BILL ANALYSIS Ó AB 1534 Page 1 Date of Hearing: April 27, 2015 ASSEMBLY COMMITTEE ON REVENUE AND TAXATION Philip Ting, Chair AB 1534 (Committee on Revenue and Taxation) - As Introduced March 25, 2015 Majority vote. Fiscal committee. SUBJECT: Assessment analyst: certification SUMMARY: Prohibits any state, county, or municipal employee from making any decision regarding a "change in ownership" issue or a property tax exemption without holding a valid assessment analyst certificate issued by the State Board of Equalization (BOE) Specifically, this bill: 1)Includes the legislative findings and declarations stating legislative intent to do all of the following: AB 1534 Page 2 a) Protect the interests of taxpayers by ensuring that decisions regarding eligibility of a property for exemption or whether a transaction constitutes a "change in ownership" (COI) be made by staff who is certified; b) Ensure that education and certification requirements be implemented in the most efficient and economical manner, utilizing existing resources of California county assessors with advice and counsel of the Board of Equalization; c) Not impede assessors in managing their staff resources in an efficient manner and in a way that allows non-certificated staff to prepare and work with exemption applications and COI documents, provided that the staff is not making COI or exemption decisions; and, d) Clarify that this act shall be construed as an act necessary for the implementation of Article XIII A of the California Constitution and, as such, is not a program or higher level of service mandated by the state. 2)Prohibits a person, who is an employee of the state, a county, or a city and county, from making decisions regarding changes in ownership or a property tax exemption, other than a homeowner's exemption, unless he/she is the holder of a valid assessment analyst certificate issued by the BOE. 3)Requires the BOE to provide for the examination of applicants for an assessment analyst certificate and authorizes the BOE to contract with the Department of Human Resources to give the examinations. 4)Provides that the examinations must be prepared by the BOE, with the advice and assistance of a committee of five assessors selected by the California Assessors' Association for this purpose. 5)Prohibits the issuance of a certificate to a person who has not attained a passing grade in the examination or AB 1534 Page 3 demonstrated that he/she is competent to make the change in ownership (CIO) and exemption decisions, as specified. 6)Grants any applicant who is denied a certificate the right to a review of that denial in accordance with the Administrative Procedure Act [Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code (GC)] ("APA"). 7)Does not apply to a person holding a valid appraiser's or advanced appraiser's certificate issued by the BOE. 8)Prohibits the BOE from imposing any charge upon a county or city and county or an applicant for an examination or certification required by this bill or training conducted by the BOE. 9)Requires the BOE to do both of the following: a) Issue an advanced assessment analyst certificate for an applicant that has held a valid assessment analyst certificate for at least three years and has either successfully completed an advanced study course or passed an advanced level examination; and, b) Prescribe an advanced course of study and prepare the advanced level examination, with the advice and assistance of five assessors selected by the California Assessors' Association. 10)Requires a certified assessment analyst, in order to retain a valid certificate, to complete at least 24 hours of training conducted or approved by the BOE in each one-year period. Allows any training time in excess of the 24-hour minimum that is accumulated in any one year to be carried over as credit for future training requirements, with a limit of three years in which the carryover time may be credited. 11)Requires an advanced assessment analyst to complete at least AB 1534 Page 4 12 hours of training in each one-year period in order to retain a valid certificate and allows any training time that is in excess of the 12-hour minimum accumulated in any one year to be carried over as a credit for future training requirements, with a limit of two years in which the carryover time may be credited. 12)Requires training for both regular and advanced assessment analyst certificates to include new developments in applicable case law, statutory law, and administrative rules. 13)Specifies that failure to complete additional training, as provided, shall constitute grounds for revocation of a certificate. A proceeding to revoke shall be conducted in accordance with the APA. 14)Requires each applicant to disclose, at the time of certification, on forms provided by the BOE, his or her financial interest in any legal entity. 15)Provides that, if an applicant is required to annually file with the Fair Political Practices Commission pursuant to Article 3 (commencing with Section 87300) of Chapter 7 of Title of the GC), a duplicate of that filing must meet the requirements of this bill. 16)Allows the BOE to do both of the following: a) Issue a temporary certificate to a person who is newly employed by the state, a county, or a city and county in order to afford the person the opportunity to apply for, and take, an examination. b) Issue an interim certificate to a current employee of the state, county, or a city and county, who is making CIO or exemption decisions, in order to afford that person the opportunity to apply for and take an exemption for a AB 1534 Page 5 certificate. 17)Prohibits the BOE from issuing a temporary or interim certificate if its duration exceeds one year or four years, respectively, unless the person has been duly elected or appointed to the office of assessor. 18)Prohibits the BOE from renewing either a temporary or an interim certificate. 