BILL ANALYSIS Ó
AB 1378
Page A
ASSEMBLY THIRD READING
AB
1378 (Holden)
As Introduced February 27, 2015
Majority vote. Tax levy
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+--------------------+----------------------|
|Revenue & |9-0 |Ting, Brough, | |
|Taxation | |Dababneh, Gipson, | |
| | |Roger Hernández, | |
| | |Mullin, Patterson, | |
| | |Quirk, Wagner | |
| | | | |
|----------------+------+--------------------+----------------------|
|Appropriations |17-0 |Gomez, Bigelow, | |
| | |Bonta, Calderon, | |
| | |Chang, Daly, | |
| | |Eggman, Gallagher, | |
| | | | |
| | | | |
| | |Eduardo Garcia, | |
| | |Gordon, Holden, | |
| | |Jones, Quirk, | |
| | |Rendon, Wagner, | |
| | |Weber, Wood | |
| | | | |
| | | | |
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AB 1378
Page B
SUMMARY: Allows each spouse to qualify individually for the base
year value transfer property tax relief. Specifically, this bill:
1)Revises the definition of "claimant" to exclude a spouse of the
person claiming the base year value transfer property tax
relief. Specifically, this bill eliminates the requirement that
the claimant's spouse, who is a record owner of the replacement
dwelling, be considered a "claimant" for purposes of determining
whether in any future claim filed by the spouse the condition of
eligibility has been met.
2)Makes technical, conforming changes to the provisions relating
to the base year value transfer eligibility requirements.
3)Applies only to persons who file a claim on or after January 1,
2016, and who have not been previously granted the base year
value transfer property tax relief.
4)Takes effect immediately as a tax levy.
FISCAL EFFECT: According to the Assembly Appropriations
Committee:
1)Minor and absorbable administrative costs to the Board of
Equalization (BOE).
2)Significant annual reductions in property tax revenue, possibly
around $350,000 in the first year and likely increasing annually
thereafter, resulting in General Fund costs for approximately
AB 1378
Page C
half the decrease in revenues to reimburse counties under the
Proposition 98 (1988) funding guarantee.
COMMENTS:
1)The Author's Statement. The author has provided the following
statement in support of this bill:
"Assembly Bill 1378 recognizes the evolving nature of marriage
relations and living patterns of Californians and expands
eligibility for a Proposition 60 [1986]/[Proposition] 90 [1988]
transfer to include one transfer per person in a recognized
long-term relationship. Assembly Bill 1378 ensures California
law recognizes all types of marriages, cohabitations and housing
situations."
2)Proposition 13 (1978). Much of the law pertaining to property
taxation is prescribed by Articles XIII and XIII A (commonly
known as "Proposition 13") of the California Constitution.
Proposition 13 was added to the California Constitution in June
1978 and was most recently amended by Proposition 26 in 2010.
Proposition 13 was designed to provide real property tax relief
by imposing a set of interlocking limitations upon the
assessment and taxing powers of state and local governments.<1>
California Constitution Article XIII A, Section 1 states that,
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<1>
Since any tax savings resulting from the real property tax
limitations provided in Sections 1 and 2 of Article XIII A of the
California Constitution could be effectively eliminated through
the imposition of additional state and local taxes, Sections 3 and
4 place additional restrictions upon the imposition of any such
taxes. See Amador Valley Joint Union High Sch. Dist. v. State Bd.
of Equalization, (1978) 22 Cal.3d 208.
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as a general rule, the maximum amount of any ad valorem tax on
real property may not exceed 1% of the property's full cash
value, as adjusted for the lesser of inflation or 2% per year.
The term "full cash value" means the "county assessor's
valuation of real property as shown on the 1975-1976 tax bill"
or, thereafter, "the appraised value of real property when
purchased, newly constructed, or a change in ownership has
occurred after the 1975 assessment" (emphasis added) [California
Constitution, Article XIII A, Sections 1 and 2]. In other
words, the California Constitution requires that real property
be reassessed to its current fair market value whenever a
"change in ownership" occurs. The definition of a "change in
ownership" was not included in Proposition 13, but was left to
implementing legislation.
