BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 803|
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CONSENT
Bill No: SB 803
Author: Committee on Governance and Finance
Introduced:3/24/15
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 6-0, 4/29/15
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Pavley
NO VOTE RECORDED: Moorlach
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SUBJECT: Property taxation
SOURCE: Board of Equalization
California Association of County Treasurer-Tax
Collectors
DIGEST: This bill makes seven changes to property tax
administration law.
ANALYSIS:
Existing law:
1)Excludes from change of ownership reassessment real property
transferred from parents to children upon timely filing a
claim, but the exemption usually doesn't apply for changes in
legal entities, like corporations or partnerships, except for
transfers in legal entities that own any of the below
properties. In these cases, the pro rata share of the legal
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interest in the project that a parent transfers to a child
isn't reassessed:
a) Exempts from reassessment parent-child transfers in
legal entities for cooperative housing (Revenue and
Taxation Code § 63.1).
b) Allows tenants to purchase mobile home parks (R&T§62.1)
and floating home marinas (R&T §62.5) without reassessment,
and additionally allows any other exclusion to apply.
2)Allows taxpayers who have property taken or purchased by a
public agency to transfer their base-year values to a
replacement property, starting with the first month after the
taxpayer purchases the replacement property. Taxpayers must
request the transfer within four years as part of the
implementing statute, but Board of Equalization (BOE) Rules
require the taxpayer to identify the replacement property as
part of the request for the transfer, and direct the taxpayer
to make a timely filed request for the assessor to grant the
transfer.
3)Provides that all property is taxable unless explicitly
exempted by the Constitution or federal law.
a) Imposes the possessory interest tax on independent,
durable, and exclusive real property interests located on
publicly-owned land.
b) Sets forth a specific methodology for valuing the
possessory interests of tenants in buildings owned by the
California State Teachers' Retirement System (CALSTRS),
valuing each tenant's possessory interest tax by
calculating each tenant's share of the building on a square
footage basis, multiplied that share by the building's full
cash value, and then applying the appropriate rate.
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c) Allows BOE to enact rules, regulations, and other advice
for assessors, including regarding the valuation of
possessory interests.
4)Allows counties to choose between several methodologies for
assessors to value land enrolled in the California Land
Conservation Act, known as the Williamson Act.
a) Under the "percentage of base year value" method,
directs assessors to multiply the factored base year value
of the property by a percentage to determine its assessed
value, with the percentage differing based on the kind of
land: 70% for prime agricultural land, as defined in
Government Code 16142 (a), 80% for prime commercial
rangeland, and 90% for non-prime agricultural land in GC
16142 (b).
b) Defines "prime agricultural land," in Government Code
16142 (a)(1) and "non-prime agricultural land" in 16142
(b)(1).
5)Requires the tax collector to publish a notice, with specified
information regarding the payment of taxes "on or before the
date taxes are payable."
6)Requires persons challenging tax sales in Court to do so
within one year of the date of the execution of the tax
collector's deed.
a) Additionally requires the person challenging the sale to
first petition the board of supervisors to rescind the sale
within one year before going to court, and reset the time
restriction for a challenge to one year after the date the
board rejects the rescission petition (AB 261, Dickinson,
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Chapter 288, Statutes of 2011).
b) Provides that a defense can only be maintained for one
year after the execution date of the deed as part of the
tax sale.
7)Directs assessors value intercounty pipeline rights-of-way
according to a codified assessment valuation methodology.
a) States that a value based on the density classification
of the pipeline on a per-mile basis is rebuttably presumed
to be correct.
b) Provides that any unpaid taxes on intercounty pipeline
rights-of-way are on the secured roll, and thereby subject
to the same penalties and collections provisions for all
real property taxes.
c) Sunsets the intercounty pipeline rights-of-way
methodology on January 1, 2016.
This bill:
1)Adds to the list of legal entity changes eligible for the
parent-child transfer in §63.1 the pro rata ownership interest
in resident-owned floating home marinas and mobile home parks.
2)Requires that the assessor apply a base-year value transfer
resulting from eminent domain on the lien date of the
assessment year in which the taxpayer files the request if the
taxpayer filed the request after the four-year deadline.
a) Precludes cancellations of taxes or refunds for
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taxpayers who do not file the request before the four-year
deadline, which assessors can grant to taxpayers who file
the request before the deadline.
b) Provides that the assessor should adjust the value of
the property for inflation, as well as any changes in
ownership, after applying the transfer.
3)Strikes the assessment methodology to value possessory
interests in CALSTRS, and instead directs assessors to value
these interests in accordance with BOE regulations.
4)Corrects erroneous cross references for the "percentage of
base year value" method for valuing land enrolled in the
California Land Conservation Act.
5)Replaces "before the date taxes are payable" with "November
1st" for purposes of the tax collector publishing a notice
regarding property tax payments.
6)Allows tax collectors to maintain a defense to tax sale for
challenges initiated for one year after the board of
supervisor's rejection of the rescission petition.