19)Provides that this bill only applies to counties and cities that adopt a resolution upon the recommendation of the assessor to require a valid assessment analyst certification. EXISTING LAW: 1)Provides that all property is taxable, unless otherwise provided by the California Constitution or federal laws. [Section 1(a), Article XIII, California Constitution.] Limits ad valorem taxes on real property to 1% of the full cash value of that property (Proposition 13). 2)Requires real property to be reassessed to its current fair market value whenever a "change in ownership" occurs. [California Constitution, Article XIII A, Section 2; Revenue and Taxation Code (R&TC) Sections 60 - 69.5.] 3)Provides that "change in ownership" includes a transfer of any interest in real property between a corporation, partnership, or other legal entity and a shareholder, partner or any other person. [R&TC Section 61(j).] 4)Specifies in RT&C Sections 60 through 69.5 what constitutes "a change in ownership." 5)States that, generally, when real property is owned by a homeowner, the purchase or transfer or ownership interests in AB 1534 Page 6 that entity triggers a change in ownership of the property. However, specific exemptions from reassessment are provided for intra-family transfers, replacement residences of senior citizens and disabled persons, and specific types of home improvements. 6)Provides a homeowners' exemption from property taxes equal to $7,000 in assessed value (at a one percent property tax rate, the exemption reduces property taxes by roughly $70) for owner-occupied homes. Once granted, homeowners' exemptions are generally permanent. However, an assessor may deny a homeowner's exemption if the property becomes vacant or is under construction as of the January 1st lien date FISCAL EFFECT: According to the BOE, "[t]his bill has no impact on property tax revenues." COMMENTS: 1)The Purpose of this Bill . Current law does not require any certification or training for employees who make change in ownership or exemption decisions. Yet, their decisions can potentially add or eliminate millions of dollars each year from tax rolls statewide. Both CIO and exemption decisions have become highly complex, requiring a deep understanding of many different legal documents and a variety of statutes, regulations, court decisions. This bill ensures that state and local employees making CIO and property tax exemption decisions are adequately trained and educated. 2)Arguments in Support . The California Assessor's Association states, "Despite the extreme complexity of determining whether a property has changed ownership, or is eligible for exemption, and the millions of dollars in property tax value impact such decisions have, no training is required for [employees making those decisions]." The California AB 1534 Page 7 Assessor's Association emphasizes that it is time to "recognize the need for these [employees] to be certified," especially in light of new legal and regulatory changes. Current law already requires appraisers to be certified. This bill is needed to create similar certification procedures for state and local government employees making decisions with regard to property tax exemptions and CIO transactions. 3)Background: Proposition 13 and "Change in Ownership" . The property tax applies to all classes of property and is one of the major general revenue sources for local governments in California. The property tax is imposed on the property owners and is based on the value of the property. Much of the law pertaining to taxation of property is prescribed by the California Constitution, Article XIII and Article XIII A. Since the adoption of Proposition 13 in 1978, real property has generally been taxed based on its value at the time of its acquisition, with increases for inflation limited to 2% per year. The property is reassessed to its market value when the ownership of property is changed. While the requirement to reassess property upon a change in ownership is contained in the California Constitution, the phrase "change in ownership" is not defined. There have been hundreds of court cases relating to interpretation of "change in ownership" and exemption issues, and attorneys with years of training still scrutinize statutory language and argue as to its meaning and intended interpretation. 4)What Does this Bill Do ? This bill proposes to create a training program required for any state, county, or municipal employee who is involved in making decisions regarding a "change in ownership" or property tax exemption, except for homeowners' exemption claims. The annual training program will be administered by the BOE, which will provide for the training and examination of applicants. Once certified, an employee will also have to complete additional training, in order to retain a valid certificate. Each year, a certified employee will have to complete either 24 hours or 12 hours of training, depending on whether he/she is an assessment analyst AB 1534 Page 8 or an advanced assessment analyst. 5)Addressing the Governor's Veto Message : This bill is substantially similar to AB 2756 (Revenue and Taxation Committee), of the 2013-14 Legislative Session. AB 2756 was vetoed. The Governor provided the following in his veto message: This measure requires employees in county Assessor offices who decide change in ownership issues affecting the real property tax to receive state provided training and certification. This is something the Assessors can and should be doing without a state mandate. In order to address the concerns of the Governor, this bill creates an opt-in provision requiring the counties and cities to first adopt a resolution upon the recommendation of the assessor before any of the valid assessment analyst certification requirements go into effect. By requiring counties and cities to opt in, this bill does not create a state mandate. REGISTERED SUPPORT / OPPOSITION: Support California Assessor's Association AB 1534 Page 9 Opposition None on file Analysis Prepared by:Carlos Anguiano / REV. & TAX. / (916) 319-2098