BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 1183 (Bates) - Property taxation: exemptions: disabled
veterans
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|Version: May 10, 2016 |Policy Vote: V.A. 5 - 0, GOV. & |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: May 16, 2016 |Consultant: Robert Ingenito |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 1183 would (1) exempt from property tax the home of
any person eligible for the disabled veterans' exemption, with a
$1 million cap in assessed value that would be adjusted annually
for inflation, and (2) expand eligibility for the exemption.
Fiscal
Impact: The Board of Equalization (BOE) indicates that the bill
would result in annual property tax revenue losses of $66
million. Reductions in local property tax revenues, in turn,
increase General Fund Proposition 98 spending by up to roughly
50 percent (the exact amount depends on the specific amount of
SB 1183 (Bates) Page 1 of
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the annual Proposition 98 guarantee, which in turns depends upon
a variety of economic, demographic and budgetary factors).
Additionally, the bill could result in unknown, but likely
minor, costs to reimburse local governments related to changes
in property tax administration.
Background: Under the California Constitution, all property is taxable
unless explicitly exempted. The Constitution limits the maximum
amount of any ad valorem tax on real property at 1 percent 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 permits 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 for the exemption instead
of, but not in combination with, other real property exemptions.
BOE indicates that the number of taxpayers claiming the disabled
veterans' exemption has increased by 344 percent between 1990
and 2015. Unlike the homeowners' property tax exemption, the
State does not backfill local property tax revenue losses
resulting from taxpayers applying the disabled veterans'
exemption.
State law implementing the exemption doesn't fully exclude
property value; instead, it enacts 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 (as measured
by the California Consumer Price Index). The current inflation
adjusted value (for 2016-17) is $127,510 for disabled veterans
with income of more than $57,258, and $191,266 for those with
income less than that amount.
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Additionally, current law 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 percent.
Proposed Law:
This bill would broaden the disabled veterans' exemption from
property tax in three ways. Specifically, it would (1) increase
the exemption amount for the home of any person qualified to
receive the disabled veterans' exemption to up to $1 million
adjusted annually for inflation, (2) revise 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, and (3) add an additional "totally disabled"
condition which is "the veteran is so severely disabled as to be
unable to move without the aid of an assistive device." The bill
would take effect for lien dates for the 2017-18 fiscal year.
Related
Legislation: AB 1556 (Mathis, 2016) is similar to this bill. It
is currently on the suspense file in the Assembly Revenue and
Taxation Committee.
Staff
Comments: To develop the revenue estimate, BOE used 2015-16
data (the most recent period for which all necessary information
is available). Specifically, BOE staff estimated the number of
disabled veteran-owned homes currently receiving the exemption
to be 37,653: 33,196 at the basic level and 4,457 at the lower
income level. Based on a survey of several counties, BOE
estimates that this bill would not impact 21 percent of homes
receiving the basic exemption (6,971 homes), or 24 percent of
homes receiving the lower income exemption (1,070 homes). These
homes are already fully exempt because they have an assessed
value below the requisite levels in existing law. Thus, BOE
estimates that the bill would exempt 29,612 homes: 26,225
currently receiving the basic exemption, and 3,387 homes
receiving the lower income exemption.
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Using the average 2015-16 assessed value of $356,370, and the
basic one percent property tax rate, BOE calculates that the
bill would result in an annual property tax reduction of $66
million.
The BOE estimate of annual property tax revenue loss is
understated. Due to data limitations, the estimate is based on
the existing property tax law requirement of either a 100
percent disability compensation rating for unemployability or a
100 percent disability rating. The BOE revenue estimate does not
account for newly eligible claimants under the proposed
blindness definition or mobility definition.
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