BILL ANALYSIS Ó
SB 371
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Date of Hearing: June 22, 2015
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Philip Ting, Chair
SB
371 (Hancock) - As Amended April 6, 2015
Majority vote. Non-fiscal.
SENATE VOTE: 30-3
SUBJECT: School districts: special taxes.
SUMMARY: Clarifies that a school district may exempt from
special taxes any of the specified categories of persons and is
not required, but may, provide this exemption to all of these
persons. Specifically, this bill:
1)Clarifies that a school district is authorized to exempt from
the qualified special taxes any or all of the following
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persons:
a) Persons over the age of 65;
b) Persons receiving Social Security Insurance (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.
2)States that the proposed clarification is declaratory of
existing law.
EXISTING STATE 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
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special tax" a person 65 years of age or older, persons
receving SSI for a disability, regardless of age, and persons
receving SSDI benefits with the yearly income not exceeding
250% of the 2012 federal poverty guidelines, as specified.
FISCAL EFFECT: None.
COMMENTS:
1)Author's Statement . The author has provided the following
statement in support of this bill:
"Existing law allows school districts and community college
districts to impose special taxes (parcel taxes) that apply to
taxpayers or real property within the school district. K-12
school districts may exempt persons 65 years of age (or
older), persons receiving supplemental security income (SSI)
regardless of age, and/or persons receiving Social Security
Disability Insurance (SSDI).'
"In 2011, SB 874 (Hancock) gave school districts the option of
exempting property owners receiving SSDI from paying parcel
taxes, but in 2015 the Santa Clara County Counsel's office
raised an issue with this new exemption. The Santa Clara
County Counsel's office interpreted Government Code Section
50079(b)(1) which states, "all of the following taxpayers," to
mean that an individual must meet all three categories to
qualify for a parcel tax exemption. An interpretation that
goes against the intention of SB 874.'
"SB 371 clarifies that school districts can provide the
exemption to "any or all" of the exempted categories of
taxpayers."
2)Arguments in Opposition . The opponents state that this bill
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would broaden the current tax exemption "to include
individuals on SSDI." They argue that the "goal of this
expansion is not to assist the disabled" and that "it is
flawed public policy to deceive voters by encouraging them to
vote for taxes under the premise that they may not have to pay
them." The opponents believe that this bill would "deviate
from the constitutional property tax standard of uniformity"
by allowing school districts "to exempt from parcel taxes
seniors or disabled rather than exempting both of them." They
assert that, to "promote uniformity, no exemptions should be
allowed for the parcel tax", but if a "school district?desires
to allow exemptions, sound tax policy must be strictly adhered
to and uniformity should prevail."
3)"Qualified Special Taxes": Background. In 1978, Proposition
13 limited both the tax rates and assessments, thus
significantly reducing property tax revenues. Proposition 13
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.] School districts and special districts are prohibited
from imposing general taxes (Proposition 218) and thus, by
definition, any tax levied by a school district or community
school district is considered to be a special tax subject to a
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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.
4)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
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.
Parcel taxes are flexible ways of raising revenues at the
local level, but are subject to certain requirements.
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. Therefore, the rate of tax varies significantly
among different school districts. Existing law 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 art, music and sports programs.
5)The Current Exemption: What is the Problem ? School districts
and community college 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.
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The original exemption enacted in 1988 was limited in its scope
to senior citizens over the age of 65. In 2006, the
Legislature expanded the exemption to include persons
receiving SSI, regardless of age, and clearly allowed school
districts to exempt either persons over the age of 65 or
persons receiving SSI. In 2012, the Legislature added one
more category to the exemption list of persons, namely persons
receiving SSDI, with a specified annual income [Chapter 791,
Statutes 2012, SB 874 (Hancock)]. However, as SB 874 was
going through the legislative process, a drafting error
occurred and the word "or" was replaced with the phrase "all
of the following." As a result, some interpret the statute to
require school district to exempt either none or all three
categories of individuals eligible for the exemption. AB 371
would clarify that this interpretation is incorrect and, thus,
a school district may exempt any or all of the individuals
currently eligible for the exemption from the qualified
special tax.
6)Related Legislation .
a) SB 874 (Hancock), Chapter 791, Statutes of 2012,
authorized school districts and community college districts
to exempt from "qualified special taxes" persons receiving
SSDI whose annual income is less than 250% of 2012 federal
poverty guidelines.
b) AB 385 (Lieber), Chapter 41, Statutes of 2006,
authorized school districts to exempt SSI recipients,
regardless of age, from qualified special taxes.
REGISTERED SUPPORT / OPPOSITION:
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Support
None on file
Opposition
Howard Jarvis Taxpayers Association
California Taxpayers Association
Analysis Prepared by:Oksana Jaffe / REV. & TAX. / (916)
319-2098