3)Base-Year Value Transfers. California Constitution Article
XIIIA contains provisions allowing a homeowner over the age of
55<2> or a homeowner who is a disabled person<3> a
once-in-a-lifetime opportunity to transfer the base year values
in his/her principal residence, within two years from the sale
of the original residence, to a replacement home of equal or
lesser value within the same county or to a replacement home in
counties that have adopted ordinances allowing the transfer<4>,
provided certain conditions are met and the county assessor is
properly notified. Base year transfers allow homeowners to
continue paying property taxes at the amount and rate of growth
of their previous homes and prevent reassessments of their newly
purchased or constructed homes to full market value.
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<2> In 1986, the voters passed Proposition 60 that amended the
Constitution to allow a person over the age of 55 to sell a
principal residence and transfer its base year value to a
replacement principal residence within the same county.
<3> In 1990, the voters passed Proposition 110 that amended the
Constitution to extend these provisions to any severely and
permanently disabled person regardless of age.
<4> In 1988, Proposition 90 was passed by the voters. That
proposition amended the Constitution to extend the base year value
transfer provisions to a replacement residence located in another
county on a county-optional basis.
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4)Fifty-Five and Over. California has one of the lowest property
taxes in the nation and provides the greatest benefit to
property owners, especially those that have lived in their homes
for many years. Subject to certain conditions, a homeowner may
sell his/her home, buy or build a new one, and transfer the
base-year value to a replacement dwelling. Any person claiming
the base year value transfer relief is defined as a "claimant."
To qualify, the claimant must provide certain information to the
assessor, including his/her name and Social Security number as
well as the name of Social Security number of his/her spouse who
is also a record owner of the replacement dwelling. Under
existing law, a person of any age may make a base year value
transfer claim as long as that person resides with a spouse who
is over 55 or permanently disabled, even if the spouse is not an
owner of record of either the original or replacement property.
A spouse who shares title of the newly purchased home with the
"claimant" is also considered to be a "claimant." Consequently,
if "A" and "B" are married and record owners of property which
has received the benefits of the base year transfer value
relief, then neither "A" nor "B" is eligible for a similar
benefit in the future.<5> Furthermore, if "A" and "B" divorce,
and "A" marries "C", C will not be eligible for the base year
value transfer relief with respect to C's replacement dwelling
if both "A" and "C" are co-owners of record. The relief will be
unavailable to "C" because "A" would be considered a "claimant"
for purposes of "C's" claim.
5)What is a Problem? The proponents of this bill point out that
married people are unfairly penalized when divorced. According
to the author, existing law creates a "marriage penalty" by
disallowing the benefits afforded by Propositions 60 and 90 to a
married person whose spouse has already claimed a base year
value transfer property tax relief. The author argues that base
year value property transfers "remains one of the few areas of
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<5> BOE Annotation 200.0020 "Claimant (New Spouse)".
AB 1378
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law continuing to make a distinction between domestic
partnership and marriage." The purpose of this bill is to
"remove tax considerations" when a couple decides on the type of
relationship that "is best for them."
6)Proposed Solution. This bill proposes to stop treating a
married couple as one "claimant" for purposes of the base year
value transfer relief and, instead, grant this property tax
relief to every individual regardless of his/her marital status.
Practically speaking, this bill would allow a married couple to
transfer their base year value twice, similarly to unmarried
co-owners and registered domestic partners. However, this bill
would disallow a claim made by a claimant who is under the age
of 55, even if the claimant resides with a spouse who meets the
age requirement. As noted by the BOE staff, residency by an
over-55 spouse will no longer suffice to permit transfer of the
base year value. To qualify, the over-55 spouse must file the
actual claim and be a recorded owner of both homes. Under
current law, a person who is under the age of 55 may be a
claimant if he/she resides with a spouse who is over 55 years of
age.
7)Statewide Tracking Database. To monitor and enforce the
one-time relief, the BOE is required to collect data from
counties and maintain a database of base year value transfer
claimants and their spouses if names of both spouses appear on
the title to the new home. If claimant's spouse subsequently
claims another base year value transfer, the BOE database would
match the name and the claim will be denied. This bill would
allow a married couple to move their base year value twice but
only if each spouse makes a claim for the first time after
January 1, 2016. Because this bill applies prospectively, a
spouse of the person who has already been granted a base year
value transfer will not be able to claim a second base year
value transfer.
AB 1378
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Analysis Prepared by:
Oksana Jaffe / REV. & TAX. / (916) 319-2098 FN:
0000661