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:
SB 587
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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.
SB 587
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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
SB 587
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