BILL ANALYSIS Ó SENATE COMMITTEE ON TRANSPORTATION AND HOUSING Senator Jim Beall, Chair 2015 - 2016 Regular Bill No: SB 434 Hearing Date: 4/21/2015 ----------------------------------------------------------------- |Author: |Allen | |----------+------------------------------------------------------| |Version: |2/25/2015 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |No | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Christine Hochmuth | |: | | ----------------------------------------------------------------- SUBJECT: Manufactured housing: vehicle license fee: property taxation DIGEST: This bill requires a mobile- or manufactured home owner to request a transfer from the vehicle license fee to local property taxation when they submit building plans that rebuild the home on a foundation system which leaves only the original chassis. ANALYSIS: Existing law: 1.Requires the Department of Housing and Community Development (HCD) to establish regulations for manufactured home, mobilehome, and commercial modular foundation systems (referred to hereafter collectively as manufactured homes). These types of homes may be installed on a foundation as either a fixture or improvement to the real property or as a chattel (an item of property other than real estate), each condition dependent upon meeting certain criteria, including obtaining permits, payming of fees, and undergoing proper inspections. 2.Requires a manufactured home owner or contractor to obtain a building permit from HCD before installing a manufactured home on a foundation system. 3.Requires HCD, within five days of the issuance of the SB 434 (Allen) Page 2 of ? certificate of occupancy for the manufactured home, to record a document with a county recorder's office naming the owner of the real property and declaring that a manufactured home has been affixed to that real property by installation on a foundation system. 4.Requires that manufactured homes originally purchased new on or after July 1, 1980 be automatically subject to local property taxes (LPT). If purchased new prior to that date, the prior owner could voluntarily convert the annual vehicle license fee (VLF) to local taxation though HCD. Owners of manufactured homes not subject to local property tax (LPT) must pay a vehicle license fee (VLF) to HCD. The annual amount of the fee is a sum equal to 0.65 percent of the market value of the manufactured home. This bill requires an owner of a manufactured home that is currently subject to the VLF to request a transfer to LPT at the time they submit building plans to, and receive building permits from, HCD when the building plans rebuild the manufactured home on a foundation system leaving only the chassis of the original home in place. COMMENTS: 1.Purpose of the bill. According to the author, this bill intends to close a loophole where certain older homes, under current code, are considered vehicles and are not subject to property tax rules. This loophole is invoked by retaining the steel chassis of the original manufactured home, surrounded by the new foundation and under the floor of the newly built home. The author contends that an issue of fairness arises when a VLF home is extensively rebuilt into an essentially new home, and the owner is allowed to continue paying the relatively low annual VLF. In the case of a typical single-family home, when rebuilt to be essentially the same as new, the property is reassessed, and the property taxes will increase to an appropriate amount, based on the increase in the property's value. However, any home under VLF, no matter how extensively it is reconstructed, is allowed to remain subject to the relatively low annual license fee. This bill seeks to resolve the inequity created by this abuse. SB 434 (Allen) Page 3 of ? 2.Taxation of manufactured homes. Manufactured homes in California are taxed in two ways: via the annual VLF, sometimes known as the In-Lieu Tax (ILT), or as personal property via LPT. HCD administers the program involving homes subject to the VLF. A manufactured home first sold prior to July 1, 1980, is subject to the annual VLF, under which a homeowner will pay between $16 and $80 per year (0.65% of the original pre-1980 value, determined by a manufactured home "blue book"). This is much less than the amount owed if the home were subject to LPT. LPT includes a 1% rate based on a property's assessed value, and the assessment increases each year by 2%. VLF is a state revenue, whereas LPT is a local revenue, so this bill has the potential to shift revenues to local jurisdictions. However, the manufactured homes that utilized the loophole this bill intends to close currently number less than 100, and this bill does not retroactively affect these existing homes. This bill sets provisions for future projects at the time of building permit submission. 3.Support for the bill. The Assessor for the County of Los Angeles states that this bill ensures that extensively rebuilt manufactured homes are properly assessed and taxed accordingly. They claim this bill is not intended to affect manufactured-home homeowners who make basic repairs or perform essential maintenance on their homes; it only applies to homes that are extensively rebuilt. The California Assessors' Association states that this bill addresses an assessment fairness issue with certain manufactured homes. 4.Opposition to the bill. The Western Manufactured Housing Communities Association states that the issue this bill is attempting to address has already been taken care of at the administrative level, by virtue of bringing this issue to HCD's attention. Opponents also contend that current rebuilds that are the examples for this legislation are being reassessed at the rebuilt value. Further, they are concerned with the interpretations that arise in the legislative counsel digest which refers to alterations on these homes being done on real property, whereas the code section that this bill amends pertains to mobilehomes that are installed in manufactured housing communities on leased land. 5.Double referral. This bill has been double-referred to the SB 434 (Allen) Page 4 of ? Governance and Finance Committee. RELATED LEGISLATION: AB 379 (Brown, Chapter 137, Statutes of 2013) - changes the process whereby the law deems a mobilehome a fixture or improvement to real property. SB 259 (Haynes, Chapter 423, Statutes of 1997) - allows manufactured homes, mobilehomes, or commercial coaches to be installed on a foundation system as either a fixture or an improvement to real property, or as a chattel. SB 259 specifies that manufactured homes or mobilehomes on a foundation system as chattel are subject to permit requirements and their foundations must meet minimum standards. FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No POSITIONS: (Communicated to the committee before noon on Wednesday, April 15, 2015.) SUPPORT: County of Los Angeles Assessor (Sponsor) California Assessors' Association OPPOSITION: Western Manufactured Housing Communities Association -- END -- SB 434 (Allen) Page 5 of ?