) (i) The property was previously purchased and owned by the
Department of Transportation pursuant to a consent decree requiring
housing mitigation measures relating to the construction of a freeway
and is now solely owned by an organization that qualifies as an
exempt organization under Section 501(c)(3) of the Internal Revenue
Code.
   (ii) This subparagraph shall not apply to property owned by a
limited partnership in which the managing partner is an eligible
nonprofit corporation.
   (2) (A) To be eligible for the exemption provided by this
subdivision, the owner of the property shall comply with the
following:
   (i) For any claim filed for the 2000-01 fiscal year or any fiscal
year thereafter, certify and ensure, subject to the limitation in
clause (ii), that there is an enforceable and verifiable agreement
with a public agency, a recorded deed restriction, or other legal
document that restricts the project's usage and that provides that
the units designated for use by lower income households are
continuously available to or occupied by lower income households at
rents that do not exceed those prescribed by Section 50053 of the
Health and Safety Code, or, to the extent that the terms of federal,
state, or local financing or financial assistance conflicts with
Section 50053, rents that do not exceed those prescribed by the terms
of the financing or financial assistance.
   (ii) In the case of a limited partnership in which the managing
general partner is an eligible nonprofit corporation, the restriction
and provision specified in clause (i) shall be contained in an
enforceable and verifiable agreement with a public agency, or in a
recorded deed restriction to which the limited partnership certifies.

   (B) Notwithstanding any other law, an assessor shall not levy any
escape or supplemental assessment as a result of this paragraph as it
read prior to January 1, 2015, because of a property owner's
certification concerning the use of funds that would have been
necessary to pay property taxes and a payment-in-lieu-of-taxes
agreement with a local government for which the assessor did not,
prior to January 1, 2015, levy any assessment.  It shall be
conclusively presumed that funds from payments under a
payment-in-lieu-of-taxes agreement dated before January 1, 2015, were
used in compliance with this paragraph as it read prior to January
1, 2015.  Any outstanding ad valorem tax, interest, or penalty
that was levied between January 1, 2012, and January 1, 2015,
inclusive, as a result of this paragraph as it read prior to January
1, 2015, because of a property owner's certification concerning the
use of funds that would have been necessary to pay property taxes and
a payment-in-lieu-of-taxes agreement with a local government shall
be canceled.  However, there shall be no refund of 
 A  tax, interest, or penalty, as so levied, that was paid
prior to January 1,  2015.   2015, shall be
refunded. 
   (3) As used in this subdivision:
   (A) "Lower income households" has the same meaning as the term
"lower income households" as defined by Section 50079.5 of the Health
and Safety Code.
   (B) "Related facilities" means any manager's units and any and all
common area spaces that are included within the physical boundaries
of the low-income apartment development, including, but not limited
to, common area space, walkways, balconies, patios, clubhouse space,
meeting rooms, and parking areas, except any portions of the overall
project that are nonexempt commercial structures.
   (h) Property used exclusively for an emergency or temporary
shelter and related facilities for homeless persons and families and
owned and operated by religious, hospital, scientific, or charitable
funds, foundations, limited liability companies, or corporations
meeting all of the requirements of this section shall be deemed to be
within the exemption provided for in subdivision (b) of Section 4
and Section 5 of Article XIII of the California Constitution and this
section. Property that otherwise would be exempt pursuant to this
subdivision, except that it includes housing and related facilities
for other than an emergency or temporary shelter, shall be entitled
to a partial exemption.
   As used in this subdivision, "emergency or temporary shelter"
means a facility that would be eligible for funding pursuant to
Chapter 11 (commencing with Section 50800) of Part 2 of Division 31
of the Health and Safety Code.
   (i) Property used exclusively for housing and related facilities
for employees of religious, charitable, scientific, or hospital
organizations that meet all the requirements of subdivision (a) and
owned and operated by funds, foundations, limited liability
companies, or corporations that meet all the requirements of
subdivision (a) shall be deemed to be within the exemption provided
for in subdivision (b) of Section 4 and Section 5 of Article XIII of
the California Constitution and this section to the extent the
residential use of the property is institutionally necessary for the
operation of the organization.
   (j) For purposes of this section, charitable purposes include
educational purposes. For purposes of this subdivision, "educational
purposes" means those educational purposes and activities for the
benefit of the community as a whole or an unascertainable and
indefinite portion thereof, and do not include those educational
purposes and activities that are primarily for the benefit of an
organization's shareholders. Educational activities include the study
of relevant information, the dissemination of that information to
interested members of the general public, and the participation of
interested members of the general public.
   (k) In the case of property used exclusively for the exempt
purposes specified in this section, owned and operated by limited
liability companies that are organized and operated for those
purposes, the State Board of Equalization shall adopt regulations to
specify the ownership, organizational, and operational requirements
for those companies to qualify for the exemption provided by this
section.
   (  l  ) The amendments made by Chapter 354 of the
Statutes of 2004 shall apply with respect to lien dates occurring on
and after January 1, 2005.
  SEC. 4.  An inference shall not be drawn from the changes made by
this act with regard to whether existing law allows a local agency to
enter into a payment-in-lieu-of-taxes agreement with a property
owner of a low-income housing project eligible for the property tax
welfare exemption under Section 214 of the Revenue and Taxation Code.