BILL ANALYSIS                                                                                                                                                                                                    



                                                                     SB 371


                                                                    Page  1





          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