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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