BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 2|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: SB 2
Author: Anderson (R) and Vidak (R), et al.
Amended: 4/6/15
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/15/15
AYES: Hertzberg, Nguyen, Bates, Beall, Hernandez, Lara, Pavley
SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/28/15
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen
SUBJECT: Property taxation: exemptions: veterans'
organizations
SOURCE: Author
DIGEST: This bill provides that assessors can't deny the
welfare exemption on property owned by veterans' organizations
used for fraternal, lodge, or social club purposes.
ANALYSIS:
Existing law:
1)Provides that all property is taxable unless explicitly
exempted by the Constitution or federal law (Article XIII,
Section 1 of the California Constitution), but allows the
Legislature to exempt property used for religious, hospital,
or charitable purposes, so long as it's owned by nonprofit
entities organized and operated for charitable purposes, none
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of whose income inures to the benefit of any private
shareholder or individual (Article XIII, Section 4). This
exemption is commonly known as the welfare exemption.
2)Requires taxpayers and property to comply with all of the
following to obtain the welfare exemption:
a) 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,
b) The property is not used to benefit the owner or any
other person,
c) The property is not used for fraternal, lodge, or social
club purposes, except to the extent that the use is clearly
incidental to the exempt purpose, and
d) 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.
1)Allows property owned by a veterans' organization chartered by
the United States Congress to obtain 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.
This bill:
1)Provides that the welfare exemption shall not be denied to
property owned by veterans' organizations that is used for
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fraternal, lodge, or social club purposes, by stating that
veterans' organizations' social uses of property qualitatively
differs from the exempt activities of other organizations as
specified, and deeming it as central to the organization's
exempt purpose.
2)Denies the exemption to any part of a property where alcoholic
beverages are served, and states that the part of the property
that's ineligible for the exemption is the area where
alcoholic beverages are prepared and served.
3)Makes legislative findings and declarations supporting its
purposes.
Comments
The California Constitution allows the Legislature to enact the
welfare exemption for specified property meeting three
standards: first, the property must operate for charitable
purposes. Second, a non-profit organization owns the property,
and lastly, any net earnings don't inure to the benefit of any
private individual or shareholder. The Legislature subsequently
enacted a section of law setting forth additional requirements
for all charitable organizations, and another section of law
only for veterans' organizations. However, a conflict exists
between the welfare exemption's requirements prohibiting exempt
property from being used for fraternal, lodge, or social club
purposes, and the use of buildings owned by Veterans of Foreign
Wars (VFW) and the American Legion which often have uses which
are social in nature. As a result, the application of the
veterans' organization exemption varies 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 simply don't assess the property. SB 2 responds to
veterans' groups request for clarity that property owned by VFW
and American Legion that serve veterans' unique need should be
eligible for the welfare exemption from property tax.
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FISCAL EFFECT: Appropriation: No Fiscal
Com.:Yes Local: No
According to the Senate Appropriations Committee:
This bill would lower local property tax revenue by roughly
$575,000 annually. Under Proposition 98, this reduction in
local property tax revenues would lead to an increase in state
General Fund support for K-14 education of approximately 40 to
50 percent, or potentially $288,000 annually. The exact amount
would depend on the specific factors which determine the
annual Proposition 98 minimum funding guarantee.
The Board of Equalization (BOE) would incur annual costs of up
to $150,000 (General Fund) for the first three years to
administer the provisions of the bill. Specifically, BOE would
incur costs primarily to issue organizational clearance
certificates to veterans' organizations applying for the
exemption under the bill.
SUPPORT: (Verified5/28/15)
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: (Verified5/28/15)
None received
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ARGUMENTS IN SUPPORT: 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."
Prepared by:Colin Grinnell / GOV. & F. / (916) 651-4119
5/28/15 15:48:23
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