BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 2691| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 2691 Author: Holden (D) Amended: 8/1/16 in Senate Vote: 21 SENATE GOVERNANCE & FIN. COMMITTEE: 6-1, 6/8/16 AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Pavley NOES: Moorlach ASSEMBLY FLOOR: 75-0, 5/2/16 - See last page for vote SUBJECT: Property taxation: Monthly Property Tax Payment Program SOURCE: Author DIGEST: This bill allows counties boards of supervisors to implement monthly property tax payment programs. Senate Floor Amendments of 8/1/16 add a provision that states that the bill does not apply to escrow accounts, as defined. Senate Floor Amendments of 6/21/16 add references to school entities for purposes of the auditor's allocation of property tax revenue. ANALYSIS: AB 2691 Page 2 Existing law: 1)Sets January 1 of each year as the "lien date," or the date upon which the assessor values property, and property taxes are imposed on its owner in the form of a lien against the property. 2)Requires tax collectors to send bills to taxpayers on the secured roll by November 1. 3)Requires taxpayers must pay their bills in two installments: the first on November 1, which becomes delinquent December 10, and the second on February 1, with delinquency occurring on April 10, but allows taxpayers to pay in full in the first installment. 4)Imposes a 10% penalty on each amount, and allows counties to also apply administrative charges. 5)Provides that a property becomes tax defaulted if taxes remain unpaid as of June 30th, triggering redemption penalties of 1.5% a month until the full amount is paid. 6)Allows the tax collector with approval by the board of supervisors to sell a tax defaulted residential property to satisfy back taxes, penalties, costs, and other liens; for commercial property, the tax collector can do so after three years. 7)Requires counties to allow taxpayers to pay in installments by making an initial payment of 20% of the amount outstanding, but only after a property becomes tax defaulted. Under an installment plan, taxpayers must make one payment a year for five years, in addition to paying current taxes. Failure to make timely payments on an installment plan again places the property in default; however, taxpayers can enter into another installment plan at the beginning of the next fiscal year. AB 2691 Page 3 8)Allows tax collectors to also accept partial payments from delinquent taxpayers if authorized to do so by the board of supervisors. This bill: 1)Authorizes a county board of supervisors to adopt a resolution or ordinance to implement a Monthly Property Tax Payment Program, where qualified taxpayers can instead pay taxes on a monthly basis. 2)Allows the ordinance or resolution authorizing the program to set forth specific procedures for the tax collector to deem as timely filed monthly installments paid late but within a specified grace period due to reasonable cause for purposes of determining delinquency and default. 3)Directs the auditor to apportion property tax payments to cities, counties, special districts and school entities on a proportional basis based on existing law. 4)Defines as "qualified taxpayers" those individuals who are 62 years of age or older, or who receive supplemental security income. 5)Defines "school entities" by reference to the Revenue and Taxation Code. 6)States that the bill not apply to escrow accounts, as defined in Section 1024.17 of Title 12 of the Code of Federal Regulations. Background AB 2691 Page 4 County tax collectors administer the property tax collection, billing, and tax sale process. County tax collectors currently send only two bills per year, one for each installment, so administering a monthly payment system would increase printing, mailing, and banking costs. Information technology may also need to be reprogrammed, because most of the state's tax collectors use the same collections software built around the two-installment system, which does not currently allow for monthly payments. Because AB 2691 allows, but does not require, counties to allow monthly payments, this bill does not obligate the state to pay these costs; instead, tax collectors would have to ask their boards of supervisors for funding to implement the program. AB 2691 allows counties to enact ordinances or resolutions implementing a program for eligible taxpayers to pay property taxes in monthly installments. However, shifting the payment schedule from twice per year to monthly doesn't affect the amount due, or positively impact the taxpayer's ability to pay. For low-income home-owning taxpayers, the State Controller administers the Property Tax Postponement Program, which allows the state to loan funds to individuals over the age of 62 or disabled persons with less than $39,000 in income per year to pay their property taxes to the county tax collector. The Controller secures repayment by recording a lien against the claimant's property, which is satisfied when the home is sold or refinanced. As liens are repaid, revenue flows back to the Controller, who in turn uses these funds to pay property taxes for new applicants, up to $20 million annually; the Controller must shift any amounts received above that amount to the General Fund. FISCAL EFFECT: Appropriation: No Fiscal Com.:NoLocal: No SUPPORT: (Verified8/2/16) AB 2691 Page 5 California State Retirees Howard Jarvis Taxpayers Association OPPOSITION: (Verified8/2/16) California Association of County Treasurer-Tax Collectors State Association of County Auditors ARGUMENTS IN SUPPORT: According to the author, "Assembly Bill 2691 would authorize a county board of supervisors to implement a Monthly Property Tax Payment Program. The Program would allow qualified individuals living on a fixed-income to pay their property tax in monthly installments. The individual would have to be 62 years of age or older or be receiving supplemental security income for a disability, regardless of age. By providing an option to pay property taxes in lower monthly installments, AB 2691 makes it easier for individuals on fixed incomes to pay the principal of the tax steadily, rather than face the uncertainty of paying a month's worth of Social Security Income. This bill provides the power to the county board of supervisors to implement such a program." ARGUMENTS IN OPPOSITION: According to the California Association of County Treasurer-Tax Collectors, "The use of the word installment suggests that the tax collector has the capacity to send out monthly bills requiring that month's payment and outstanding balances; tax collectors do not have this capacity - this would require a significant investment at the Board of Supervisors to upgrade tax collection systems to produce those mailings and handle postage. Many counties' systems are decades old and predicated on the December 10 and April 10 collection dates. Changes to these systems take enormous time and resources that the Tax Collector must request from the County's General Fund, and compete with public safety, health, and public works projects for local resources. There are existing options to assist seniors who wish to remain current on their taxes without creating new local, publicly funded programs." AB 2691 Page 6 ASSEMBLY FLOOR: 75-0, 5/2/16 AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gray, Grove, Hadley, Harper, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Wood, Rendon NO VOTE RECORDED: Beth Gaines, Gordon, Roger Hernández, Ridley-Thomas, Williams Prepared by:Colin Grinnell / GOV. & F. / (916) 651-4119 8/3/16 19:38:12 **** END ****