7)Extends the methodology to value intercounty pipeline
rights-of-way until January 1, 2021, and provides that unpaid
taxes on the default date plus penalties and costs shall be
transferred to the unsecured roll.
Comments
In 1850, the Legislature first directed county assessors to tax
property; however, assessors in different counties often applied
different tax rates and methods of assessment. The California
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Constitution of 1879 created BOE to equalize rates and
assessment practices among counties, and state law directs BOE
to oversee county assessors. BOE annually reviews property tax
statutes and makes recommendations to the Legislature for
changes to aid property tax administration, or respond to recent
litigation. Additionally, county treasurer-tax collectors, who
administer property tax billing, collection, and property tax
sales, make similar recommendations to improve implementation of
property tax law. SB 803 includes suggestions from both.
Provision #1 adds exclusions allowed by two other parts of the
law into the foundational section on parent-child transfers.
Provision #2 responds to a recent Fourth District Court of
Appeals ruling in Olive Lane Industrial Park, LLC v. County of
San Diego (2014, D063337) in the case of a taxpayer who had
property taken by eminent domain and purchased replacement
property within four years of the date of the taking, but didn't
file the claim until five and a half years after that date. The
Court ruled that the assessor wrongfully denied the exemption
claim because the Constitutional exclusion doesn't contain any
deadlines, the Legislature has allowed taxpayers to obtain
relief when taxpayers file request for other Constitutional
property tax exclusions filed after the deadline, and the
deadline undermines the purpose of the Constitutional exclusion.
Provision #3 responds to a recent Second District Court of
Appeals decision that held unconstitutional the methodology for
valuing possessory interests of tenants in CALSTRS-owned
buildings in CALSTRS v. County of Los Angeles (2013, B225245).
The Court reasoned that the possessory interest tax applies to
the lessee's right to possess the real property for a specified
period, but doesn't account for CALSTRS's reversionary interest,
or its right to possess the property at a future date, thereby
imposing a tax that exceeds the taxpayer's full market value of
the possessory interest. Additionally, the court stated that to
base the tenant's share of the tax based on the building's full
cash value amounted to taxing exempt property owned by a public
agency.
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Provision #4 corrects an erroneous cross-reference.
Provision #5 changes the law to account for counties now posting
notices on the internet, instead of the tax collector, often
without coordinating with tax collectors. Some tax collectors
have interpreted this section, to mean that they can't accept
payments taxpayers remit until the county website administrator
posts the notice.
Provision #6 extends the period of time for tax collectors to
maintain a defense to a tax sale to account for AB 261's change
that requires a petition first be filed with the county board of
supervisors before proceeding to Court.
Provision #7 extends the sunset on the methodology assessors use
to value intercounty pipeline rights-of-way, first enacted in
1996 (AB 1286, Takasugi, Chapter 76, Statutes of 1996), which
reflected an agreement between assessors and intercounty
pipeline right-of-way owners after litigation transferred the
assessment duty from BOE to assessors in 1993 in Southern
Pacific Pipe Lines, Inc. v. State Board of Equalization ( 14
Cal.App.4th 42). Before the case, BOE assessed the pipelines,
necessary operational equipment, land, and rights-of-way, but
the Fourth District Court of Appeals held that assessors must
value the land and rights-of-way because the Constitution only
directs the BOE to assess pipelines. Essentially, assessors
determine value based on the density classification of the
pipeline on a per-mile basis, and that value is rebuttably
presumed to be correct. The Legislature has extended the
methodology twice before, and it's set to expire again on
January 1, 2016. (AB 2612, Brewer, Chapter 206, Statues of 2000,
and SB 1494, Committee on Revenue and Taxation, Chapter 654,
Statutes of 2010).
Additionally, current law provides that any unpaid taxes on
intercounty pipeline rights-of-way are subject to the same
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penalties and collections provisions for all property taxes.
However, rights of way can't be treated like real property for
collection purposes, as the tax collector can neither issue
liens nor sell them at tax sales, so they shouldn't be treated
as such by being on the secured roll. The change would treat
these rights-of-way similar to BOE assessed unitary property and
oil and gas rights.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
SUPPORT: (Verified5/12/15)
Board of Equalization (co-source)
California Association of County Treasurer-Tax Collectors
(co-source)
OPPOSITION: (Verified5/12/15)
None received
ARGUMENTS IN SUPPORT: According to the author, SB 803
consolidates seven technical, noncontroversial changes to
property tax law recommended by the State Board of Equalization
and the California Association of County Treasurer Tax
Collectors to improve property tax administration and respond to
recent litigation. Consolidating several consensus items into a
single bill conserves legislative resources. Senate Rule 23
requires all members of the Committee to sign Committee Bills
prior to introduction, so SB 803 can only contain items with
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universal agreement; should anyone object to a provision in the
measure, it will be removed.
Prepared by: Colin Grinnell / GOV. & F. / (916) 651-4119
5/13/15 16:07:03
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