BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 434|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: SB 434
Author: Allen (D)
Amended: 5/20/15
Vote: 21
SENATE TRANS. & HOUSING COMMITTEE: 9-0, 4/21/15
AYES: Beall, Cannella, Allen, Galgiani, Leyva, McGuire,
Mendoza, Roth, Wieckowski
NO VOTE RECORDED: Bates, Gaines
SENATE GOVERNANCE & FIN. COMMITTEE: 6-0, 5/13/15
AYES: Hertzberg, Beall, Hernandez, Lara, Moorlach, Pavley
NO VOTE RECORDED: Nguyen
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SUBJECT: Manufactured housing: vehicle license fee: property
taxation.
SOURCE: Los Angeles County Assessor Jeffrey Prang
DIGEST: This bill requires the assessor to notify the
Department of Housing and Community Development (HCD), the legal
owner, and each assessee whose manufactured home is to be placed
on the local assessment role. This bill also requires HCD to
transfer a manufactured home that is subject to the vehicle
license fee to local property taxation when it is found that the
home has been rebuilt and is no longer mobile.
ANALYSIS:
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Existing law:
1)Provides in Section 1 of Article XIII of the California
Constitution 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.
2)Provides mobilehomes and manufactured homes are different than
traditional residential properties in California, especially
for property tax purposes. 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) - also known
as the vehicle license fee (VLF) - 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. The
difference between the two taxes can be significant: ILF is
.65% 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.
3)Requires 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 is 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.
This bill:
1)Authorizes the assessor to transfer a manufactured home
subject to VLF and registration fees to property taxation if
the assessor finds that the manufactured home has been rebuilt
to the substantial equivalent of a new residential structure
and deems that the manufactured home is no longer
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transportable in one or more sections. The assessor must
notify each assessee whose manufactured home is to be placed
on the local assessment roll. The notification must also be
given to HCD and the legal owner of the manufactured home at
the same time it is given to the assessee. This will apply to
projects with a construction completion date of January 1,
2016.
2)Requires HCD to transfer a manufactured home or mobilehome
which is subject to VLF to local property taxation upon
notification by the assessor that the manufactured home or
mobilehome has become subject to local property taxation.
3)Adds to the meaning of manufactured home in "The Manufactured
Home Property Tax Law." This expanded meaning will include
manufactured homes or mobilehomes, as defined in the Health
and Safety Code, which were first sold new on or before June
30, 1980, and, following the owner's notification by the
assessor, subsequently made subject to local property
taxation.
4)Defines the "base year value" of a manufactured home that has
been converted from paying the VLF to paying local property
taxation to be its full cash value on the date of completion
of new construction. The completion of new construction is
subject to supplemental assessment.
Comments
Purpose of the bill. According to the source and author, this
bill addresses an exploitation of tax law by a small subset of
mobilehome owners. Under current statute, owners of mobilehomes
first purchased prior to 1980 are taxed at a rate of between $16
and $80 annually, because the home is considered a vehicle. 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, surrounded by the new
foundation, and under the floor of the newly constructed home.
The owner does this with the intent of narrowly meeting the
letter of the law so they are still permitted to only pay a
nominal VLF. Comparatively, a single-family home owner, 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
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property's overall value. If a mobilehome owner completely
rebuilds a pre-1980 structure, this bill requires them to pay
property taxes like other homeowners instead of a much smaller
VLF. These homes are not mobile, nor are they vehicles. Their
owners should pay their fair share of property tax like any
other California homeowner.
Better solutions. The original version of this bill amended a
section of law that sets forth the process by which HCD approves
plans to alter or install a manufactured or mobilehome on a
foundation. It required the owner at the time of submitting
plans to HCD which would rebuild the mobilehome on a foundation
system leaving only the chassis to request a transfer from
vehicle license fee to property tax.
This version of the bill more effectively addresses the problem
by amending the Revenue and Taxation Code sections applicable to
manufactured homes and mobilehomes to trigger the shift from VLF
to local property taxation when the assessor determines that the
manufactured home or mobilehome has been rebuilt to a state
where it is no longer mobile and is "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.
This new version also makes 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 manufactured home or mobilehome
from VLF to local property tax. HCD and the assessors working
together would likely be a stronger deterrent of abuse, and more
effective enforcement, as opposed to the previous version of the
bill which required home owners to self-report/request a
transfer.
Tax levy. This bill provides for a tax levy and will go into
effect immediately if passed. It will affect manufactured homes
with a construction completion date of January 1, 2016 or later
and will not retroactively affect homeowners that have already
utilized this loophole.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
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SUPPORT: (Verified5/26/15)
Los Angeles County Assessor Jeffrey Prang (source)
California Assessors' Association
Los Angeles County Board of Supervisors
OPPOSITION: (Verified5/26/15)
None received
ARGUMENTS IN SUPPORT:
The California Assessors' Association states that this bill
addresses an assessment fairness issue with certain manufactured
homes. Current loopholes create a disparity between similar
properties located in and out of a manufactured home park, and
violate the premise that the structure still qualifies as a
moveable vehicle. The Los Angeles County Board of Supervisors
states that this bill addresses the inadequate assessment of
property taxes on manufactured homes that were purchased prior
to July 1, 1980, which were extensively rebuilt, but still
subject to the ILF.
Prepared by:Christine Hochmuth / T. & H. / (916) 651-4121
5/27/15 11:22:50
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