BILL ANALYSIS                                                                                                                                                                                                    



                                                                     SB 801


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          Date of Hearing:  July 13, 2015





                     ASSEMBLY COMMITTEE ON REVENUE AND TAXATION


                                 Philip Ting, Chair





          SB  
          801 (Committee on Governance and Finance) - As Amended June 29,  
          2015


          


          Majority vote.  Non-fiscal


          SENATE VOTE:  36-0


          SUBJECT:  Property tax postponement.


          SUMMARY:  Makes technical changes to the Senior Citizens and  
          Disabled Citizens Property Tax Postponement (PTP) Law.   
          Specifically, this bill:  


          1)Eliminates the outdated references to "a certificate of  
            eligibility" and to certain duties of local tax officials,  








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            with respect to lien notices, to conform to the superseding  
            duties of the State Controller (Controller) in preparing and  
            filing the notice of lien for postponed taxes.  


          2)Specifies timing of payments by the Controller to the county  
            and the refund by the county of taxes paid when a taxpayer  
            successfully appeals his/her denial of postponement under the  
            law. 


          3)Clarifies that the interest on existing loans made prior to  
            June 30, 2016 will continue to accrue at the Pooled Money  
            Investment Account rate, which was the rate in effect prior to  
            the suspension of the PTP program. 


          4)Authorizes the Controller to release a lien if there is a  
            foreclosure on an obligation secured by a lien that is senior  
            in recording priority. 


          5)Revises the definition of a "claimant" for purposes of the  
            cooperative housing and possessory interest property tax  
            postponement provisions to clarify that blind and disabled  
            persons are  included in that definition, in addition to  
            individuals who are 62 years or older.


          6)Requires a person who has postponed his/her proportionate  
            share of property tax in the cooperative housing to make a  
            written request when requesting that the Controller issue a  
            statement showing the total amount postponed and increases the  
            fee amount that may be charged by the Controller for the  
            provision of this statement from $10 to $30. 


          7)Deletes provisions relating to the eligibility of mobilehome  
            properties for the PTP program and specifies that cooperative  








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            housing is eligible for the program.


          8)Removes the exception to a prohibition on the ability of a  
            claimant who is a holder of possessory interest in a  
            residential dwelling to participate in the PTP program if any  
            taxes or assessments on the possessory interest or improvement  
            are delinquent.  


          9)Specifies that a claim for property tax postponement must be  
            filed after October 1 of the fiscal year in which the  
            postponement is claimed, instead of September 1, and before  
            February 10 of that year, instead of April 10th. 


          10)Corrects grammatical errors, deletes duplicate numbering and  
            erroneous references, and makes other technical and conforming  
            changes. 


          EXISTING LAW:   


          1)Reinstates a modified PTP program that provides property tax  
            deferment to seniors and disabled persons and eliminates,  
            effective July 1, 2016, the current prohibition on any person  
            filing a claim and the Controller from accepting applications  
            for the PTP program.   

          2)Allows the Controller to pay property taxes to county tax  
            collectors, on behalf of individuals over the age of 62 or  
            disabled persons with an annual household income of $39,000 or  
            less.  

          3)Authorizes the Controller to secure repayment by recording a  
            lien against the claimant's property, which is satisfied when  
            the home is sold or refinanced.  









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          4)Requires the Controller to transfer to the General Fund (GF)  
            repayments in excess of a $20 million total.  

          FISCAL EFFECT:  None


          COMMENTS:  


           1)Purpose of this bill  .  In 2014, the Legislature reinstated a  
            modified PTP program to provide property tax deferment to  
            seniors and disabled persons and to allow income-eligible  
            senior citizens and disabled persons to apply to the  
            Controller to defer payment of property taxes, beginning on  
            July 1, 2016.  Although the funding for the previous program  
            was eliminated in 2009, the statute remained.  However, not  
            all of the statutory provisions related to the PTP program  
            were amended in 2014, which made it difficult for the  
            Controller to administer the program effectively.  This bill  
            would make several technical changes to the program to ensure  
            that it is implemented correctly. 

           2)PTP Program:  Background  .  California has several property tax  
            programs benefiting the elderly and disabled individuals,  
            including property tax assistance program and property tax  
            postponement.  The assistance program, which is administered  
            by the FTB, was established in 1967 to provide direct property  
            tax relief to seniors living on a fixed income.  The  
            assistance program provides a direct grant to qualifying  
            seniors and disabled individuals who own or rent a residence.   
            The program was later expanded to include renters who meet the  
            income requirement, and to homeowners who are blind and/or  
            disabled, regardless of their age.  

          Unlike the property tax assistance program that refunds a  
            percentage of property taxes paid, the PTP program allows  
            eligible homeowners to defer payment of all or a portion of  
            the property taxes on their residences.  The program was  
            enacted in 1977, after the passage of a constitutional  








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            amendment authorizing the postponement of property taxes  
            (California Constitution Article XIII, Section 8) and is  
            administered by the Controller's Office.  The constitutional  
            amendment was in response to concerns that senior homeowners  
            on fixed incomes could lose their homes because of the  
            inability to pay rising property tax bills.  Originally  
            designed for persons over 62 years of age, the program is now  
            also available to eligible blind and disabled persons,  
            regardless of age.  

