BILL ANALYSIS Ó
AB 1378
Page A
GOVERNOR'S VETO
AB
1378 (Holden)
As Enrolled September 3, 2015
2/3 vote
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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
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|ASSEMBLY: | 80-0 |(June 1, 2015) |SENATE: |40-0 |(September 1, |
| | | | | |2015) |
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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. 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.
AB 1378
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4)Takes effect immediately as a tax levy.
FISCAL EFFECT: According to the Senate Appropriations
Committee, 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% 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.
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."
AB 1378
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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, 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
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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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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.
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
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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.
AB 1378
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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 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
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<5> BOE Annotation 200.0020 "Claimant (New Spouse)".
AB 1378
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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.
GOVERNOR'S 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 broad and allows an already generous
property tax benefit to be allowed a second time on a larger
scale.
AB 1378
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I do not believe that it would be prudent to authorize
legislation such as this that would result in significant
long-term costs to the General Fund.
Analysis Prepared by: Oksana Jaffe / REV.
& TAX. / (916) 319-2098 FN: 0002456