BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 1458 (Bates) - Property taxation: exemptions: disabled
veterans
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|Version: April 6, 2016 |Policy Vote: V.A. 4 - 0, GOV. & |
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|Urgency: No |Mandate: No |
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|Hearing Date: May 9, 2016 |Consultant: Robert Ingenito |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 1458 would expand eligibility for the disabled
veteran's property tax exemption, by changing the requirement
that a veteran's character of discharge from military service be
under "honorable" conditions to the standard of under "other
than dishonorable," provided the veteran is eligible for federal
benefits.
Fiscal
Impact: The Board of Equalization (BOE) indicates that the bill
would result in an annual property tax revenue loss of $127,000
SB 1458 (Bates) Page 1 of
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for every 100 newly-qualified disabled veterans. Lower local
property tax revenues lead to increased General Fund Proposition
98 spending by up to roughly 50 percent (the exact amount
depends on the specific amount of the annual Proposition 98
guarantee, which in turns depends upon a variety of economic,
demographic and budgetary factors). BOE would incur minor
implementation costs.
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 is $127,510 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
SB 1458 (Bates) Page 2 of
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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.
Currently, there are five different types of discharges from
active duty: Honorable Discharge, General Discharge Under
Honorable Conditions, Discharge Under Other than Honorable
Conditions (OTH), Bad Conduct, and Dishonorable. Under federal
law, various veteran benefits depend on the type of discharge.
Generally, to receive disability compensation benefits from the
United States Department of Veteran Affairs (USDVA) requires an
Honorable Discharge, a General Discharge and, on occasion, an
OTH.
Under existing state law, only veterans who receive an Honorable
Discharge can receive the property tax exemption; thus, although
a veteran may have received a 100 percent disability rating from
the USDVA, they are unable to quality for the state's disabled
veterans' property tax exemption if they did not receive an
Honorable Discharge.
Proposed Law:
This bill would delete the reference to the California
Constitution's definition of veteran currently used to determine
eligibility for the disabled veteran's exemption. Instead, the
measure would provide that to be eligible, a person must (1) be
serving in, or have served in, the United States Army, Navy, Air
Force, Marine Corps, or Coast Guard, (2) be discharged under
other than dishonorable conditions, (3) 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 (4) have been determined by the USDVA to be
eligible for federal veterans' health and medical benefits.
SB 1458 (Bates) Page 3 of
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Related
Legislation: SB 1183 (Bates) would fully exempt from property
tax the home of any person eligible for the disabled veterans'
exemption. SB 1104 (Stone) would fully exempt the home of a
disabled veteran from property tax and prohibit any future
inflation adjustments to the assessed value of homes of
honorably discharged veterans over the age of 65. Both bills
await action in this Committee
Staff
Comments: BOE research staff note that the number of additional
veteran-owned homes that would qualify for an exemption under
this bill is difficult to determine. Using data from both the
U.S. Census and USDVA, BOE assumes the number would be small
vis-à-vis the over 37,000 claimants currently qualified. BOE
assumes continuation of the historical split between the number
of exemption claims granted are at the basic exemption level (90
percent) and at the lower income exemption level (10 percent).
Additionally, newly qualifying claimants would receive this
relief in lieu of the standard $7,000 homeowners' exemption they
are currently receiving. Ultimately, BOE concludes that for
every 100 additional qualifying disabled veteran-owned homes,
the bill would result in an annual revenue loss of $127,000.
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