BILL ANALYSIS                                                                                                                                                                                                    ”



                                                                     SB 371


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          SENATE THIRD READING


          SB  
          371 (Hancock)


          As Amended  April 6, 2015


          Majority vote


          SENATE VOTE:  30-3


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          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
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          |----------------+-----+----------------------+--------------------|
          |Revenue &       |6-1  |Ting, Dababneh,       |Patterson           |
          |Taxation        |     |Gipson,               |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |Roger HernŠndez,      |                    |
          |                |     |Mullin, Quirk         |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
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          SUMMARY:  Clarifies that a school district may exempt from  
          special taxes any of the specified categories of individuals and  
          is not required, but may, provide this exemption to all of these  
          persons.  Specifically, this bill:  










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          1)Clarifies that a school district is authorized to exempt from  
            the qualified special taxes any or all of the following  
            persons:


             a)   Persons over the age of 65;


             b)   Persons receiving Supplemental Security Income (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. 


          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).









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            "In 2011, SB 874 (Hancock) [Chapter 791, Statutes of 2012]  
            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)"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  








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            from imposing general taxes (Proposition 218 of 1996) 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 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.  


          3)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.


          4)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  








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            impact of, an exemption from special taxes imposed.   


             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 (SB 874  
            (Hancock), Chapter 791, Statutes 2012).  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 a school district to exempt either none or all three  
            categories of individuals eligible for the exemption.   This  
            bill 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.  




           Analysis Prepared by:                                             
                          Oksana Jaffe / REV. & TAX. / (916) 319-2098  FN:  
          0001072



















                                                                     SB 371


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