BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |SB 1458 |Hearing |4/27/16 |
| | |Date: | |
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|Author: |Bates |Tax Levy: |Yes |
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|Version: |4/6/16 |Fiscal: |Yes |
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|Consultant|Grinnell |
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Property taxation: exemptions: disabled veterans
Expands eligibility for the disabled veteran's exemption from
property tax to other than dishonorable discharges, so long as
the veteran is eligible for federal benefits.
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
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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 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.
Current law refers to the Constitutional definition of "veteran"
to determine eligibility for the exemption, which includes a
person who is serving in the United States Army, Navy, Air
Force, Marines, Coast Guard, or Revenue Marine (Revenue Cutter)
Service, or served in one of the listed services and was
discharged under honorable conditions. Veterans who meet this
definition, but died while on active duty as a result of a
service-connected injury or disease, qualify their unmarried,
surviving spouses for the exemption. The veteran must also have
served in war; or in a time of peace as part of a campaign or
expedition where Congress issued medals. The veteran must also
live in the state on the lien date to be eligible for the
exemption. Seeking to expand the application of the exemption,
Board of Equalization Member George Runner wants to expand
eligibility to veterans who receive benefits provided by the
United States Department of Veterans' Affairs, but aren't
currently eligible for the exemption because they were not
honorably discharged.
Proposed Law
Senate Bill 1458 deletes the reference to the California
Constitution's definition of veteran currently used to determine
eligibility for the disabled veteran's exemption. The measure
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instead provides that to be eligible, a person must:
Be serving in, or have served in, the United States
Army, Navy, Air Force, Marine Corps, or Coast Guard,
Be discharged under other than dishonorable conditions,
Have served in war; or in a time of peace as part of a
campaign or expedition where Congress issued medals, or
because of a service-connected disability, and
Have been determined by the USDVA to be eligible for
federal veterans' health and medical benefits.
The measure also makes technical and conforming changes.
State Revenue Impact
According to BOE, SB 1458 results in property tax revenue losses
of $126,880 annually.
Comments
1. Purpose of the bill . According to the author, "California
has the nation's highest number of veterans. Representing Camp
Pendleton in San Diego, I see many men and women serve their
county with great honor. Often these brave service members
don't make it back to their loved ones, whereas some return with
significant disabilities. SB 1458 will make California's law
consistent with federal law so that any veteran receiving
service-connected disability benefits at 100% disabled will be
eligible to receive the state's disabled veterans' property tax
exemption on their home. When veterans leave active duty with a
100% disability rating (excluding those Dishonorably Discharged
or Discharged for Bad Conduct), they should be eligible for
California's disabled veteran's property tax exemption. The
problem with current statute in California is that only veterans
who receive an "honorable discharge" may qualify for the
disabled veterans' property tax exemption, whereas federal
statute allows these same veterans to receive benefits if they
are discharged under "honorable," "general," or "other than
honorable" conditions. SB 1458 fixes this problem and gives
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100% disabled veterans access to a tax benefit they deserve.
Additionally, this bill necessarily helps California veterans
returning from war receive a merited property tax exemption, as
long as they meet the appropriate discharge eligibility from the
service."
2. What qualifies ? Unlike the general veterans' exemption, the
Constitution allows the Legislature to establish eligibility for
the disabled veterans' exemption as it sees fit, so long as the
veteran lost one or more limbs, is totally blind, or is totally
disabled, as a result of a service-connected injury. While the
law currently applies only to veterans honorably discharged,
many veterans who were discharged under conditions other than
honorable, possibly due to conditions such as post-traumatic
stress disorder, but served with sufficient distinction to be
eligible for benefits, are unable to obtain the exemption. SB
1458 would provide a substantial tax benefit to these disabled
veterans. However, the individuals affected by the bill are
distinct from those eligible under current law because the
military has some reason not to grant them honorable discharges,
which is required for state veteran benefits (Military and
Veterans Code §980). On the other hand, other state programs
don't require honorable discharges, and recent amendments
require that the veteran demonstrate to USDVA that the facts
justifying the discharge aren't so bad as to deny them benefits.
The Committee may wish to consider what forms of military
discharges should qualify a disabled veteran for the exemption.
3. Types of discharges . SB 1458 would change the eligibility
for the disabled veterans' exemption to include veterans who
were discharged under "other than honorable conditions."
