BILL ANALYSIS Ó
AB 1891
Page 1
Date of Hearing: April 4, 2016
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Sebastian Ridley-Thomas, Chair
AB 1891
(Dababneh) - As Introduced February 11, 2016
Majority vote. Non-fiscal.
SUBJECT: School districts: special taxes: exemptions
SUMMARY: Specifies requirements for a school district if it
imposes a qualified special tax that: (1) provides an exemption
for persons 65 years of age or older, and (2) requires those
persons to opt out of the qualified special tax. Specifically,
this bill:
1)Specifies that school districts, if imposing a qualified
special tax that provides an exemption for persons 65 years of
age or older and requires those persons to opt out of the
qualified special tax, shall only require those persons to opt
out of the qualified special tax once.
2)Specifies that once a taxpayer is granted the exemption, the
school district shall grant the exemption to the taxpayer for
each subsequent taxable period.
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3)Provides that in the case of a qualified special tax on real
property, the granted exemption shall be valid until a change
in ownership occurs.
EXISTING LAW:
1)Authorizes school districts to impose qualified special taxes,
in accordance with specified procedures, including the
approval of two-thirds of the voters in the district.
2)Provides that "qualified special taxes" must apply uniformly
to all taxpayers or all real property within the school
district and do not include special taxes imposed on a
particular class of property or taxpayers.
3)Authorizes a school district to exempt from a "qualified
special tax" any or all of the following persons:
a) Persons 65 or older;
b) Persons receiving Supplemental Security Income (SSI) for
a disability; or,
c) Persons receiving Social Security Disability Insurance
(SSDI) benefits whose annual income is less than 250% of
2012 federal poverty guidelines.
4)Specifies in Revenue & Taxation Code (R&TC) Sections 60
through 69.5 what constitutes a "change in ownership," and
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provides an exclusion from reassessment for transfers of real
property between parents and children, amongst others.
FISCAL EFFECT: Unknown
COMMENTS:
1)Author's Statement : The author provided the following
statement in support of this bill:
AB 1891 is a common sense piece of legislation that simply
states once an individual has turned 65 years old, and a
school district has exempted them from a parcel tax,
districts should honor that request and not have an overly
burdensome system that can result in a surreptitious tax
against those who often have difficulty affording it. This
is a simple way to maintain the exemption as well as uphold
current law and protect seniors.
2)Arguments in Support : The sponsor of this bill, the Howard
Jarvis Taxpayers Association, states:
The current system for opting out of parcel taxes is
cumbersome. Some school districts already require the
opt-out form to be filled out once, but for most taxpayers
it is an annual requirement. We have received dozens of
phone calls over the years from our members who lost or did
not know that the form needed to be completed annually and
it resulted in a property tax bill hundreds of dollars
higher than it should have been.
3)Qualified Special Taxes : Proposition 13 (1978) not only
limited both the tax rates and assessments of property taxes,
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but also eliminated the ability of school districts to levy an
incremental ad valorem tax on real property. However, school
districts still have limited authority to generate local
revenues from qualified special taxes as long as the special
tax applies uniformly to all taxpayers (other than persons
over the age of 65 or persons receiving SSI or SSDI) and real
property within the district. While Proposition 13 did not
define the term "special tax," over time the courts have
opined that a tax is a "special tax" whenever expenditure of
its revenues is limited to specific purposes, i.e., the
proceeds of the tax are earmarked or dedicated in some manner
to a specific project or projects. In contrast, a tax is a
"general tax" only when its revenues are placed into the
General Fund and are available for expenditure for any and all
governmental purposes. [Bay Area Cellular Telephone Co. v.
City of Union City (2008) 162 Cal. App.4th 686; Howard Jarvis
Taxpayers Assn. v. City of Roseville (2003) 106 Cal.App.4th
1178.] Because Proposition 218 (1996) prohibits school
districts and special districts from imposing general taxes,
thus, by definition, any tax levied by a school district is
considered to be a special tax subject to two-thirds voter
approval. Thus far, school districts have only imposed
"qualified special taxes" under Government Code Section 50079
in the form of a parcel tax.
4)Parcel Taxes : A parcel tax is a flat fee imposed by a city,
county, or special district on each parcel, residential as
well as commercial, rather than on the assessed value of
property located within the local entity's jurisdiction.
Because the same dollar amount of tax is assessed on each
parcel of property, whether the parcel is one acre or 100
acres, parcel taxes are generally regressive, which means
owners of smaller parcels of land pay a larger percentage of
tax as compared to owners of larger parcels of land. Some
districts levy a rate at a fixed amount per square foot of
taxable land, and many include an annual inflation adjustment.
Although subject to certain requirements, parcel taxes are
flexible ways of raising revenues at the local level.
