Senate Bill No. 1104

Introduced by Senator Stone

February 17, 2016

An act to amend Sections 51 and 205.5 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

SB 1104, as introduced, Stone. Property tax: senior and disabled veterans.

(1) The California Constitution generally limits ad valorem taxes on real property to 1% of the full cash value, as defined, of that property, and provides that the full cash value base may be adjusted each year by the inflationary rate not to exceed 2% for any given year.

Existing property tax law implementing this constitutional authority provides that the taxable value of real property is the lesser of its base year value compounded annually by an inflation factor not to exceed 2%, as provided, or its full cash value.

This bill would provide that the inflation factor shall not apply to the principal place of residence of a veteran, as defined, who is 65 years of age or older and honorably discharged from military service for any assessment year commencing on or after either January 1, 2017, or the veteran’s 65th birthday, whichever occurs later.

By changing the manner in which local tax officials calculate the taxable value of real property owned by senior veterans, this bill would impose a state-mandated local program.

(2) Existing property tax law provides, pursuant to the authorization of the California Constitution, a disabled veterans’ property tax exemption for the principal place of residence of a veteran or a veteran’s spouse, including an unmarried surviving spouse, if the veteran, because of injury incurred in military service, is blind in both eyes, has lost the use of 2 or more limbs, or is totally disabled, as those terms are defined, or if the veteran has, as a result of a service-connected injury or disease, died while on active duty in military service. Existing law exempts that part of the full value of the residence that does not exceed $100,000, or $150,000, if the veteran’s household income does not exceed $40,000, adjusted for inflation, as specified.

This bill, commencing with the lien date for the 2017-18 fiscal year and for each fiscal year thereafter, would instead exempt the full value of the principal place of residence of a veteran or veteran’s spouse. The bill would also make technical and conforming changes to the disabled veterans’ property tax exemption.

By changing the manner in which local tax officials administer the disabled veterans’ property tax exemption, this bill would impose a state-mandated local program.

(3) Section 2229 of the Revenue and Taxation Code requires the Legislature to reimburse local agencies annually for certain property tax revenues lost as a result of any exemption or classification of property for purposes of ad valorem property taxation.

This bill would provide that, notwithstanding Section 2229 of the Revenue and Taxation Code, no appropriation is made and the state shall not reimburse local agencies for property tax revenues lost by them pursuant to the bill.

(4) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

(5) This bill would take effect immediately as a tax levy.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

SECTION 1.  

Section 51 of the Revenue and Taxation Code is
amended to read:

51.  

(a) For purposes of subdivision (b) of Section 2 of Article
XIII A of the California Constitution, for each lien date after the
lien date in which the base year value is determined pursuant to
Section 110.1, the taxable value of real property shall, except as
otherwise provided in subdivision (b) or (c), be the lesser of:

(1) Its base year value, compounded annually since the base
year by an inflation factor, which shall be determined as follows:

(A) For any assessment year commencing prior to January 1,
1985, the inflation factor shall be the percentage change in the cost
of living, as defined in Section 2212.

(B) For any assessment year commencing after January 1, 1985,
and prior to January 1, 1998, the inflation factor shall be the
percentage change, rounded to the nearest one-thousandth of 1
percent, from December of the prior fiscal year to December of
the current fiscal year in the California Consumer Price Index for
all items, as determined by the California Department of Industrial
Relations.

(C) For any assessment year commencing on or after January
1, 1998, the inflation factor shall be the percentage change, rounded
to the nearest one-thousandth of 1 percent, from October of the
prior fiscal year to October of the current fiscal year in the
California Consumer Price Index for all items, as determined by
the California Department of Industrial Relations.

