BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |SB 2 |Hearing |4/15/15 |
| | |Date: | |
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|Author: |Anderson |Tax Levy: |Yes |
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|Version: |4/6/15 |Fiscal: |Yes |
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|Consultant|Grinnell |
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PROPERTY TAXATION: EXEMPTIONS: VETERANS' ORGANIZATIONS
Provides that assessors can't deny the welfare exemption on
property owned by veterans' organizations used for fraternal,
lodge, or social club purposes.
Background and Existing Law
Section One of Article XIII of the California Constitution
provides that all property is taxable unless explicitly exempted
by the Constitution or federal law, but allows the Legislature
to exempt property used for religious, hospital, or charitable
purposes, so long as its owned by nonprofit entities organized
and operated for charitable purposes, none of whose income
inures to the benefit of any private shareholder or individual.
The Legislature enacted this exemption in law, commonly known as
the "welfare exemption." To be eligible, the Legislature
required the owner and property to meet the standards in the
Constitution, in addition to other requirements, such as:
The property is used for the actual operation of the
exempt activity, and does not exceed an amount of property
reasonably necessary to accomplish the exempt purpose,
The property is not used to benefit the owner or any
other person.
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The property is not used for fraternal, lodge, or social
club purposes, except to the extent that the use is clearly
incidental to its charitable purpose, and
The property is irrevocably dedicated to charitable
purposes, and will not inure to the benefit of a person
upon sale or dissolution, except in specified
circumstances.
Property owned by a veterans' organization chartered by the
United States Congress is eligible for the welfare exemption, so
long as the organization complies with the requirements above,
is tax-exempt under federal and state law, and has a "veterans'
organization exemption" certificate of compliance on file with
the county assessor. However, this exemption conflicts with the
welfare exemption's general prohibition on exempting property
used for fraternal, lodge, or social club purposes, because
buildings owned by Veterans of Foreign Wars (VFW) and the
American Legion often have many uses, some of which are social
in nature. As a result, the application of the veterans'
organization exemption can vary across counties, where
independent, elected assessors enforce property tax law. Some
assessors don't apply the exemption at all, others exempt just
the office and facilities that directly serve veterans, while
others don't assess the property at all. Veterans' groups seek
clarity that property owned by VFW and American Legion that
serve veterans' unique need should be eligible for the welfare
exemption from property tax.
Proposed Law
Senate Bill 2 provides that the welfare exemption shall not be
denied to property owned by veterans' organizations that is used
for fraternal, lodge, or social club purposes. However, the
exemption doesn't apply to any portion of a property where
alcoholic beverages are sold, as defined. The measure also
states legislative findings and declarations.
State Revenue Impact
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According to BOE, SB 2 results in annual property tax revenue
losses of $575,000.
Comments
1. Purpose of the bill . According to the author, "Veteran halls
in communities across our country are an invaluable resource for
millions of active military, veterans, and their families. Due
to skyrocketing operation and business costs, the number of
veteran halls has declined and fewer military families are
receiving the much-needed services that they provide. This bill
would ensure that as non-profit organizations, existing property
tax exemptions for veteran halls are preserved so that they can
continue to provide high quality and important services to the
heroes who have served our country."
2. Next best . The Constitution prohibits the Legislature from
enacting changes to the property tax that conflict with its
provisions. SB 2 stretches the Constitutional welfare exemption
to apply to veterans' organizations by defining a veterans'
organization's lodge, fraternal, and social uses as central to
its Constitutionally required charitable purpose. While the
Legislature has some discretion to interpret Constitutional
provisions, statutory changes to the property tax are always a
second best option. The most effective and direct way to
clearly exclude property owned by veterans' organizations is to
amend the Constitution.
3. Precedent . While SB 2 would help veterans' organizations,
the measure creates a precedent by applying the exemption more
broadly to veterans' organizations' property than to other
groups. Under the bill, a building owned and used by the Elks'
Club would be taxed differently than the same building owned and
used for the same purposes by the American Legion. Given this
difference, nonprofit social clubs and lodges that perform
considerable community services may want similar treatment. The
Committee may wish to consider the precedent SB 2 sets.
4. Do it again . SB 2 is largely identical to SB 1152
(Anderson, 2014), which was approved by the Committee on
Governance and Finance by a vote of 6-0 last year. However, SB
1152 was held on the Assembly Revenue and Taxation Committee's
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suspense file.
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Support and
Opposition (4/9/15)
Support : The American Legion - Department of California; AMVETS
- Department of California; California Assessors Association;
California Association of County Veterans' Service Officers;
California Council of Chapters; California State Commanders
Veterans Council; Military Officers Association of America; San
Diego Military Advisory Council; VFW Department of California;
Vietnam Veterans of America - California State Council.
Opposition : Unknown].
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