           3)Suspension and Subsequent Reinstatement of the PTP program  .   
            On February 20, 2009, the PTP Program was indefinitely  
            suspended as part of the budget reductions to the state's GF  
            programs [SBx3 8 (Ducheny), Chapter 4, Statutes of 2009].  The  
            funding for the program was eliminated and the Controller was  
            prohibited from accepting any new applications after February  
            20, 2009.  However, in 2014, the Governor signed into law AB  
            2231 (Gordon), Chapter 703, Statutes of 2014, which  
            resurrected the PTP program, but with tightened eligibility  
            criteria and a requirement for the Controller to transfer to  
            the General Fund repayments in excess of a total of $20  
            million.  AB 2231 also increased the amount of equity required  
            in the home from 20% to 40%, and eliminated mobilehomes,  
            houseboats, and floating homes from the definition of  
            "residential dwelling." Increasing the necessary equity in the  
            home was thought to help ensure that California is made whole  
            in case of foreclosure or a forced sale.  Additionally, AB  
            2231 modernized and streamlined payment methods by  
            establishing the Senior Citizens and Disabled Citizens PTP  
            Fund within the State Treasury, utilizing electronic fund  
            transfer in place of certificates and eliminating the impound  
            account.  Finally, before 2009, the PTP Program included  
            mobile and manufactured homes in the program.  However, AB  
            2231 excluded mobilehomes from the new program.  
           
          4)The Definition of "Claimant.  " For purposes of the PTP program,  
            an individual is defined as a "claimant" if he/she is at least  
            62 years of age, blind or disabled, among other requirements,  
            and owns or rents a residential dwelling.  However, in the  








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            case of individuals who own a proportionate share in a  
            cooperative housing corporation or a possessory interest in a  
            dwelling, the definition of a "claimant" does not include  
            individuals who are either blind or disabled and thus they are  
            not able to participate in the PTP program.  This bill  
            proposes to standardize the definition of "claimant" for  
            purposes of the PTP program to include blind and disabled  
            individuals, regardless of whether they own a share in a  
            cooperative housing, hold a possessory interest, or own and  
            occupy a residential dwelling. This bill is intended to make  
            sure that the PTP program is consistent across the board and  
            that blind and disabled individuals are included in all  
            categories of the program. 
           
          5)Changing the Filing Deadlines  .  Under existing program, a  
            claim for postponement of property tax must be filed between  
            September 1of the fiscal year in which the postponement is  
            claimed and on, or before, April 10 of that fiscal year.  This  
            bill would revise this period for filing by requiring  
            individuals to submit their claims between October 1 and  
            February 10.  Currently, April 1 is the due date for the  
            property tax payments.  According to the Controller's Office,  
            the application period must be completed well before April 1  
            in order to ensure that the Controller will have adequate time  
            to notify the claimants of the decision and to allow the  
            unsuccessful claimants to make an alternative arrangement for  
            the property tax payments.  

          6)Certificates of Eligibility  .  The PTP program formerly used a  
            process where the Controller provided "certificates of  
            eligibility" to applicants to pay their property taxes.  The  
            Controller submitted these "checks" to the county.  The  
            renewed program, instead, uses electronic funds transfers.   
            This bill deletes the outdated reference to "a certificate of  
            eligibility" and eliminates duplicate numbering in Government  
            Code Section 16183.  

           7)Lien Notice  .  Under the previous PTP program, a county tax  
            collector or assessor was required to enter, on a notice of  








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            lien, a description of the real property owned by individuals  
            enrolled in the program and to forward the notice of lien to  
            the county recorder.  The new modified PTP program instead  
            directs the Controller to prepare a notice of lien for  
            postponed property taxes and file it with the county recorder.  
             This bill makes technical changes to the relevant provisions  
            of the PTP program to reflect the new requirements of the  
            Controller. 

           8)Lien Release  .  Currently, a lien attached to the property has  
            the priority of a judgment lien and remains in effect until it  
            is released by the Controller, as prescribed.  The  
            Controller's Office argues that it needs the ability to  
            release a lien in the case of foreclosure.  Hence, this bill  
            would provide that a lien may be released by the Controller in  
            the case of the foreclosure or sale of an obligation secured  
            by a lien which is senior in recording priority to the lien of  
            the State.

           9)Replication Payments  .  Existing law provides that when the  
            Controller denies a taxpayer's application for the  
            postponement of property taxes, the taxpayer has a right to  
            appeal the Controller's decision.  If the denial is reversed  
            on appeal, the Controller is required to transfer funds to the  
            county electronically for the amount of the property taxes.   
            The law, however, is silent with respect to the taxpayer's  
            right to receive a refund from the county for the property  
            taxes already paid.  This bill would expressly require the  
            county to refund the overpayment of tax directly to the  
            taxpayer if the Controller sends a payment for taxes due in  
            the same fiscal year for which the taxpayer has paid the tax.   


           10)Conflicting Legislation  .  Provisions of this bill conflict  
            with SB 477 (Levya) and may need amendments to resolve the  
            conflict should both bills continue through the legislative  
            process.

           11)Proposed Technical Amendments  .  The Committee staff proposes  








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            the following technical amendments to SB 801:

          AMENDMENT 1
             
             Amend Section 20602 to update the obsolete references to the  
            Government Code.

            AMENDMENT 2 

            On page 13, line 25, strike out "otherwise" 

            AMENDMENT 3
            On page 13, in line 25, strike out "16100" and insert "16180"

            AMENDMENT 3

            On page 20, line 9, strike out "Except as provided in this  
            section, any" and insert "Any"

            AMENDMENT 4

            On page 21, line 7, after "collector" insert:

            or chartered city which levies and collects its own taxes,

            AMENDMENT 5

            On page 21, line 9, strike out "otherwise"

            AMENDMENT 6

            On page 21, line 10, strike out "16100" and insert "16180"
            
          REGISTERED SUPPORT / OPPOSITION:




          Support








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          Betty T. Yee, California State Controller




          Opposition


          None on file




          Analysis Prepared by:Oksana Jaffe / REV. & TAX. / (916)  
          319-2098