BILL ANALYSIS Ó
AB 1378
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Date of Hearing: May 27, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
1378 (Holden) - As Introduced February 27, 2015
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|Policy |Revenue and Taxation |Vote:|9 - 0 |
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Urgency: Yes State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill modifies the definition of "claimant" with respect to
persons claiming base year value transfer tax relief, excluding
the claimant's spouse from being considered a claimant for
purposes of determining whether any future claim filed by that
spouse remains eligible. As a result of the change, for claims
filed on or after January 1, 2016, each disabled spouse aged 55
or older may qualify individually and file separately for
one-time base year value transfer property tax relief.
FISCAL EFFECT:
AB 1378
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1)Minor and absorbable administrative costs to the Board of
Equalization.
2)Significant annual reductions in property tax revenue,
possibly around $350,000 in the first year and likely
increasing annually thereafter, resulting in GF costs for
approximately half the decrease in revenues to reimburse
counties under the Proposition 98 funding guarantee.
COMMENTS:
1)Purpose. According to the author, this bill recognizes the
evolving nature of marriages and living patterns of
Californians, expanding eligibility for base year value
transfers to allow one transfer per person in a recognized
long-term relationship. As a result, the base value year
transfer law will recognize all types of marriages and
cohabitations. Proponents argue this bill is about fairness,
allowing both spouses or cohabitants to make separate claims
for transfer, assuming the other statutory requirements are
satisfied.
2)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.
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One exception to the change in ownership fair market value
reassessment is the base year value transfer provision. Under
that rule, a disabled 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.
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.
3)Love and Marriage. Although very limited in scope, this bill
takes a rather progressive view of marital and cohabitant
relationships. In general, federal and state income tax laws
treat married couples as a single economic unit. This is not
based in tax logic or economic experience, but rather reflects
society's views on the institution of marriage and the family.
Most married couples file joint tax returns, and even married
couples filing singly are taxed as married persons.
California property tax law similarly treats married taxpayers
as a single economic unit, and this bill represents a small,
but perhaps symbolic, deviation from that general policy. The
committee may wish to consider whether this policy ought to be
considered with respect to property tax more generally, and
whether this bill should be considered in that broader
context.
AB 1378
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Analysis Prepared by:Joel Tashjian / APPR. / (916)
319-2081