BILL ANALYSIS Ó
SB 1304
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Date of Hearing: June 20, 2016
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Sebastian Ridley-Thomas, Chair
SB
1304 (Huff) - As Amended June 8, 2016
Urgency. 2/3 vote. Non-fiscal.
SENATE VOTE: 36-0
SUBJECT: Property taxation: disaster relief: Porter Ranch
methane gas leak
SUMMARY: Revises the eligibility criteria for reassessment of
property, which was damaged or destroyed by a major misfortune
or calamity, and thereby retroactively authorizes property tax
relief to property owners impacted by the Porter Ranch
neighborhood methane gas leak. Specifically, this bill:
1)Authorizes a county board of supervisors to provide for
reassessment of property destroyed or damaged by a major
misfortune or calamity in an area or region subsequently
proclaimed by the Governor to be in a state of emergency, in
addition to a state of disaster.
2)Expands the definition of "damage" to include a diminution in
the value of property as a result of environmental
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contamination to the property caused by a major misfortune or
calamity.
3)Specifies that this bill's provisions apply retroactively to
the County of Los Angeles with respect to property located in
the Porter Ranch neighborhood in the City of Los Angeles that
was affected by the methane gas leak in that area in 2015 and
2016.
4)States that the application for reassessment, in the case of
the Porter Ranch properties, may be filed within 12 months of
the enactment of this bill or within the time specified in the
county ordinance, whichever is later.
5)Declares that a special law is necessary and that a general
law cannot be made applicable within the meaning of Section 16
of Article IV of the California Constitution because of the
unique circumstances related to the methane gas leak that
occurred in the Porter Ranch neighborhood of the City of Los
Angeles in 2015 and 2016.
6)Makes technical, non-substantive changes.
7)Takes effect immediately as an urgency statute necessary for
the immediate preservation of the public peach, health or
safety within the meaning of Article IV of the California
Constitution.
EXISTING LAW:
1)Allows a county board of supervisors, by ordinance, to provide
property tax relief to property owners following a "disaster"
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if the property owner's property is damaged or destroyed, and
the property owner is not at fault. (Article XIII, Section 15
of the California Constitution; Revenue and Taxation Code
(R&TC) Section 170).
2)Provides that, in order to be eligible for reassessment, the
damage or destruction to the property shall have been caused
by any of the following:
a) A major misfortune or calamity, in an area or region
subsequently proclaimed by the Governor to be in a state of
disaster. Defines "damage" to include a diminution in the
value of property as a result of restricted access to the
property where the restricted access was caused by the
major misfortune or calamity;
b) A misfortune or calamity; and,
c) A misfortune or calamity that, with respect to a
possessory interest in land owned by the state or federal
government, has caused the permit or other right to enter
upon the land to be suspended or restricted.
3)Allows the application of reassessment to be filed within the
time specified in the ordinance or within 12 months of the
misfortune or calamity, whichever is later, as specified.
4)Authorizes the Governor to proclaim a state of emergency under
specified circumstances, as defined:
a) "State of war emergency" is the condition which exists
immediately, with or without a proclamation thereof by the
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governor, whenever this state or nation is attacked by an
enemy of the United States, or upon receipt by the state of
a warning from the federal government indicating that such
an enemy attack is probable or imminent.
b) "State of emergency" is the duly proclaimed existence of
conditions of disaster or of extreme peril to the safety of
persons and property within the state.
c) "Local emergency" is the duly proclaimed existence of
conditions of disaster or of extreme peril to the safety of
persons and property within the territorial limits of a
county, city and county, or city.
FISCAL EFFECT: According to the State Board of Equalization
staff, the fiscal impact of this bill is insignificant.
COMMENTS:
1)Author's Statement . The author has provided the following
statement in support of this bill:
"Residents of the Porter Ranch in the City of Los Angeles had
been driven from their homes and neighborhood due to harmful
gas that was released into the air from neighboring natural
gas wells in Aliso Canyon in October of 2015. After being
displaced for months, residents have struggled to manage the
lasting impacts of the damage to both their health and
property. This bill is an important step of financial
assistance to residents of Porter Ranch during this time of
healing and repairing."
2)Arguments in Support . The proponents state that this bill
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would provide much-needed property tax relief to those
affected by a disaster and would allow county assessors across
the State much flexibility to conduct value reviews on
properties located in areas declared by the Governor to be
under "state of emergency." The proponents explain that
current law excludes areas that "are merely considered to be
'in a state of emergency,' even though existing law allows
county assessors to re-value property in areas where a "a
misfortune or calamity has occurred and is subsequently
proclaimed by the Governor to be in a 'state of disaster.' "
They argue that this bill "will provide county assessors
broader flexibility to respond to the needs of the public when
facing unforeseen events and undefined disasters."
