BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |SB 1183 |Hearing |4/27/16 |
| | |Date: | |
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|Author: |Bates |Tax Levy: |Yes |
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|Version: |3/28/16 |Fiscal: |Yes |
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|Consultant|Grinnell |
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Property taxation: exemptions: disabled veterans
Expands to a full exemption the current partial Disabled
Veterans' Property tax exemption; expands eligibility for the
exemption.
Background
The California Constitution provides that all property is
taxable unless explicitly exempted by the Constitution or
federal law. The Constitution limits the maximum amount of any
ad valorem tax on real property at 1% of full cash value, plus
any locally-authorized bonded indebtedness. Assessors
reappraise property whenever it is purchased, newly constructed,
or when ownership changes.
The Constitution allows the Legislature to partially or wholly
exempt from property tax the value of a disabled veteran's
principal place of residence if the veteran has lost one or more
limbs, is totally blind, or is totally disabled, as a result of
a service-connected injury. This is known as the "disabled
veterans' exemption." The Constitution provides that disabled
veteran taxpayers, or unmarried surviving spouses of persons who
die while on active duty, must apply the exemption instead of,
but not in combination with, other real property exemptions.
Unlike the homeowners' exemption, the state does not backfill
SB 1183 (Bates) 3/28/16 Page 2
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property tax revenue losses resulting from taxpayers applying
the exemption. According to the Board of Equalization (BOE),
the number of taxpayers claiming the exemption has increased
from 8,483 to 37,653 between 1990 and 2015, an increase of 344%.
San Diego (5,391), San Bernardino (3,732), and Sacramento
(2,422) are the counties with the most taxpayers claiming the
exemption.
State law implementing the Constitutional exemption doesn't
fully exclude the property value, instead enacting a partial
exemption of $100,000 for disabled veteran taxpayers with
household income of more than $40,000, or $150,000 for income
lower than that amount, with each threshold adjusted for
inflation by the Department of Industrial Relations using the
California Consumer Price Index for all items. The current
inflation adjusted value is $127,410 for disabled veterans with
income of more than $57,258, and $191,266 for those with less
than that amount.
Additionally, statute defines "blind in both eyes" to mean
having a visual acuity of less than 5/200, or concentric
contraction of the visual field to five degrees or less, both of
which have a United States Department of Veterans' Affairs
rating of 100%. The author wants to expand the current partial
exemption measured by income to a full exemption without regard
to income, and expand the definition for blind in both eyes to
allow the exemption for other forms of blindness.
Proposed Law
Senate Bill 1183 broadens the disabled veterans' exemption from
property tax in three ways. The bill:
Enacts a full exemption from property tax for the
principal place of residence qualifying disabled veterans,
Revises the definition for "blind in both eyes" to
delete the current one, and instead use the definition of
"blind person" in Welfare and Institutions Code §19153,
Qualifies as "totally disabled," a veteran who "is so
severely disabled as to be unable to move without the aid
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of an assistive device."
The measure makes technical and conforming changes, and would
take effect for lien dates for the 2017-18 fiscal year.
State Revenue Impact
According to BOE, SB 1183 results in potential annual property
tax revenue losses of $65.9 million.
Comments
1. Purpose of the bill . According to the author, "Existing
property tax exemptions for disabled veterans are well below
California's median home value of $458,500. In veteran-rich
counties, such as Orange, for example, this gap grows even
wider, with the median home cost at $647,000. Often, existing
law only exempts a small portion of veterans' home value,
putting disabled veterans in jeopardy of losing their homes.
California must expand statute to assist those veterans who have
given so much to our state and country. 100% disabled veterans
deserve to be protected from losing their homes because of the
disabilities they have suffered protecting us. Additionally,
military spouses should not be left with a tax burden that they
cannot afford, upon their spouses' deaths."
2. No Income test . Generally, property tax exemptions don't
depend on the taxpayer's income; however, the different disabled
veterans exemption amounts were first enacted by the Legislature
when it allowed a greater exemption ($15,000 at the time), for
disabled veterans with income that qualified him or her for the
Property Tax Postponement program (AB 955, Mangers, 1978). The
Legislature maintained the distinction when it fixed the current
exemption amounts (SB 320, Royce, 1989), and applied the
inflation adjustment (SB 1362, Poochigian, 2000). SB 1183 would
end this distinction by granting a full exemption for all
taxpayers regardless of income. Increasing the disabled
veterans' exemption provides reduces taxes for those who have
sacrificed greatly for the country, and would be easier for
assessors to administer, as they would no longer have to verify
the taxpayer's income. However, SB 1183 would grant a full
exemption to all qualifying taxpayers, thereby providing a
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potential benefit for individuals who have income sufficient to
meet current tax obligations. The Committee may wish to
consider whether the disabled veterans' exemptions should be
full or partial, and whether it should depend on the taxpayer's
income.
3. Expanded definitions . The Constitution allows the
Legislature to implement the disabled veterans' exemption to any
veteran who has lost one or more limbs, is totally blind, or is
totally disabled, as a result of a service-connected injury, or
their surviving, unmarried spouse. SB 1183 incorporates a
broader definition of blindness, and expands eligibility to
include disabled veterans who are unable to move without the aid
of an assistance device. The change in the blindness definition
applies to conditions currently rated by USDVA at 70%
disability, whereas current law applies to conditions rated at
100%. Additionally, because current law already qualifies
disabled veterans who are 100% disabled according to USDVA, it's
unclear who would qualify under the measure's expansion of
eligibility to veterans who are unable to move without the aid
of an assistive device.
4. Related legislation . SB 1183 is identical to AB 1556
(Mathis), which was recently heard by the Assembly Revenue and
Taxation Committee, but referred to its suspense file. SB
1183's change from a partial exemption conditioned on income to
a full exemption is also in SB 1104 (Stone), which is currently
set for the Committee's May 11th hearing.
5. Mandate . The California Constitution requires the state to
reimburse local governments for the costs of new or expanded
state mandated local programs. Because SB 1183 changes how
assessors apply the disabled veterans' exemption, Legislative
Counsel says that it imposes a new state mandate. The measure
provides that the state shall not reimburse local agencies for
property tax revenue losses, instead stating that should the
Commission on State Mandates determine that the bill imposes a
reimbursable mandate, reimbursement must be made pursuant to
existing statutory provisions.
6. Technicals . BOE and Committee Staff recommend the following
technical amendment to reflect the USDVA's responsibility to
rate disabilities:
SB 1183 (Bates) 3/28/16 Page 5
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On page 6, line 4, strike out "the veteran is so
severely;" strike out line 5; on line 6, replace, "device,
or the or the veteran has" with "or;" and at the end of
line 8, strike the period and insert ", or the veteran is
so severely disabled as to be unable to move without the
aid of an assistive device."
7. Incoming ! On April 12th, the Committee on Veteran's Affairs
approved SB 1183 by a vote of 5 to 0. The Committee on
Governance and Finance is hearing the measure as the committee
of second referral.
Support and
Opposition (4/21/16)
Support : Disabled Veterans of America, Cal-Diego Chapter
(Sponsor); American G.I. Forum of California; Paralyzed Veterans
of America, Cal-Diego Chapter; The American Legion - Department
of California; The AMVETS - Department of California; The
California Association of County Veterans Service Officers; The
California State Commanders Veterans Council; The Military
Officers Association of America, California Council of Chapters;
The VFW - Department of California; The Vietnam Veterans of
America - California State Council
Opposition : California Tax Reform Association (unless amended).
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