BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |SB 434 |Hearing |5/13/15 |
| | |Date: | |
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|Author: |Allen |Tax Levy: |No |
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|Version: |2/25/15 |Fiscal: |No |
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|Consultant|Grinnell |
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MANUFACTURED HOUSING: VEHICLE LICENSE FEE: PROPERTY TAXATION
Requires owners of mobilehomes or manufactured homes to request
local property taxation when affixing the home to the ground but
retaining the original chassis.
Background and Existing Law
Section 1 of Article XIII of the California Constitution
provides that all property is taxable unless explicitly exempted
by the Constitution or federal law. The Constitution limits the
maximum amount of any ad valorem taxes on real property at 1% of
full cash value and precludes reassessment unless the property
is newly constructed or changes ownership.
Mobilehomes and manufactured homes are different than
traditional residential properties in California, especially for
property tax purposes. The Department of Housing and Community
Development (HCD) maintains a title registry of all mobilehomes
and manufactured homes in the state. Prior to 1980, all
mobilehomes paid an in-lieu fee (ILF) to HCD instead of the
property tax; however, the Legislature required any mobilehomes
sold after July 1, 1980 to pay the property tax as personal
property. Any new mobilehomes sold in the state are
automatically placed on the local property tax roll.
Additionally, individuals can elect to pay local property taxes
instead of paying the ILF by making a request to HCD. HCD must
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inform counties of new registrations, title transfers, and
conversions to local property taxation each month. The
difference between the two taxes can be significant: ILF is .65
percent of pre-1980 value depreciated according to a statutory
schedule, and usually totals between $16 and $80, while the
property tax would generally total 1% of its assessed value.
A property owner must first obtain a building permit from HCD to
install a mobilehome, manufactured home, or modular home on the
original foundation. HCD will only approve new construction
that allows the home to be moved on its original chassis, or
else, it's subject to local property taxation as personal
property. If HCD approves the permit and grants a certificate
of occupancy, it must record a document in the county recorder's
office within five days naming the owner of the real property
and declaring that the mobilehome, manufactured home, or
commercial modular home has been affixed to the real property by
installation on a foundation.
The Los Angeles County Assessor noticed that current mobilehome
owners in areas with high land values would tear down a current
home, and replace it with a newly built one, while keeping its
original steel chassis. HCD approved these changes, which they
now admit was done in error, because these rebuilds are no
longer movable on their original chassis. However, taxpayers
have already completed the rebuilds, and avoided significant
taxes. The Los Angeles County Assessor wants homes similarly
converted in the future to pay the property tax as personal
property instead.
Proposed Law
Senate Bill 434 requires an owner of a manufactured home or
mobilehome currently subject to the vehicle license fee to
request a transfer to local property tax when he or she submits
building plans to HCD that rebuilds the home in a way that
leaves only the chassis of the original home in place. The
measure also makes conforming changes.
State Revenue Impact
No estimate.
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Comments
1. Purpose of the bill . According to the author, "SB 434
addresses an exploitation of tax law by a small but
sophisticated subset of mobile home owners. Under current
statute, owners of mobile homes first purchased prior to 1980
are taxed at a rate of between $16 and $80 annually, because the
home is considered a vehicle. These homes, typically over 35
years old and constructed of aluminum siding with a flat roof,
are often owned by residents of modest means with fixed incomes.
An issue of fairness arises when certain owners choose to
entirely and sometimes opulently rebuild their homes, retaining
only the steel chassis of the original structure, and nothing
else, surrounded by the new foundation, and under the floor of
the newly-constructed home. The savvy owner does this with the
sole and explicit intent of narrowly meeting the letter of the
law so he or she is still permitted to only pay a nominal
vehicle license fee. Compare this to the case of an average
single family home owner, who, when rebuilding his or her house
to be essentially the same as new, is reassessed under
Proposition 13 guidelines, with the property taxes increasing to
an amount relative to the increase in the property's overall
value. As a simple matter of fairness, if a mobile home owner
completely rebuilds a pre-1980 structure, SB 434 would require
them to pay property taxes like other homeowners instead of a
much smaller vehicle license fee. The bill is not retroactive,
and would only impact construction undertaken beginning in 2016.
Stripping a 35-year-old mobile home down to the chassis and
building a multi-million dollar structure around it, just so the
home can be taxed like a vehicle, is dishonest. These homes
aren't mobile, nor are they vehicles. Their owners should pay
their fair share of property tax like any other California
homeowner."
2. Another way ? Currently, SB 434 amends Section 18551of the
Health and Safety Code, a section of law that sets forth the
process by which HCD approves plans to alter or install a
mobilehome or manufactured home on a foundation. A potentially
more effective way would be to instead amend Revenue and
Taxation Code sections applicable to mobilehomes and
manufactured homes to trigger the shift from ILF to local
property taxation when the assessor determines that the
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mobilehome or manufactured home has been rebuilt to a state
where it is no longer mobile, and "substantially equivalent to
new." This standard is commonly used by assessors to determine
the degree of new construction that has taken place to any
building or fixture when considering a reassessment, and is
defined in the Board of Equalization's Assessor's Handbook.
Amendments should also include conforming changes to the Health
and Safety Code to ensure that should the assessor determine
that the rebuilt state is substantially equivalent to new, HCD
would then automatically transfer the mobilehome or manufactured
home from ILF to local property tax.
3. Rounding up horses . SB 434 would provide that whenever HCD
receives plans in the future that would rebuild the home in a
way that only retains the original chassis; however, those who
already received HCD approval and continue to pay the ILF would
remain unaffected. The measure could instead direct assessors
to revalue these homes in the next taxable year, requiring these
homeowners to pay property tax in the future based on the newly
enrolled value. However, this amendment will likely cause
Legislative Counsel to rekey the measure as a 2/3 vote tax
increase.
4. Incoming ! The Senate Transportation and Housing Committee
approved SB 434 by a vote of 9 to 0 on April 21, 2015.
Support and
Opposition (4/23/15)
Support : California Assessors' Association; Los Angeles County
Assessor Jeffrey Prang; Los Angeles County Board of Supervisors.
Opposition : Western Manufactured Housing Association (unless
amended)
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