3)Disaster Relief: Background . Existing law provides broad
property tax relief to disaster victims, ranging from a
reassessment of property to an authorization to rebuild or
repair damaged property without incurring any increase in
property tax liability. For example, the county assessor may
reassess property that was damaged or destroyed in a disaster
to recognize the diminution in the property's market value,
provided the county in which the damaged property is located
has adopted an ordinance authorizing such reassessment and the
property owner is not at fault. As pointed out in the State
Board of Equalization (BOE) analysis, the disaster relief
applies to both a "major" event impacting a widespread area or
region resulting in a Governor's proclamation, such as a
wildfire, and a site-specific event, such as a single-home
fire. In the case of a major event, property tax law uses the
phrase "an area or region subsequently proclaimed by the
Governor to be in a state of disaster."
State law sets forth a very specific process for taxpayers to
follow. The property value loss must be at least $10,000 and
the taxpayer must file a written request with the assessor
before the date specified in the ordinance or within 12 months
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of the major misfortune or calamity, whichever is later. If
relief is granted, the assessor will reduce the property's
assessed value in proportion to the property's market value
loss immediately after the event and will send a notice to the
taxpayer. In turn, the county must refund any previously
overpaid taxes. The reduced assessment will remain in place
until the taxpayer restores, repairs, or reconstructs the
property.
4)What Does this Bill Do ? This bill would expand eligibility
for disaster reassessment. First, this bill would revise the
circumstances under which property would qualify for the
reassessment by specifying that a "state of emergency" is a
qualifying event. Currently, the relevant provisions of the
statute state that property is eligible for reassessment if
the damage or destruction to the property was caused by a
major misfortune or calamity ("a disaster") in an area or
region subsequently proclaimed by the Governor to be in a
"state of disaster." As aptly noted in the BOE analysis, "the
governor does not proclaim a 'state of disaster;' the governor
proclaims a 'state of emergency' " (as authorized by the
Government Code Sections 8625 and 8558). The inconsistent
terminology causes confusion. This bill would clarify
existing law to state that an area or region must be
proclaimed by the Governor to be in a "state of emergency or
disaster." Thus, whenever the Governor proclaims a state of
emergency or disaster, the county board of supervisors may
allow taxpayers, by ordinance, to apply for reassessment
property.
Furthermore, this bill would revise the definition of "damage"
to include market value loss caused by environmental
contamination of the property due to a major misfortunate or
calamity that has resulted in a Governor's state of emergency
proclamation. Finally, the revised definition of "damage"
would apply retroactively to properties located in the Porter
Ranch neighborhood of the City and County of Los Angeles
affected in 2015 and 2016 by the methane gas leak.
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5)The Porter Ranch Gas Leak . On October 23, 2015, a massive
natural gas leak was discovered in the Aliso Canyon Natural
Gas Storage Facility in Los Angeles County, known today as the
Aliso Canyon or Porter Ranch gas leak. The leak sickened and
displaced residents, and may be one of the most harmful
environmental events in the country's history according to
news reports. The gas leak spewed an estimated 107,000 tons
of methane over 16 weeks. The estimated cost of a massive gas
well blowout that lasted nearly four months and uprooted 8,000
Los Angeles families has more than doubled to $665 million
according to Sempra Energy. Currently, approximately 54% of
relocated residents have returned and more are returning each
week. However, according to the author's office, some 3,700
households remain in short- or long-term housing, many because
of fears of returning until they are assured their homes are
clean and safe.
On January 6, 2016, the Governor issued a proclamation declaring
the situation a "state of emergency." The proclamation,
however, did not declare the situation a "disaster," as
required by existing law in order for the board of supervisors
to provide for reassessment of damaged properties.
Consequently, the Los Angeles County Board of Supervisors
could not enact an ordinance directing the assessor to revalue
properties to reflect the gas leak's impact on property
values. Furthermore, since the gas leak did not cause
physical damage to property, it is unclear whether the Porter
Ranch properties were "damaged" within the existing definition
of "damage."
6)Retroactivity . This bill would retroactively apply to
properties damaged by the Porter Ranch gas leak. The affected
property owners would be eligible to file reassessment claims
within 12 months of this bill's enactment. As such, residents
affected by the gas leak can have their property values (and,
therefore, the taxes due) reduced to reflect the restricted
access and environmental contamination the gas leak caused.
Generally, the Legislature does not apply changes in tax law
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retroactively since it would create uncertainty for both
taxpayers and tax enforcement agencies. However, taxpayers
can usually obtain refunds when they are eligible for an
exemption or transfer and did not claim it on time; the
Legislature has enacted bills in the past that change tax law
retroactively.
7)BOE Technical Amendments . This bill expressly provides that
the term "damage" includes market value loss related to the
property's environmental contamination caused by a misfortune
or calamity. As noted by the BOE staff in its analysis of
this bill, this provision is not limited in scope to the
recent Porter Ranch gas leak. The original language of R&TC
Section 170 was based on a "market" value system, but under
existing law the property's assessed value is not based on a
current market value. BOE staff also notes that it may take
decades before contaminated property is "restored" and
proposes certain technical amendments to clarify these issues
relating to the revised definition of "damage."
REGISTERED SUPPORT / OPPOSITION:
Support
California Apartment Association
California Assessors' Association
Jeffrey Prang, Los Angeles County Assessor
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Member G. Runner, State Board of Equalization
Opposition
None on file
Analysis Prepared by:Oksana Jaffe / REV. & TAX. / (916)
319-2098