BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 996  


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          Date of Hearing:  August 3, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          SB 996  
          (Hill) - As Amended June 23, 2016


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          |Policy       |Revenue and Taxation           |Vote:|9 - 0        |
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          Urgency:  No  State Mandated Local Program:  YesReimbursable:   
          No


          SUMMARY:


          This bill increases the total property tax welfare exemption  
          allowed to a qualified nonprofit taxpayer from $20,000 to  
          $100,000 with respect to lien dates occurring on or after  
          January 1, 2017. This bill also allows a cancellation or refund  
          of property tax outstanding or paid in excess of $20,000 between  
          January 1, 2013 and January 1, 2017, to the extent that the  
          amount canceled or refunded does not exceed $100,000.


          FISCAL EFFECT:









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          1)Annual ongoing property tax revenue losses of approximately  
            $240,000, resulting in GF costs of approximately $120,000 as a  
            result of the Proposition 98 guarantee. 


          2)One-time property tax refund or cancellations of about  
            $400,000, resulting in GF costs of approximately $200,000 as a  
            result of the Proposition 98 guarantee.


          COMMENTS:


          1)Purpose. According to the author, SB 996 will provide property  
            tax relief to certain nonprofit organizations that can provide  
            more affordable housing for low-income families.  


          2)The Property Tax Welfare Exemption. Existing law provides a  
            partial property tax welfare exemption to property owned by a  
            nonprofit organization and operated exclusively for rental  
            housing occupied by lower income households. The partial  
            exemption is granted in proportion to the percentage of rental  
            units serving lower income households. For example, if lower  
            income households occupy 95% of a rental property, the welfare  
            exemption is granted in an amount equal to 95% of the value of  
            the property. 


            The amount of exemption also depends on the property's  
            financing. There is no cap on the amount of exemption if the  
            rental property receives government financing. Alternatively,  
            rental properties without government financing may also  
            qualify for the rental exemption, but under more restrictive  
            conditions. The rental property must be solely managed by a  
            nonprofit organization and lower income households must  
            comprise 90% or more of its occupants. For these properties,  
            there is a statewide cap on the total amount of exempt  








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            property from which a nonprofit organization may benefit,  
            limited to the first $20,000 of property tax ($2 million of  
            assessed value), with respect to a single property or multiple  
            properties for any fiscal year.


          3)The impact of SB 996.  SB 996 increases the statewide cap on  
            the total property exemption available to certain nonprofits.  
            This cap was originally intended to preclude "bad actors" from  
            exploiting the welfare exemption by creating shell nonprofit  
            organizations. Currently, there are 26 nonprofit organizations  
            in California that provide affordable rental housing subject  
            to the cap.  These 26 organizations own 76 properties of  
            various types (single-family residences, multifamily  
            residences, and apartment complexes) located across 11  
            counties.  Currently, three of these 26 organizations own an  
            amount rental property which puts them over the cap, and must  
            therefore pay property taxes in excess of the first $20,000  
            otherwise due.  



            The Assembly Revenue and Taxation Committee's analysis of SB  
            996 notes that since the creation of the welfare exemption cap  
            over 15 years ago, few nonprofit organizations that own rental  
            housing have exceeded the cap. This is largely because a  
            majority of affordable housing projects receive government  
            financing and are therefore not subject to the cap. However,  
            as property values continue to rise across California, it is  
            possible that more and more properties may become limited by  
            the cap, especially in areas with high costs of living such as  
            the San Francisco Bay Area.   


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











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