(D)  begin delete In no event shall the end delete begin insert The end insert percentage increase for begin delete any end delete begin insert an end insert
assessment year determined pursuant to subparagraph (A), (B), or
(C) begin insert shall not end insert exceed 2 percent of the prior year’s value.

begin insert

(E) Notwithstanding any other law, the percentage increase for
an assessment year determined pursuant to subparagraph (A),
(B), or (C) shall not apply to the principal place of residence of a
veteran who is 65 years of age or older and was honorably
discharged from military service for any assessment year
commencing on or after either January 1, 2017, or the veteran’s
65th birthday, whichever occurs later. For the purpose of this
subparagraph, “veteran” means a person who meets the criteria
specified in subdivision (o) of Section 3 of Article XIII of the
California Constitution, except for the limitation on the value of
property owned by the veteran or the veteran’s spouse.

end insert

(2) Its full cash value, as defined in Section 110, as of the lien
date, taking into account reductions in value due to damage,
destruction, depreciation, obsolescence, removal of property, or
other factors causing a decline in value.

(b) If the real property was damaged or destroyed by disaster,
misfortune, or calamity and the board of supervisors of the county
in which the real property is located has not adopted an ordinance
pursuant to Section 170, or any portion of the real property has
been removed by voluntary action by the taxpayer, the taxable
value of the property shall be the sum of the following:

(1) The lesser of its base year value of land determined under
paragraph (1) of subdivision (a) or full cash value of land
determined pursuant to paragraph (2) of subdivision (a).

(2) The lesser of its base year value of improvements determined
pursuant to paragraph (1) of subdivision (a) or the full cash value
of improvements determined pursuant to paragraph (2) of
subdivision (a).

In applying this subdivision, the base year value of the subject
real property does not include that portion of the previous base
year value of that property that was attributable to any portion of
the property that has been destroyed or removed. The sum
determined under this subdivision shall then become the base year
value of the real property until that property is restored, repaired,
or reconstructed or other provisions of law require establishment
of a new base year value.

(c) If the real property was damaged or destroyed by disaster,
misfortune or calamity and the board of supervisors in the county
in which the real property is located has adopted an ordinance
pursuant to Section 170, the taxable value of the real property shall
be its assessed value as computed pursuant to Section 170.

(d) For purposes of this section, “real property” means that
appraisal unit that persons in the marketplace commonly buy and
sell as a unit, or that is normally valued separately.

(e) Nothing in this section shall be construed to require the
assessor to make an annual reappraisal of all assessable property.
However, for each lien date after the first lien date for which the
taxable value of property is reduced pursuant to paragraph (2) of
subdivision (a), the value of that property shall be annually
reappraised at its full cash value as defined in Section 110 until
that value exceeds the value determined pursuant to paragraph (1)
of subdivision (a). In no event shall the assessor condition the
implementation of the preceding sentence in any year upon the
filing of an assessment appeal.

SEC. 2.  

Section 205.5 of the Revenue and Taxation Code is
amended to read:

205.5.  

(a) Property that constitutes the principal place of
residence of a veteran, that is owned by the veteran, the veteran’s
spouse, or the veteran and the veteran’s spouse jointly, is exempted
from taxation begin delete on that part of the full value of the residence that
does not exceed one hundred thousand dollars ($100,000), as
adjusted for the relevant assessment year as provided in subdivision
(h), end delete if the veteran is blind in both eyes, has lost the use of two or
more limbs, or if the veteran is totally disabled as a result of injury
or disease incurred in military service. begin delete The one hundred thousand
dollar ($100,000) exemption shall be one hundred fifty thousand
dollars ($150,000), as adjusted for the relevant assessment year as
provided in subdivision (h), in the case of an eligible veteran whose
household income does not exceed the amount of forty thousand
dollars ($40,000), as adjusted for the relevant assessment year as
provided in subdivision (g). end delete

(b) (1) For purposes of this section, “veteran” means either of
the following:

(A) A veteran as specified in subdivision (o) of Section 3 of
Article XIII of the California begin delete Constitution without regard to any end delete
begin insert Constitution, except for the end insert limitation begin delete contained therein end delete on the
value of property owned by the veteran or the veteran’s spouse.

