BILL ANALYSIS Ó
AB 1556
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Date of Hearing: May 9, 2016
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Sebastian Ridley-Thomas, Chair
AB 1556
(Mathis) - As Amended April 28, 2016
SUSPENSE
Majority vote. Fiscal committee. Tax levy.
SUBJECT: Property taxation: exemptions: disabled veterans
SUMMARY: Expands the property tax exemption available to a
totally disabled veteran, as defined, or his/her unmarried
surviving spouse. Specifically, this bill:
1)Repeals provisions limiting the exempt portion of the full
value of an eligible disabled veteran's home to $100,000, as
adjusted (or $150,000 in the case of a veteran with household
income of $40,000 or less).
2)Increases the exempt portion of the full value of the
principal residence of a veteran or his/her spouse, as
specified, to $2.1 million adjusted annually for inflation, as
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provided.
3)Defines the term "blind in both eyes" as a blind person as
defined in Welfare and Institutions Code Section 19153.
Specifically, a person who:
a) Has not more than 20/200 central visual acuity in the
better eye after correction; or,
b) Has visual acuity greater than 20/200, but with a
limitation in the fields of vision such that the widest
diameter of the visual field subtends an angle no greater
than 20 degrees.
4)Expands the term "totally disabled veteran" to include a
veteran so severely disabled as to be unable to move without
the aid of an assistive device.
5)Makes other technical and conforming changes to the disabled
veterans' property tax exemption provisions.
6)Specifies that no appropriation is made and the state will not
reimburse local agencies for property tax revenues lost by
them pursuant to this bill.
7)Imposes a state-mandated local program and provides that, if
the Commission on State Mandates determines that the bill
contains costs mandated by the state, reimbursement for those
costs shall be made pursuant to these statutory provisions.
8)Takes effect immediately as a tax levy, but applies for
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property tax lien dates for the 2017-18 fiscal year (FY) and
each FY thereafter.
EXISTING LAW:
1)Exempts from property tax, in whole or in part, the home of a
veteran who is totally disabled because of injury or disease
incurred in military service, or his/her surviving unmarried
spouse. [Article XIII, Section 4, California Constitution;
Revenue and Taxation Code (R&TC) Section 205.5.] The disabled
veterans' exemption is also available to the surviving spouse
of a person who has died as a result of service-connected
injuries while on active military duty. The amount of the
exemption depends on the claimant's income. The basic
exemption amount is $100,000, adjusted annually for inflation.
For low-income claimants, the exemption amount is $150,000,
adjusted annually for inflation, when the veteran's household
income does not exceed $40,000, as adjusted. For the fiscal
year (FY) 2016-17, the disabled veterans' exemption amount is
$191,266 of assessed value for those with a household income
below $57,258 (the "low-income" exemption), and $127,510 for
all other disabled veterans (the 'basic' exemption).
2)Defines a "totally disabled veteran" as a veteran who has a
disability rating from the United States Department of
Veterans Affairs (USDVA), or the military service from which
the veteran was discharged, at 100%, or has a disability
compensation rating at 100% because he/she is unable to secure
or follow a substantially gainful occupation.
3)Allows a surviving spouse of a disabled veteran to receive the
exemption if the veteran's death is service-connected, as
determined by the USDVA.
4)Requires a disabled veteran to file a claim with the local
county assessor to receive the exemption. To receive the
basic exemption, a claimant needs to file a claim only once.
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To receive the larger low-income exemption, the claimant must
file a claim each year to verify income eligibility.
FISCAL EFFECT: Unknown
COMMENTS:
1)Author's Statement . The author has provided the following
statement in support of this bill:
"This bill will exempt the full value of a disabled veteran's
place of residence from annual property tax. In the event of
the disabled veteran's death, the exemption extends to the
surviving spouse. In addition, this bill includes new
definitions for specific statues of disablement."
2)"Disabled Veterans' Exemption": Background . Existing law
authorizes a property tax exemption for the principal
residence of a disabled veteran or for the unmarried surviving
spouse of a deceased disabled veteran. For purposes of the
exemption, the disability rating must be 100%, generally
occurring for a veteran that was blind in both eyes, had lost
the use of two or more limbs, or was totally disabled. This
exemption is commonly referred to as the "disabled veterans'
exemption."
In order to qualify for the property tax exemption, a veteran
must receive a disability certification from either the USDVA
or the military service from which the veteran was discharged.
In addition, the eligible veteran must file a timely claim
with the county assessor by the specified deadlines to receive
the full amount of the property tax exemption.