According to the Senate Committee on Veterans Affairs, the
military separates its personnel from active service by formally
discharging them, either administratively or punitively. Each
of the five different discharge statuses is determined by the
characterization of an individual's service, which slides along
a scale with "honorable" at the high end and "dishonorable" at
the low end. Punitive discharges are reserved for the most
negative cases and imposed only by special and general courts
martial. Administrative separations cannot be awarded by a
court-martial and are not punitive in nature. Enlisted
personnel may be administratively separated with a
characterization of service or a description of separation.
Administrative discharges include:
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Honorable. This is the most common discharge status. It
presumes creditable service and good behavior. All service
members will earn an Honorable Discharge unless they
experience significant problems and receive a lower type of
discharge,
General (under honorable conditions). Sometimes
referred to as a "General Discharge," it is granted if an
individual's commander determines that the service has been
generally honest and faithful, even if the person ran into
some trouble. General Discharges are given for a variety
of reasons, including failure to progress in training;
failure to maintain military standards in appearance,
weight, or fitness; or for disciplinary infractions,
including drug or alcohol abuse.
Other than Honorable. An "OTH" discharge usually is
given when an individual's service represents a broader
pattern of departure from the conduct and performance
expected of all military members. It can result from
notable drug or alcohol problems, but also can be based on
other misconduct, such as abuse of authority,
fraternization, or a pattern of continued misconduct. OTH
discharges bar the individual from reenlisting into any
component of the Armed Forces, including the federal
reserves and National Guard.
Punitive discharges are authorized punishments of courts-martial
and can only be imposed as an approved court-martial sentence
following an individual's conviction for violating the Uniform
Code of Military Justice. There are two types of punitive
discharges:
Bad Conduct Discharge. This can be imposed by both
special and general courts-martial. This discharge is
usually given for convictions of crimes such as absent
without leave, drunk on duty, driving while under the
influence, adultery, writing bad checks, and disorderly
conduct.
Dishonorable Discharge. This is the worst type of
military discharge a service member can receive, and can be
imposed only by a general court-martial. In most cases, a
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Dishonorable Discharge also involves being sentenced to
serve time in a military prison.
SB 1458 would make veterans who received OTH and Bad Conduct
discharges eligible for the disabled veterans' exemption, so
long as they met the other legal criteria, including receiving
USDVA benefits.
4. Discharge Requirements for Veterans Benefits . SB 1458 would
require that the veteran receive USDVA benefits to be eligible
for the exemption. According to the Senate Committee on
Veterans' Affairs, basic eligibility for federal veterans'
benefits depends upon the type of military service performed,
duration of service, and character of discharge or separation.
The discharging military branch makes those determinations; the
USDVA reviews the military's description of the "character of
discharge" to determine whether a person meets the basic
eligibility requirements for receipt of VA benefits under Title
38 of the United States Code. A discharge characterized by a
military service as "under honorable conditions" is binding on
the USDVA, and requires it to provide benefits if other
eligibility requirements are met. A Dishonorable Discharge
explicitly bars the USDVA from providing benefits. The OTH and
Bad Conduct discharges bar an individual from presumptive
eligibility for federal benefits. In these cases, however, the
USDVA, as administering agency of benefits, may be asked to make
an independent assessment of the character of service. The
USDVA reviews facts and circumstances surrounding the
incident(s) that led to the discharge, as reported by the
military, as well as any supporting evidence from the claimant
or third parties. On a case-by-case basis, USDVA determines
whether the incidents that led to the OTH or Bad Conduct
discharge may be found to have been "under conditions other than
dishonorable," and thus whether basic eligibility for USDVA
benefits can be established.
5. Related legislation . At its April 27th hearing, the
Committee will also hear SB 1183 (Bates), which expands the
current partial exemption to a full one. SB 1104 (Stone) which
disconnects inflation adjustments for veterans over 65 while
also expanding the current partial exemption to a full one is
set for the Committee's May 11th hearing.
6. Technical . BOE and Committee staff recommends an amendment
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to specify that the bill takes effect for lien dates for the
2017-18 fiscal year.
7. Incoming ! On April 12th, the Committee on Veteran's Affairs
approved SB 1458 by a vote of 4 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 : BOE Member George Runner, Board of Equalization;
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 : Unknown.
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