BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 1378 (Holden) - Property tax: base year value transfers. ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: February 27, 2015 |Policy Vote: GOV. & F. 7 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: Yes |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 17, 2015 |Consultant: Robert Ingenito | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: AB 1378 would allow spouses to each make separate base year value transfer claims related to the onetime only benefit provided to persons 55 years and over that move from one home to another. Fiscal Impact: The Board of Equalization (BOE) estimates that the bill would result in a $350,000 annual property tax revenue loss, increasing annually thereafter. Approximately 50 percent of property tax revenues statewide accrue to schools, which generally offsets state General Fund obligations pursuant to Proposition 98. Consequently, any reduction in the school share of property tax revenues that are attributable to the bill's impact on assessed values would result in a commensurate increase in General Fund costs. BOE indicates that the bill's administrative costs would be minor and absorbable. AB 1378 (Holden) Page 1 of ? Background: The California Constitution (1) provides that all property is taxable unless explicitly exempted by the Constitution or federal law, (2) limits the maximum amount of any ad valorem tax on real property at 1 percent of full cash value, and (3) directs county assessors to only reappraise property when newly constructed, or ownership changes. Voters subsequently approved change in ownership exclusions to allow homeowners over the age of 55 and disabled persons (regardless of age) to transfer their home's base year values to a replacement home of equal or lesser value within the same county, or to homes in counties that adopt ordinances allowing the transfer. Ten counties allow these out-of-county transfers (Alameda, El Dorado, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, and Ventura). Base year transfers allow taxpayers to continue to pay property taxes at the amount and rate of growth of their previous home, and not on the cash value of their newly purchased home. The Constitution doesn't specify eligibility requirements; consequently, state law details base year value transfer requirements. Instead of allowing infinite number of transfers, taxpayers can generally transfer base year values once, as a "claimant" is eligible only when an assessor has not previously granted a base year transfer, with "claimant" defined as any eligible person claiming the base year transfer. Current law only allows individuals to claim a second base year value transfer after becoming 55 years of age, then another should they subsequently become disabled, or vice versa. If the claimant has a spouse who is also an owner of record of the home, then the spouse is considered a claimant, and therefore precluded from claiming a base year transfer in the future. Proposed Law: This bill would modify 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. Consequently, for claims filed on or after January 1, 2016, each disabled spouse aged 55 or older would may qualify individually and file separately for one-time AB 1378 (Holden) Page 2 of ? base year value transfer property tax relief. Staff Comments: BOE property tax data indicate that counties grant an average of 5,000 base year value transfer claims each year. BOE assumes the bill would lead to a five percent increase, resulting in 250 additional qualified transfers annually. California Association of Realtors data indicate that the median home price in December 2014 was $454,000. The 2013-14 average assessed value of a property receiving the homeowners' exemption was $314,000. Therefore, BOE estimates the amount assessed value difference per home after a base year transfer is about $140,000, and the aggregate revenue loss (at the one percent rate) is about $350,000 annually, and would likely increase to the extent that home values exceed the annual two percent cap in assessed valuation allowed under Proposition 13. -- END --