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The property tax exemption amount is equal to the assessed
value of the property, up to $100,000, as adjusted for
inflation. If the household income does not exceed $40,000,
as adjusted for inflation, the maximum property tax exemption
is increased to $150,000, as adjusted for inflation. The
exemption amounts and income limitation are adjusted annually
for the change in the California Consumer Price Index for all
items, as determined by the California Department of
Industrial relations. For the 2016-17 fiscal years, the basic
exemption amount is $127,510; the low-income exemption amount
is $191,266; and the maximum household income for low-income
classification is $57,258.
The exemption is only available on a veteran's principal place
of residence. Since the home may only receive one property
exemption, if a homeowners' exemption has been granted on a
property and the owner subsequently qualifies for the disabled
veterans' exemption, the homeowners' exemption should be
cancelled to allow for the disabled veterans' exemption as it
provides the greater benefit.
3)What is the Problem ? According to the author's office, due to
increased housing prices throughout California, many disabled
veterans and their spouses are being forced from their homes.
The Counties of Los Angeles and San Diego are home to the
highest number of California veterans. The median housing
prices in 2015 was $475,000 in Los Angeles County and $455,000
in San Diego County - hardly within the existing cap of
$100,000 or $150,000 in the case of the low-income exemption.
The author states that these veterans "are forced to make
staggering payments for housing and medical expenses despite
being severely disabled; many are unable to work on account of
their injuries." The author argues that the state must ensure
that "those who sustained injury during their service are
granted the ability to reside within the state, despite our
increasing housing prices."
4)The Proposed Solution . This bill is intended to expand the
property tax exemption for disabled veterans or their
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unmarried surviving spouses. This bill would accomplish this
goal by first repealing the existing limitations imposed on
the assessed value of the disabled veteran's principal
residence eligible for the exemption and the amount of his/her
household income, and then increasing the amount of the
assessed value eligible for the exemption to $2.1 million,
regardless of the income.
5)The Scope of the Disabled Veterans' Exemption . This bill
would eliminate only the ad valorem property tax imposed on a
disabled veteran's principal residence, but not the special
taxes or assessments that might be due on the property.
Direct levies, special taxes, and special assessments are not
property taxes because they are not based upon the assessed
value of the property. Such levies are usually imposed by
independent governmental entities within a county; the county
has no jurisdiction over most of those levies or the agencies
issuing them. Thus, while a disabled veteran's home would be
fully exempt from property tax, the veteran would still be
required to pay all other local taxes and fees assessed
against the property.
BOE staff also estimates that approximately 21% - or 6,971 - of
those currently receiving the basic disabled veterans'
exemption have assessed values of less than the maximum
exemption allowed, i.e., $126,380; and 24% of those currently
receiving the low-income disabled veterans' exemption have
principal residences with assessed values less than the
maximum exemption allowed , i.e., $189,571. Thus, those
individuals would receive no benefit from this bill because
their homes are already fully exempt from the property tax
under the current law.
6)Expanded Definition of "Totally Disabled ." This bill
classifies veterans "who are so severely disabled as to be
unable to move without the aid of an assistive device" as
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"totally disabled." It is unclear to Committee staff whether
the USDV would necessarily assign the 100% disability rating
to a veteran who is unable to move without the aid of an
assistive device. Thus, potentially, the expanded definition
of "totally disabled" may include veterans who would not
qualify as 100% disabled by the USDV.
7)The Fiscal Impact on Counties . The disabled veterans'
exemption, unlike the homeowner's exemption, does not require
the state to reimburse the counties for the full amount of
property tax revenues lost. This bill may impact counties
that have a large number of eligible disabled veterans and
surviving spouses.
8)Related Legislation . SB 1104 (Stone) is similar to this bill
in that SB 1104 would, among other things, exempt from the
property tax the full, instead of partial, value of the
principal place of residence of a veteran or veteran's spouse.
SB 1104 would also make technical and conforming changes to
the disabled veterans' property tax exemption. SB 1104 is
currently pending hearing by the Senate Committee on
Governance and Finance.
SB 1458 (Bates) would extend the property tax exemption to
persons who, among other things, are serving in or have served
in and have been discharged under honorable conditions from
service in the United States Army, Navy, Air Force, Marine
Corps, or Coast Guard. SB 1458 is currently pending hearing
by the Senate Committee on Governance and Finance.
REGISTERED SUPPORT / OPPOSITION:
AB 1556
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Support
None on file
Opposition
None on file
Analysis Prepared by:Oksana Jaffe / REV. & TAX. / (916) 319-2098