(B)  begin delete Any end delete begin insert A end insert person who would qualify as a veteran pursuant to
paragraph (1) except that he or she has, as a result of a
service-connected injury or disease, begin insert as determined by the United
States Department of Veterans Affairs, end insert died while on active duty
in military service. begin delete The United States Department of Veterans
Affairs shall determine whether an injury or disease is service
connected. end delete

(2) For purposes of this section, property is deemed to be the
principal place of residence of a veteran, disabled as described in
subdivision (a), who is confined to a hospital or other care facility,
if that property would be that veteran’s principal place of residence
were it not for his or her confinement to a hospital or other care
facility, provided that the residence is not rented or leased to a
third party. begin delete A end delete begin insert For the purposes of this paragraph, a end insert family member
that resides at the residence is not begin delete considered to be end delete a third party.

(c) (1) Property that is owned by, and that constitutes the
principal place of residence of, the unmarried surviving spouse of
a deceased veteran is exempt from taxation begin delete on that part of the full
value of the residence that does not exceed one hundred thousand
dollars ($100,000), as adjusted for the relevant assessment year as
provided in subdivision (h), in the case of a end delete begin insert if the deceased end insert veteran
begin delete who end delete was blind in both eyes, had lost the use of two or more limbs,
or was totally begin delete disabled end delete begin insert disabled, end insert provided that either of the
following conditions is met:

(A) The deceased veteran during his or her lifetime qualified
begin delete in all respects end delete for the exemption begin insert pursuant to subdivision (a), end insert or
would have qualified for the exemption under the laws effective
on January 1, 1977, except that the veteran died prior to January
1, 1977.

(B) The veteran died from a disease that was begin delete service connected end delete
begin insert service-connected, end insert as determined by the United States Department
of Veterans Affairs.

begin delete

The one hundred thousand dollar ($100,000) exemption shall
be one hundred fifty thousand dollars ($150,000), as adjusted for
the relevant assessment year as provided in subdivision (h), in the
case of an eligible unmarried surviving spouse whose household
income does not exceed the amount of forty thousand dollars
($40,000), as adjusted for the relevant assessment year as provided
in subdivision (g).

end delete

(2)  begin delete Commencing with the 1994-95 fiscal year, property end delete begin insert Property end insert
that is owned by, and that constitutes the principal place of
residence of, the unmarried surviving spouse of a veteran begin delete as end delete
described in subparagraph (B) of paragraph (1) of subdivision (b)
is exempt from begin delete taxation on that part of the full value of the
residence that does not exceed one hundred thousand dollars
($100,000), as adjusted for the relevant assessment year as provided
in subdivision (h). The one hundred thousand dollar ($100,000)
exemption shall be one hundred fifty thousand dollars ($150,000),
as adjusted for the relevant assessment year as provided in
subdivision (h), in the case of an eligible unmarried surviving
spouse whose household income does not exceed the amount of
forty thousand dollars ($40,000), as adjusted for the relevant
assessment year as provided in subdivision (g). end delete begin insert taxation. end insert

(3)  begin delete Beginning with the 2012-13 fiscal year and for each fiscal
year thereafter, property end delete begin insert Property end insert is deemed to be the principal
place of residence of the unmarried surviving spouse of a deceased
veteran, who is confined to a hospital or other care facility, if that
property would be the unmarried surviving spouse’s principal place
of residence were it not for his or her confinement to a hospital or
other care facility, provided that the residence is not rented or
leased to a third party. For purposes of this paragraph, a family
member who resides at the residence is not begin delete considered to be end delete a third
party.

(d) As used in this section, “property that is owned by a veteran”
or “property that is owned by the veteran’s unmarried surviving
spouse” includes all of the following:

(1) Property owned by the veteran with the veteran’s spouse as
a joint tenancy, tenancy in common, or as community property.

(2) Property owned by the veteran or the veteran’s spouse as
separate property.

(3) Property owned with one or more other persons to the extent
of the interest owned by the veteran, the veteran’s spouse, or both
the veteran and the veteran’s spouse.

(4) Property owned by the veteran’s unmarried surviving spouse
with one or more other persons to the extent of the interest owned
by the veteran’s unmarried surviving spouse.

