BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 571| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 571 Author: Brown (D) Amended: 9/1/15 in Senate Vote: 21 SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 7/1/15 AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach, Pavley ASSEMBLY FLOOR: 77-0, 5/28/15 - See last page for vote SUBJECT: Property taxation: property statement: change in ownership statement: penalty SOURCE: Author DIGEST: This bill changes the standard used by assessment appeals board when determining whether to abate three property tax penalties. Senate Floor Amendments of 9/1/15 apply this bill's standard to change in ownership statements (COSs) for transfers of real property. ANALYSIS: Existing law: 1)Provides that all property is taxable unless explicitly exempted by the Constitution or federal law. 2)Precludes assessors from revaluing real property for tax purposes unless a property is newly constructed, or changes AB 571 Page 2 ownership. 3)Charges each County Board of Supervisors, or an assessment appeals board of its own creation, with fairly and impartially conducting hearings between taxpayers and the assessor, including requesting penalty abatement. 4)Requires the new owner to file a COS with the assessor when ownership changes. 5)Imposes the following penalties for failing to file a COS: a) For real property eligible for the homeowners' exemption, $100, or 10% of the taxes applicable to the new value up to $5,000, whichever is greater. b) For real property not eligible for the homeowners' exemption, $100 or 10% of the taxes applicable to the new value up to $20,000, whichever is greater. c) For legal entities, 10% of the taxes applicable to the new value if a change occurred, or if not, 10% of the taxes based on the current value. 6)Requires assessors to revalue personal property annually. 7)Directs taxpayers to list taxable personal property on the business personal property statements, and submit them annually to the assessor after the January 1st lien date but before April 1st each year; however, taxpayers can submit the statement without penalty by May 7. 8)Requires assessors to impose a penalty of 10% of the value of AB 571 Page 3 the unreported property for filing late. 9)Allows assessment appeals board can abate penalties attributable to the failure to file a COS or business personal property statement if the taxpayer can establish that the failure to file the statement was due "to reasonable cause and not willful neglect." This bill amends the standard used by assessment appeals boards for penalties for failing to file a business property statement, COS for real property, or COS for legal entities to allow abatement upon "reasonable cause and circumstances beyond the assessee's control, and occurred notwithstanding the exercise of ordinary care in the absence of willful neglect." Comments The Board of Equalization states that the standard that AB 571 applies for failing to file business property statements and COS appears in 56 of 76 relevant sections of property tax law. Ultimately, assessment appeals boards in 58 counties will determine how to apply AB 571's standard when they adjudicate specific cases, but legislators may want to consider whether AB 571's consistency is worth the potential effect of limiting abatement for successors who inherit control of property or legal entities. FISCAL EFFECT: Appropriation: No Fiscal Com.:NoLocal: No SUPPORT: (Verified9/2/15) California Assessors Association OPPOSITION: (Verified9/2/15) AB 571 Page 4 Executive Committee of the Trusts and Estates Section of the State Bar of California ARGUMENTS IN SUPPORT: According to the author, "AB 571 aligns existing penalty forgiveness provisions in Revenue & Taxation Code Sections 463 and 483 to mirror the language used in Section 4985.2. The consistent standard will provide individuals with an opportunity to have their penalty waived if they are able to demonstrate that the failure to file was due to circumstances beyond their control and occurred notwithstanding the exercise of ordinary care. Clarification of this discrepancy will benefit taxpayers qualifying for penalty forgiveness. AB 571's standard has been in place for 35 years, and ample case law exists to interpret it. Assessors add that cases interpreting the standard require that the standard of ordinary care increase in direct proportion to the sophistication of the taxpayer." ARGUMENTS IN OPPOSITION: According to the Executive Committee of the Trusts and Estates Section of the State Bar of California (TEXCOM), "this bill's effort to make penalty abatement consistent may make abatement more difficult for taxpayers to obtain. TEXCOM argues that the current standard is well established in law, and sufficient to establish grounds to abate a penalty that accounts for unusual circumstances that a surviving spouse, child or other personal representative can face after the death of a property owner. TEXCOM also asserts that requiring abatement only on circumstances beyond the assessee's control, doesn't fit in the particular circumstances of the successors of an entity coping with a property owner's death, where successor property owners are trying to establish control of potentially valuable property or a legal entity shortly after death." ASSEMBLY FLOOR: 77-0, 5/28/15 AYES: Alejo, Travis Allen, Baker, Bigelow, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, AB 571 Page 5 Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins NO VOTE RECORDED: Achadjian, Bloom, Grove Prepared by:Colin Grinnell / GOV. & F. / (916) 651-4119 9/2/15 18:05:27 **** END ****