BILL ANALYSIS Ó
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Date of Hearing: April 20, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
ACA
6 (Brown) - As Amended April 7, 2016
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Urgency: State Mandated Local Program: NoReimbursable: No
SUMMARY:
This measure expands two constitutionally prescribed property
tax exemptions for personal and real property. Specifically,
this bill:
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1)Modifies Section 3 of Article XIII of the California
Constitution to extend the existing property tax exemption on
newly planted pistachio tress from four years, starting after
the season in which they were planted in orchard form, to six
years.
2)Modifies Section 2 of Article XIIIA of the California
Constitutions to do the following:
a) Allows for spouses to qualify individually for the
"base-year value" property tax relief, but only for a
replacement property purchased or newly constructed on or
after the effective date of this measure, and only for a
spouse who has not already transferred a base year value
prior to that same date.
b) Authorizes the Legislature to extend the property tax
relief for the "base-year value" transfer to homeowners
who are the parent or legal guardian of a severely
disabled child, but only with respect to replacement
dwellings purchased or newly constructed on or after the
effective date of this measure.
c) Makes technical, conforming changes to the provisions
related to property tax exemptions and base year value
transfer eligibility requirements.
FISCAL EFFECT:
1)Expanding the property tax exemption for pistachio trees will
result in an annual revenue loss of $2 million, resulting in
GF costs of approximately $1 million as a result of the
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Proposition 98 guarantee.
2)Expanding the "base-year value" transfer will result in an
annual revenue loss of approximately $335,000, resulting in GF
costs of approximately $165,000 as a result of the Proposition
98 guarantee.
COMMENTS:
1)Purpose. Supporters of the pistachio provisions content that
this measure would bring property tax policy in line with the
recognition that a pistachio tree is not 'bearing' for the
first six years of its lives. Supporters of the base-year
value provision argue that this constitutional amendment is
needed to assist families caring for severely and permanently
disabled children. The author cites an example of a situation
in San Diego County where permanently disabled veterans are
returning from military action and returning to their parents'
home, a house that is not accessible to permanently disabled
inhabitants.
2)Pistachio trees and the property tax: Existing law exempts
fruit and nut bearing trees and grapevines from property tax
during the first few years of their life and synchronizes the
imposition of the tax with the ability of the trees to produce
a sellable crop. The California Constitution exempts fruit and
nut trees planted in orchard form from property tax until four
years after the season first planted, and the Revenue and
Taxation Code states that once the exemption period expires
and the trees or vines are subject to tax, the law sets the
initial base year value of the trees or vines at its full cash
value as of January 1 of the first year they are taxable.
Pistachio trees, like other nut bearing trees, are not subject
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to the property tax for the first four years after the season
in which they are planted. However, according to the United
States Department of Agriculture (USDA), pistachio trees are
not considered bearing until six years after the season in
which they are planted. Therefore, pistachio trees are
subject to the property tax for two years during which they
are not producing any value for the owner.
While the trees themselves are not subject to property tax for
the first four years of their lives, the agricultural land
itself is still subject to property tax for those years.
However, most pistachio trees are located on land subject to
the Williamson Act and assessed under its prescribed
methodology, which results in the lowest value for property
tax purposes.
3)Base year value transfers. Adopted in June 1978, Proposition
13 was designed to provide real property tax relief by
limiting the assessment and taxing powers of state and local
governments. As a general rule, Proposition 13 limits any tax
on real property to 1% of the property's assessed value,
measured as either the assessed value as of the 1975-76 tax
year or the appraisal value when purchased, constructed, or a
change in ownership has occurred, subject to adjustment for
the lesser of inflation or 2% per year. As a result, real
property is only reassessed to fair market value upon a change
in ownership.
One exception to the change in ownership fair market value
reassessment is the "base-year value transfer" provision.
Under that rule, a disabled homeowner or a homeowner aged 55
or older may elect a once-in-a-lifetime transfer of the base
year value of the homeowner's principal residence to a
replacement residence of equal or lesser value within the same
county, or in certain other counties, within two years of the
sale of the original residence. The base year value transfer
allows the homeowner to continue paying property taxes at the
amount and rate of growth of the previous residence and not
the fair market value of the new residence.
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Under the current base value transfer rules, if a married
couple are both record owners of a property that has received
base year transfer value relief, neither will be eligible to
claim such relief again in the future, even if the couple has
divorced. Furthermore, if one of the spouses were to remarry
an otherwise eligible person, that new couple would also be
ineligible for the base year value transfer because the
remarrying individual is not eligible.
4) Related legislation. AB 1378 (Holden), would have allowed
each spouse the opportunity to make separate, one-time
base-value year claim after January 1, 2016. This bill was
vetoed by the Governor, with the following veto message:
"This bill would allow each spouse in a marriage to submit
a separate base-year property tax valuation transfer claim.
I think this bill is too road and allows an already
generous property tax benefit to be allowed a second time
on a larger scale.
I do not believe it would be prudent to authorize
legislation such as this that would result in significant
long-term costs to the General Fund."
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Analysis Prepared by:Luke Reidenbach / APPR. / (916)
319-2081