(5)  begin delete So much of the end delete begin insert That portion of the end insert property of a corporation
begin delete as end delete begin insert that end insert constitutes the principal place of residence of a veteran or
a veteran’s unmarried surviving spouse when the veteran, begin delete or end delete the
veteran’s spouse, or the veteran’s unmarried surviving spouse is
a shareholder of the corporation and the rights of shareholding
entitle one to the possession of property, legal title to which is
owned by the corporation. The exemption provided by this
paragraph shall be shown on the local roll and shall reduce the full
value of the corporate property. Notwithstanding any begin delete provision of end delete
law or articles of incorporation or bylaws of a corporation described
in this paragraph, any reduction of property taxes paid by the
corporation shall reflect an equal reduction in any charges by the
corporation to the person who, by reason of qualifying for the
exemption, made possible the reduction for the corporation.

(e) For purposes of this section, begin delete being end delete begin insert the following definitions
shall apply: end insert

begin insert (1) end insert begin insert   end insert begin insert “Being end insert begin insert ” end insert blind in both begin delete eyes end delete begin insert eyes end insert begin insert ” end insert means having a visual
acuity of 5/200 or less, or concentric contraction of the visual field
to 5 degrees or begin delete less; losing end delete begin insert less. end insert

begin insert (2) end insert begin insert   end insert begin insert “Lost end insert the use of begin delete a limb end delete begin insert two or more limbs end insert begin insert ” end insert means that the
limb has been amputated or its use has been lost by reason of
ankylosis, progressive muscular dystrophies, or begin delete paralysis; and
being totally disabled end delete begin insert paralysis. end insert

begin insert (3) end insert begin insert   end insert begin insert “Totally disabled end insert begin insert ” end insert means that the United States Department
of Veterans Affairs or the military service from which the veteran
was discharged has rated the disability at 100 percent or has rated
the disability compensation at 100 percent by reason of being
unable to secure or follow a substantially gainful occupation.

(f) An exemption granted to a claimant begin delete in accordance with the
provisions of end delete begin insert pursuant to end insert this section shall be in lieu of the
veteran’s exemption provided by subdivisions (o), (p), (q), and (r)
of Section 3 of Article XIII of the California Constitution and any
other real property tax exemption to which the claimant may be
entitled. No other real property tax exemption may be granted to
any other person with respect to the same residence for which an
exemption has been granted begin delete under the provisions of end delete begin insert pursuant to end insert
this section; provided, that if two or more veterans qualified
pursuant to this section coown a property in which they reside,
each is entitled to the exemption to the extent of his or her interest.

begin delete

(g) Commencing on January 1, 2002, and for each assessment
year thereafter, the household income limit shall be compounded
annually by an inflation factor that is the annual percentage change,
measured from February to February of the two previous
assessment years, rounded to the nearest one-thousandth of 1
percent, in the California Consumer Price Index for all items, as
determined by the California Department of Industrial Relations.

end delete begin delete

(h) Commencing on January 1, 2006, and for each assessment
year thereafter, the exemption amounts set forth in subdivisions
(a) and (c) shall be compounded annually by an inflation factor
that is the annual percentage change, measured from February to
February of the two previous assessment years, rounded to the
nearest one-thousandth of 1 percent, in the California Consumer
Price Index for all items, as determined by the California
Department of Industrial Relations.

end delete begin insert

(g) The amendments made to this section by the act adding this
subdivision apply for property tax lien dates for the 2017-18 fiscal
year and for each fiscal year thereafter.

end insert

SEC. 3.  

Notwithstanding Section 2229 of the Revenue and
Taxation Code, no appropriation is made by this act and the state
shall not reimburse any local agency for any property tax revenues
lost by it pursuant to this act.

SEC. 4.  

If the Commission on State Mandates determines that
this act contains costs mandated by the state, reimbursement to
local agencies and school districts for those costs shall be made
pursuant to Part 7 (commencing with Section 17500) of Division
4 of Title 2 of the Government Code.

SEC. 5.  

This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.

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CORRECTIONS:

Text--Page 3.

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