BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 996|
|Office of Senate Floor Analyses | |
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UNFINISHED BUSINESS
Bill No: SB 996
Author: Hill (D)
Amended: 8/15/16
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 3/30/16
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach,
Pavley
SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/27/16
AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen
SENATE FLOOR: 39-0, 5/31/16
AYES: Allen, Anderson, Bates, Beall, Berryhill, Block,
Cannella, De León, Fuller, Gaines, Galgiani, Glazer, Hall,
Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson,
Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning,
Moorlach, Morrell, Nguyen, Nielsen, Pan, Pavley, Roth, Stone,
Vidak, Wieckowski, Wolk
NO VOTE RECORDED: Runner
ASSEMBLY FLOOR: 79-0, 8/18/16 - See last page for vote
SUBJECT: Property taxation: welfare exemption
SOURCE: Author
DIGEST: This bill increases the amount of the welfare exemption
from property tax for non-publicly financed affordable housing.
Assembly Amendments delete the authority to refund taxes
previously paid based on the bill's increased exemption, and
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make technical and conforming changes.
ANALYSIS:
Existing law:
1)Provides that all property is taxable unless explicitly
exempted by the Constitution or federal law.
2)Allows the Legislature to exempt property used for charitable
purposes, and owned by nonprofit entities organized and
operated for charitable purposes, such as universities,
hospitals, and libraries. The Legislature has enacted this
exemption, commonly known as the "welfare exemption."
3)Allows the welfare exemption for property used exclusively for
rental housing, so long as it meets the general requirements
to receive the welfare exemption, if:
a) The project is publicly financed with tax-exempt
mortgage revenue bonds, general obligation bonds, grants,
or low-income housing tax credits; the property is
enforceably restricted for low-income housing, rents do not
exceed those prescribed in deed restrictions, and the
property owner certifies that funds that would have been
used to pay property taxes are used to maintain the
affordability of the units or reduce rents.
b) In the case of non-publicly financed affordable housing,
90% of units are affordable, determined by reference to the
Health and Safety Code, and the property is managed solely
by a non-profit organization. However, in this case, the
taxpayer is exempt only up to $20,000 in tax for all
properties the taxpayer owns in the state.
This bill:
1)Increases the exemption amount for non-publicly financed
affordable housing to $10 million ($100,000 in tax), and
deletes the former limit of $20,000 in tax, effective for lien
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dates on or after January 1, 2017.
2)Allows taxpayers to file claims to cancel current taxes,
imposed between January 1, 2013, and January 1, 2017, for
non-publicly financed affordable housing that met the current
requirements for the welfare exemption, but who paid tax based
on a value that exceeds the current cap, but under the
measure's revised limit. This bill does not allow
cancellations of taxes that exceed the measure's increased cap
of $10 million in value.
3)Prohibits escape assessments on property for which the above
cancellation and refund authority applies.
4)Requires claims for welfare exemptions for non-publicly
financed affordable housing to include an affidavit from the
property owner which includes a list of units occupied by
lower income households for which the exemption is claimed,
and nonpersonalized information regarding the actual household
income of the occupant, the maximum rent that may be charged
to the occupant, and the actual rent charged to the occupant.
This bill provides that the affidavit is confidential and not
subject to public disclosure.
5)Makes legislative findings and declarations:
a) Expressing the statewide interest necessary for the
bill's retroactive effect.
b) Stating that the interest of protecting the privacy of
an individual's personal and financial information
justifies the limitation on the public's right to know
under Section Three of Article I of the California
Constitution.
c) Provides that state reimbursement of local agency costs
or revenue losses is not required.
Background
Prior to 1999, rental housing owners could claim a welfare
exemption from property tax for low-income housing if 20% of the
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property's residents were low-income. After the Los Angeles
Housing Project investigated some of the city's worst housing
projects, they discovered that some substandard housing projects
were exempt from property tax under that section of law.
Responding to the investigation, the Legislature enacted AB 1559
(Wiggins, Chapter 527, Statues of 1999), which repealed the
occupancy test, instead requiring owners to receive public
financing in the forms listed above for the project to claim the
welfare exemption, in addition to the above requirements.
However, AB 1559 revoked the exemption for many worthy
properties that weren't publicly financed, so the Legislature
subsequently enacted AB 659 (Wiggins, Chapter 601, Statutes of
2000), which further refined the law to:
1)Reenact the occupancy threshold, but increased to 90%,
2)Cap the exemption amount to $20,000 in tax for all properties
the taxpayer owns in the state, and
3)Require the property be managed solely by a non-profit
organization, specifically excluding limited partnerships, to
be eligible for the exemption.
Since 2000, the value of housing has increased, compelling some
non-profits to pay taxes on amounts that exceed the $20,000 cap,
and discouraging other groups from acquiring rental housing in
the hopes of preserving existing affordable units in their
areas. After the Long Beach Affordable Housing Coalition
acquired housing constructed as mitigation when the Century
Freeway (I-105) in Los Angeles was built, the Legislature
deleted the cap for those specific units to ensure they could
claim the welfare exemption (SB 1284, Lowenthal, Chapter 524,
Statutes of 2008).
BOE monitors the statewide cap, as it receives annual welfare
exemption filings filed with assessors. Based on this data, the
1999/2000 legislative reforms were successful: BOE reports that
only 26 organizations in the state own housing subject to the
limit, of which, only three exceed the cap, with five more close
to it. However, the cap hinders nonprofit organizations that
own or want to purchase affordable housing in their communities,
and can be especially burdensome for statewide organizations
because the cap applies to all of its property in California.
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Additionally, no other organizations claiming the welfare
exemption are subject to a similar cap, such as hospitals,
churches, and universities.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
According to the Assembly Appropriations Committee, SB 996's
fiscal effect is 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, and
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.
SUPPORT: (Verified8/18/16)
ARC and United Cerebral Palsy
County of San Mateo,
Ministry Services of the Daughters of Charity of St. Vincent De
Paul
Saint Francis Center
OPPOSITION: (Verified8/18/16)
None received
ARGUMENTS IN SUPPORT: According to the author, "California
has a serious shortage of affordable housing. SB 996 provides
the necessary property tax relief to certain nonprofit
organizations so that these tax-exempt organizations can
continue to provide more affordable housing for low income
people and families."
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ASSEMBLY FLOOR: 79-0, 8/18/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,
Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley,
Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth
Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto,
Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper,
Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine,
Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty,
Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell,
Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas,
Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner,
Waldron, Weber, Wilk, Williams, Wood, Rendon
NO VOTE RECORDED: Roger Hernández
Prepared by:Colin Grinnell / GOV. & F. / (916) 651-4119
8/19/16 19:21:50
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