BILL ANALYSIS Ó
SB 909
Page 1
Date of Hearing: June 20, 2016
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Sebastian Ridley-Thomas, Chair
SB
909 (Beall) - As Amended March 29, 2016
Majority vote. Fiscal committee.
SENATE VOTE: 39-0
SUBJECT: Property tax postponement: special needs trust
claimants
SUMMARY: Provides that a beneficiary of a special needs trust
may qualify for the Senior Citizens and Disabled Citizens
Property Tax Postponement (PTP) Program. Specifically, this
bill:
1)Adds, to the list of ownership interests in a residential
dwelling qualifying for the PTP Program, the interest of a
beneficiary of a special needs trust, in which title is held
in trust, as described in Revenue and Taxation Code (R&TC)
Section 62(d).
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2)Imposes a state-mandated local program and provides that no
reimbursement is required because the only costs that may be
incurred by a local agency or school district will be incurred
by creating, eliminating, changing the penalty of, or changing
the definition of a crime, as specified.
EXISTING LAW:
1)Establishes the PTP Program, which allows the State Controller
to loan funds to county tax collectors to pay property taxes
on behalf of individuals over the age of 62 or disabled
persons with less than $39,000 in annual income.
2)Requires the State Controller to secure repayment of any loan
by recording a lien against the claimant's property, which is
satisfied when the home is sold or refinanced.
3)Restricts the PTP Program to a claimant's principal place of
residence, and any land reasonably necessary for the dwelling
to be used as a home, so long as it is owned by the claimant,
the claimant and spouse, the claimant and another individual
eligible for the Program, or members of the claimant's family,
as specified. The claimant must be able to demonstrate an
ownership interest in the property.
4)Defines "owned" in reference to ownership interests in
residential dwellings to include:
a) The interest of a vendee in possession under a land sale
contract, provided that it is recorded;
b) The interest of a holder of a life estate, but not
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remainder or reversionary interests;
c) The interest of a joint tenant or tenant in common in
the residential dwelling;
d) The interest of a tenant in cooperative housing; or,
e) The interest of a residential dwelling in which title is
held in trust, as described in R&TC Section 62(d).
5)Requires, in reference to included ownership interests in
residential dwellings, the State Controller to determine that
the state's interest is adequately protected.
FISCAL EFFECT: According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS:
1)Author's Statement : The author has provided the following
statement in support of this bill:
A special needs trust is designed for beneficiaries who are
disabled, either physically or mentally. Some special
needs trust beneficiaries have financial difficulty in
meeting their property tax obligations and meet the
financial qualifications for the Property Tax Postponement
Program. However, because the trust itself, rather than
the individual, is considered to be the technical owner of
the residence held in trust, special needs trust
beneficiaries are considered ineligible for the program.
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Thus, under current law, some special needs trust
beneficiaries who have financial difficulty meeting their
tax obligations may be forced to move from their homes
because they are not able to defer their tax burden.
SB 909 would clarify that beneficiaries or special needs
trusts who meet all other criteria for participation are
eligible to apply for the property tax postponement
program. This bill will allow low-income, disabled
individuals to stay in their own home regardless of whether
their homes are held in trust.
2)Arguments in Support : Proponents of this bill state the
following:
This bill will clarify the law to allow low-income persons
with disabilities to participate in the Senior Citizens and
Disabled Citizens Property Tax Postponement Law, regardless
of whether their homes are held in special needs trusts.
Preventing these Californians from staying in their homes
simply because their homes are in trusts, as one
interpretation of current law would require, may be the
ultimate unintended consequence of all time.
3)Property Tax Postponement Program : The PTP Program was
originally enacted by a constitutional amendment (California
Constitution, Article XIII, Section 8.5) in 1977, in response
to concerns that senior homeowners on fixed incomes may lose
their homes because of the inability to pay rising property
tax bills. The PTP Program was subsequently amended by voters
in 1984 to extend the program to eligible blind and disabled
persons, regardless of age.
In 2009, the Legislature indefinitely suspended the PTP
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Program [SBx3 8 (Ducheny), Chapter 4, Statutes of 2009],
thereby prohibiting persons from filing new claims and the
State Controller from accepting applications in light of
diminishing home sales prices, which resulted in less loan
funds being paid back to the State Controller, and General
Fund budgetary constraints. The PTP Program was reinstated in
2014 with additional provisions to help control costs (AB 2231
(Gordon), Chapter 703, Statutes of 2014), and the State
Controller is slated to begin accepting new PTP Program
applications later this year.
4)Special Needs Trusts : A special needs trust is a specific
type of trust that can be created by individual beneficiaries,
family members, attorneys, or county public guardians or
conservators in support of a person with a disability, while
simultaneously allowing that person to remain eligible for
public benefits. Many government benefit programs, such as
Medi-Cal and Supplemental Security Income, have asset or
income restrictions that may otherwise disqualify a
beneficiary from receiving services, and assets in a special
needs trust do not count towards those restrictions. A
special needs trust allows the beneficiary to remain eligible
for life-supporting public benefits, while the trustee manages
the beneficiary's assets held for other important matters such
as education. However, there is no clear, comprehensive
definition of a special needs trust in state law.
Current law allows the State Controller to accept PTP Program
applications from ownership interests held in trusts if the
trust is revocable, or if the transferor of assets into the
trust is also its beneficiary. However, special needs trusts
do not always satisfy these criteria. This bill would add the
interest of a beneficiary of a special needs trust to the list
of ownership interests the State Controller is allowed to
accept for the PTP Program, but again references R&TC Section
62(d), which describes revocable trusts or trusts in which the
transferor of assets into the trust is also its beneficiary.
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As such, it is not clear what the practical effect of this
bill may be, as the State Controller already has discretion to
determine PTP Program eligibility for certain special needs
trusts on a case-by-case basis. Nonetheless, if the purpose
of this bill is to clarify that beneficiaries of special needs
trusts who meet all other criteria for PTP Program
participation are eligible program applicants, it may be
preferable to restructure this provision to avoid duplicative
and potentially confusing language, as follows:
"?(4) the interest , including the interest of a beneficiary
of a special needs trust, in the residential dwelling in
which the title is held in trust, as described in
subdivision (d) of Section 62, and (5) the interest of a
beneficiary of a special needs trust, in which title is
held in trust, as described in subdivision (d) of Section
62, provided that the Controller determines that the
state's interest is adequately protected."
5)Double Referral : This bill was double-referred to the
Assembly Committee on Local Government, which passed this bill
on June 15, 2016, on a vote of 9-0. For additional discussion
of local government issues, please refer to the analysis
prepared by the Assembly Committee on Local Government.
REGISTERED SUPPORT / OPPOSITION:
Support
County of Santa Clara (Sponsor)
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California State Association of Public Administrators, Public
Guardians, and Public Conservators
The Arc and United Cerebral Palsy California Collaboration
Opposition
None on file
Analysis Prepared by:Irene Ho / REV. & TAX. / (916)
319-2098