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Existing law does not prescribe a maximum rate of tax nor does
it limit the period within which the qualified special tax may
be imposed and, therefore, the rate of tax varies
significantly among different school districts. Existing law
also does not limit how the special tax proceeds may be spent
and, therefore, a local school board can specify in the ballot
measure how the funds will be used. Generally, local parcel
taxes provide secure funding for teacher salaries, books,
materials and supplies, computers, and arts, music, and sports
programs.
5)Exemptions from Qualified Special Taxes : School districts are
currently authorized to exempt from qualified special taxes
persons over the age of 65, persons receiving SSI for a
disability regardless of age, and persons receiving SSDI with
a specified maximum annual income. The exemption is
permissive rather than mandatory, which allows the school
district to consider the need for, and impact of, an exemption
from special taxes imposed. For example, a school district
may choose to exempt all three classes of individuals from one
qualified special tax, but may choose to exempt only seniors
from another qualified special tax, while the neighboring
school district chooses to provide no exemptions. Any
exemption, if provided, would be stipulated in the text of the
measure approved by voters. Most school parcel tax measures
have included the senior exemption to help garner more
widespread support, but only a small number of measures have
included the disability exemption.
6)Administrative Differences : There is significant variation in
how school districts administer any granted exemption.
Generally, school districts will require individuals who
qualify for the exemption to "opt out" of paying the tax by
completing an application demonstrating proof of age or
disability benefits, ownership of the property, and residence
at the property. While some school districts only require the
taxpayer to apply for the exemption once, other districts
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require the taxpayer to fill out a new application every year
to maintain the exemption. For example, Campbell Union High
School District provides an exemption for both seniors and
individuals receiving SSI for a disability. To renew their
exemption, seniors must fill out an Exemption Renewal form
every year and individuals with a disability must fill out the
original application every year. In comparison, neighboring
Fremont Union High School District only provides the exemption
for seniors and automatically renews the exemption every year
- although the school district sends a letter to all exempted
seniors annually informing them that their exemption will
continue, unless they choose to end the exemption by
responding to the letter.
7)An Unnecessary Burden ? The author states that the current
variation in opt-out processes can be especially burdensome
for seniors and has resulted in examples of taxpayers on fixed
incomes who have faced hundreds of dollars of additional tax
payments simply because they were not aware that the opt-out
paperwork needed to be completed annually. The author has
also limited this bill's application to seniors and would not
require individuals who solely receive SSI or SSDI benefits to
be granted a continuous exemption, if eligible for an
exemption from a qualified special tax, as changes in one's
health or income may occur that could disqualify the
individual from the exemption.
This bill specifies that seniors who must opt-out of the
qualified special tax to benefit from the exemption only need
to do so once, thereby renewing automatically the exemption
every year until a change in ownership occurs. However, some
voter-approved parcel tax measures not only require seniors to
own the property to qualify for the exemption, but also
require the property to be their primary residence. Thus, it
is possible for a senior to qualify for the exemption one year
but not the next despite continuous property ownership, just
as it is possible for an individual receiving SSI or SSDI
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benefits to qualify for the exemption one year but not the
next. Furthermore, the phrase "change in ownership" has a
specific meaning pursuant to Article XIII A of the
Constitution and R&TC Sections 60 through 69.5, signifying
when a property must be reassessed to its market value under
Proposition 13. Under current law, an exclusion from
reassessment is generally provided for transfers of real
property from parents to children, meaning that an individual
under age 65 could be the new owner and occupant of a property
with triggering a "change in ownership."
If it is not the author's intent to provide a continuous
qualified special tax exemption to individuals who no longer
qualify for the exemption, the author may wish to provide a
more specific and limited definition for "change in ownership"
or alternative criteria for determining when the exemption is
no longer valid. Given the fact that the intent of the
permissive exemption is to preserve local control and
flexibility, the Committee may also wish to consider whether
it is appropriate to prescribe a one-size-fits-all approach
for administering these local voter-approved taxes.
8)Prior Legislation : SB 371 (Hancock), Chapter 81, Statutes of
2015, clarified that a school district is authorized to exempt
from qualified special taxes any or all statutory classes of
potentially exempt taxpayers.
SB 874 (Hancock), Chapter 791, Statutes of 2012, authorized
school districts to exempt from qualified special taxes
persons receiving SSDI benefits under a specified income
limit.
AB 385 (Lieber), Chapter 41, Statutes of 2006 authorized
school districts to exempt from qualified special taxes
persons receiving SSI for a disability.
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REGISTERED SUPPORT / OPPOSITION:
Support
Howard Jarvis Taxpayers Association (Sponsor)
California Association of Realtors
California Taxpayers Association
Opposition
None on file
Analysis Prepared by:Irene Ho / REV. & TAX. / (916) 319-2098
AB 1891
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