BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 587  


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          Date of Hearing:   August 10, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          SB 587  
          (Stone) - As Amended August 4, 2016


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          |Policy       |Revenue and Taxation           |Vote:|8 - 0        |
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          Urgency:  No  State Mandated Local Program:  YesReimbursable:   
          Yes


          SUMMARY:


          This bill eliminates the inflation adjustment of the assessed  
          value of a low-income senior's primary home. Specifically, this  
          bill, beginning on January 1, 2017, eliminates future inflation  
          factor increases for qualified homeowners 65 years or older who  
          have an annual income of $25,000 or less, if single, or $50,000  
          or less, if married. 


          FISCAL EFFECT:










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          1)Annual property tax loss of approximately $27 million,  
            resulting in GF costs of approximately $13.5 million as a  
            result of the Proposition 98 guarantee.


          2)Minor and absorbable costs to the Board of Equalization (BOE)  
            to modify forms, publications, and website materials.


          3)Unknown and possibly reimbursable costs for local assessors to  
            verify the income of qualified seniors. 


          COMMENTS:


          1)Background. When a home is purchased, its assessed value is  
            the purchase price, or "acquisition value." Each year  
            thereafter, the property's assessed value increases by 2% or  
            the rate of inflation, whichever is lower. This process  
            continues until the property is sold, at which point the  
            county assessor again assigns it an assessed value equal to  
            its most recent purchase price.


          2)How would SB 587 work? The elimination of the  
            inflation-adjustment for seniors means that the property tax  
            amount owed by a qualified senior is frozen until that senior  
            moves or no longer meets the income requirements. 



            For example, a home purchased in 2017 for $300,000 would see  
            its assessed value increase to no more than $306,000 the  
            following year. The resulting property tax amount owed would  
            increase from $3,000 in 2017 to $3,060 in 2018. However, under  
            SB 587, a qualified senior would still pay tax on an assessed  
            value of $300,000, resulting in a $60 tax reduction relative  
            to what they would otherwise have to pay. 








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          3)Other property tax benefits for seniors. Existing state law  
            provides additional benefits to certain qualified senior  
            households. Those benefits include: 


             a)   Base year value transfer. Persons over the age of 55 may  
               "transfer" their base year value from one home to another  
               that is of equal or lesser value, allowing these homeowners  
               to avoid reassessment of the newly purchased home to its  
               fair value. This is a once-in-a-lifetime benefit that  
               tallows seniors to pay the same level of taxes if they  
               move.  B


             b)   Property Tax Postponement Program. This State  
               Controller-administered program, which is set to restart in  
               October 2015, allows income-eligible persons 62 and older  
               to postpone property tax payments on their principal  
               residence. To participate, the program requires total  
               household income of $35,500 or less and 40% home equity.  
               The interest rate is 7%.


           Analysis Prepared by:Luke Reidenbach / APPR. / (916)  
          319-2081

















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