BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 1323| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 1323 Author: Lieu (D) Amended: 4/29/14 Vote: 21 SENATE GOVERNANCE & FINANCE COMMITTEE : 6-0, 4/24/14 AYES: Wolk, Beall, DeSaulnier, Hernandez, Liu, Walters NO VOTE RECORDED: Knight SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 SUBJECT : Property taxation SOURCE : California Assessors Association DIGEST : This bill simplifies the cancellation or refunding of penalties for the late filing of property tax exemption applications, and reduces the penalty from $250 to $200. This bill deletes the religious organizations size limitation of over 500 people on leased land to qualify for property tax exemption for parking facilities, and allows exemptions for contiguous properties to be filed in a single claim. ANALYSIS : California Constitution Section 1 of Article XIII provides that all property is taxable unless explicitly exempted by the Constitution or federal law, but allows the Legislature to exempt property used for charitable purposes owned by nonprofit entities organized and operated for charitable purposes, none of whose income inure to the benefit of any private shareholder or individual. The Legislature enacted this CONTINUED SB 1323 Page 2 exemption, commonly known as the "welfare exemption." Exemptions apply to the annual property tax roll, as well as to one-time supplemental assessments, which assessors send to taxpayers whenever a change of ownership or new construction results in a reassessment after the lien date of January 1 to reflect the difference between the initial and revised assessment. I. Cancelling and refunding taxes on exempt property . Currently, when a taxpayer files an application for an exemption for property used as a college, cemetery, church, religious exhibition, veterans' organization, free public library, free museums, or other welfare exempt property before the supplemental assessment is due; the assessor can cancel all taxes, penalties, and interest for that assessment. However, if the taxpayer does not file an application until after that date, but before the first installment becomes delinquent, the assessor reduces any taxes, penalties, and interest by 90%, but not below $250. If the taxpayer applies after that date, the assessor can only reduce taxes, penalties, and interest by 85%, but not below $200. However, some exemptions depart from the general rule, such as: For not timely filed claims for the veterans' or homeowners' exemption, the assessor can refund up to 80% of the tax provided the taxpayer files an application on or before the date the first installment becomes due. For not timely filed claims for the disabled veterans' exemption, the assessor can refund up to 90% of the tax provided the taxpayer files an application on or before the date the first installment becomes due, but only 85% if the taxpayer does not file the claim before that time. For any other exemption not listed above, if the taxpayer does not file an application until after that date, but before the first installment becomes delinquent, the assessor reduces any taxes, penalties, and interest by 90%, but when the taxpayer applies after that date, the assessor can only reduce taxes, penalties, and interest by 85%. CONTINUED SB 1323 Page 3 Additionally, past practice for taxpayers and organization was to file one exemption application, regardless of the number of properties owned. However, assessors process one claims per property, and cannot easily identify which property should be assessed the penalty when a taxpayer owning multiple properties does not file for the exemption on time. This bill provides that for all the exemptions except the veterans', homeowners' exemption, and disabled veterans' exemption, the assessor can cancel 90% of the taxes, penalties, or interest, that exceeds $20,000 in total amount ($200 in property tax at the 1% rate). This bill changes both the individual statutes for each property tax exemption, as well as the general law that guides supplemental assessments. This bill provides that the $20,000 in total amount assessed valuation penalty cap for exempt properties applies to each application, which can include a property location with six contiguous parcels. If a taxpayer owns multiple properties, and fails to file applications on time for any of them, the penalty equals $200 per application, instead of per taxpayer. II. Church parking lots . Existing law allows the welfare exemption for all real property necessary and desirable for persons attending services to park their cars. However, the church, religious denomination, or sect must not have a congregation of more than 500 people for it to be eligible for the exemption. Additionally, the law conditions the exemption on the parking of "automobiles." This bill deletes the 500 person limit, and changes "automobiles" to "vehicles." III. Affidavits . Taxpayers seeking an exemption must annually submit an affidavit to the assessor each year providing any required information, and can currently combine all of his or her property into one affidavit. Additionally, state law generally requires taxpayers to submit affidavits for exemptions between the lien date and 5 p.m. on February 15. This bill requires the taxpayer to submit the affidavit for each property for which he/she seeks an exemption, but also CONTINUED SB 1323 Page 4 allows the taxpayer to file a single claim for a property consisting of contiguous parcels. This bill also clarifies that the claim period for the full disabled veterans' exemption begins when the taxpayer becomes eligible for the exemption and ends on February 15. IV. Forms . State law often contains the exact form that assessors and taxpayers use, including the card that applicants for the welfare exemption send to the assessor each year to show no change in eligibility for the exemption, and the notice that the assessor sends each year to taxpayers who received the religious exemption the year before. This bill deletes both the card and the notice from the law, and instead directs the Board of Equalization (BOE) to prescribe cards and notices for applicants and assessors to use, which BOE does for all of its forms annually. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes SUPPORT : (Verified 5/13/14) California Assessors' Association (source) California Association of Nonprofits ARGUMENTS IN SUPPORT : According to the author, "California's property taxation laws and regulations can be fairly complex and all appropriate attempts should be made to simplify them for the betterment of taxpayers and administrators alike. This measure is about simplifying the code sections related to late-filings. It will streamline the process for granting property tax welfare exemptions related to certain types of property such as religious institutions and hospitals. Ultimately, by bringing efficiencies to claiming welfare exemption status, this measure will save taxpayers and local government, including county assessors, precious time and resources." AB:k 5/13/14 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED SB 1323 Page 5 CONTINUED