BILL ANALYSIS Ó
AB 2691
Page A
Date of Hearing: April 25, 2016
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Sebastian Ridley-Thomas, Chair
AB 2691
(Holden) - As Amended April 19, 2016
Majority vote. Nonfiscal.
SUBJECT: Property taxation: Monthly Property Tax Payment
Program
SUMMARY: Authorizes a county board of supervisors to adopt a
resolution or ordinance allowing certain taxpayers to pay their
property tax in monthly installments. Specifically, this bill:
1)Authorizes a county board of supervisors to adopt a resolution
or ordinance to implement a Monthly Property Tax Payment
Program to allow a qualified taxpayer to pay the ad valorem
property tax owed on the qualified taxpayer's principal
residence in monthly installments.
2)Defines a "qualified taxpayer" as a taxpayer who is any or
both of the following:
AB 2691
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a) A person who is 62 years of age or older.
b) A person receiving supplemental security income for a
disability, regardless of age.
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 [Section 1(a), Article XIII A, California
Constitution (Proposition 13)].
2)Requires an annual payment of property tax and provides that
unpaid taxes become delinquent and subject to penalties and
costs.
3)Specifies that half of the property tax on real property is
due and payable November 1, and the second half is due and
payable on February 1.
4)Provides that the entire tax on real property may be paid when
the first installment is due and payable or at any time
thereafter until the properties on the current roll become tax
defaulted. The second installment may be paid separately
only if the first installment has been paid.
FISCAL EFFECT: None
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COMMENTS:
1)The Author's Statement . The author has provided the following
statement in support of this bill:
"Assembly Bill 2691 would authorize a county board of
supervisors to implement a Monthly Property Tax Payment
Program. The Program would allow seniors, particularly those
living on a fixed income, to pay their property tax in monthly
installments."
2)Arguments in Support . The proponents of this bill assert that
despite Proposition 13 many retired seniors on fixed incomes
are having trouble paying their property taxes. The
proponents argue that along with the re-enactment of the
Property Tax Postponement program "slated to begin later this
year, AB 2691 gives both municipal government and local
taxpayers additional options to pay their taxes in a timely
manner."
3)Arguments in Opposition . While appreciating the intent of the
bill, the opponents state that the measure "only covers ad
valorem taxes but not direct assessments and voted
indebtedness that are also collected on the tax bill."
Further, the opponents argue that tax collectors do not have
capacity to send out monthly bills reflecting that month's
payment and outstanding balances. Upgrades to tax collection
systems would be time-consuming and costly. In addition, this
bill may create "significant tension between the tax collector
and the board of supervisor over the ability to implement such
a program without appropriate resources, fee authority and
programmatic improvements." Finally, the opponents argue that
"there are existing options available to assist seniors who
wish to remain current on their taxes without creating new
local, publicly funded programs." They contend that "[w]hat
may seem like a sensible and considerable program to help
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seniors on fixed budgets would actually require a significant
public investment in order to establish a system that would
work properly and would take much time to establish and
implement."
4)Proposition 13 . 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> Section 1 of Article XIII A 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" is defined as 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" [California Constitution,
Article XIII A, Sections 1 and 2].
5)Property Tax Payments: Due Dates . Generally, property taxes
on the secured roll are due in two installments: on November
1 and February 1. Property taxes that are due but unpaid
after December 10 or April 10 become delinquent and incur a
10% penalty per installment. After April 10, the taxpayer is
---------------------------
<1> Since any tax savings resulting from the real property tax
limitations provided in Sections 1 and 2 of Article XIII A 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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also charged a $10 fee for preparation of his/her delinquent
tax records. If there are any unpaid taxes after June 30,
then the property taxes are declared to be in default and
incur additional penalties at the rate of 1.5% per month of
the unpaid taxes (18% per year), as well as a $15 redemption
fee.
6)Is There a Problem ? According to this bill's author, many
seniors, particularly those on fixed incomes, have trouble
saving up for a large expenditure such as an annual property
tax bill. While California is among the states with the
lowest property tax rates, a large number of seniors who are
homeowners still struggle to make ends meet during retirement.
The Economic Policy Institute has described the status of
these seniors as "economically vulnerable". Nearly one-half
of the elderly population in the United States, or 48%, falls
within this category.
7)Proposed Solution: Monthly Property Tax Program . This bill
proposes to authorize a county board of supervisors to create
a Monthly Property Tax Payment program for seniors and
disabled individuals, regardless of age. In essence, the
program would allow those property owners to pay their
property tax bill in monthly installments instead of bi-annual
payments.
8)The Scope of the Proposal . This bill would only allow the ad
valorem property tax imposed on a qualified homeowner'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. However,
those special taxes, direct assessments and other levies
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generally are included in, and collected through, a property
tax statement. Thus, while a county board of supervisors may
allow qualified homeowners to pay property tax on a monthly
basis, the homeowners, presumably, would still be required to
pay all other local taxes and fees assessed against the
property on a bi-annually basis.
9)Existing Partial Payment Arrangements . Existing law already
authorizes partial property tax payment arrangements, but only
in the case of tax-defaulted property. In fact, counties are
required to offer taxpayers a Permanent Installment Plan
(PIP), through which homeowners may make annual payments to
redeem their tax defaulted property. The PIP may be opened
any time prior to the property becoming subject to the power
of sale, during which time the property will not be subject to
sale unless payments are not made by the dates prescribed.
The PIP requires the delinquent taxpayer to make an initial
payment of at least 20% of the redemption amount and make
subsequent yearly payments of at least 20%, in addition to
paying current year taxes and any applicable penalties.
In addition to a PIP, a county tax collector may choose to
accept partial payments from delinquent taxpayers if
authorized to do so by the board of supervisors. These
partial payments could be accepted on an ad hoc basis or, on a
more formal basis, in the form of a monthly payment plan.
Making partial payments serves as an alternative for taxpayers
who want to catch up on delinquent taxes, but cannot afford to
begin a PIP given the 20% down payment requirement.
In view of the existing partial payment options for delinquent
taxpayers, the Committee may wish to consider whether a
partial payment arrangement should also be extended to regular
payments of property taxes by homeowners who are not
delinquent taxpayers.
REGISTERED SUPPORT / OPPOSITION:
AB 2691
Page G
Support
Howard Jarvis Taxpayers Association
Opposition
California Association of County Treasurers and Tax Collectors
Analysis Prepared by:Oksana Jaffe / REV. & TAX. / (916) 319-2098