BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1891


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          ASSEMBLY THIRD READING


          AB  
          1891 (Dababneh)


          As Amended  April 7, 2016


          Majority vote


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          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Revenue &       |9-0  |Ridley-Thomas,        |                    |
          |Taxation        |     |Brough, Dababneh,     |                    |
          |                |     |Gipson, Mullin,       |                    |
          |                |     |O'Donnell, Patterson, |                    |
          |                |     |Quirk, Wagner         |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
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          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  








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            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 he or she remains eligible for  
            the exemption.  


          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.









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          4)Specifies in Revenue and Taxation Code (R&TC) Sections 60  
            through 69.5 what constitutes a "change in ownership," and  
            provides an exclusion from reassessment for transfers of real  
            property between parents and children, amongst others.   


          FISCAL EFFECT:  None


          


          COMMENTS:  


          1)Author's Statement:  The author provided the following  
            statement in support of this bill:
               i)     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:


               ii)    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.








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          3)Arguments in Opposition:  There is no opposition on file.


          4)Qualified Special Taxes:  Proposition 13 (1978) not only  
            limited both the tax rates and assessments of property taxes,  
            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.


          5)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  








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            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.   
            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.


          6)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.


          7)Administrative Differences:  There is significant variation in  








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            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  
            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.


          8)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.  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  








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            possible for an individual receiving SSI or SSDI benefits to  
            qualify for the exemption one year but not the next.  This  
            bill provides that once a taxpayer opts out of the tax, the  
            exemption will be granted for each subsequent taxable period  
            he or she remains eligible for the exemption.  It will either  
            be the taxpayer's responsibility to notify the school district  
            if he or she is no longer eligible for the exemption, or the  
            school district's responsibility to implement a strategy for  
            determining whether or not the taxpayer is eligible for the  
            exemption.




          Analysis Prepared by:                                             
                          Irene Ho / REV. & TAX. / (916) 319-2098  FN:  
          0002726