BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 1458| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 1458 Author: Bates (R) Amended: 4/6/16 Vote: 21 SENATE VETERANS AFFAIRS COMMITTEE: 4-0, 4/12/16 AYES: Nielsen, Hueso, Allen, Roth NO VOTE RECORDED: Nguyen SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/27/16 AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach, Pavley SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/27/16 AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen SUBJECT: Property taxation: exemptions: disabled veterans SOURCE: Hon. George Runner, Member, State Board of Equalization DIGEST: This bill expands eligibility for the disabled veterans property tax exemption to include persons, who were discharged from military service under "other than dishonorable conditions." ANALYSIS: Existing law: SB 1458 Page 2 1)Authorizes the Legislature to exempt partially or fully from property tax, the home of a disabled veteran - or the veteran's spouse, including an unmarried surviving spouse - if the veteran's disabling injury incurred in military service; and the veteran is blind in both eyes; lost the use of two or more limbs; or is totally disabled. a) Applies also to the veteran's spouse, including an unmarried surviving spouse, if the veteran has, as a result of a service-connected injury or disease, died while on active duty in military service. b) Does not apply if the home is receiving another real property exemption. 1)Provides a partial exemption for eligible disabled veterans. 2)Defines an eligible veteran as a person who, among other things, is serving in or has served in and has been discharged under honorable conditions from service in the United States Army, Navy, Air Force, Marine Corps, or Coast Guard. This bill: 1)Modifies the military discharge standard, regarding eligibility for the disabled veterans property tax exemption, to include both of the following criteria: a) Discharged from military service "under other than dishonorable conditions"; and b) Determined by the United States Department of Veterans Affairs (USDVA) to be eligible for federal veterans' health and medical benefits. 2) Provides that no appropriation is made and the state shall not reimburse local agencies for property tax revenues lost by them pursuant to this bill. Background Disabled Veterans Property Tax Exemption. California provides qualified disabled veterans and their unmarried surviving SB 1458 Page 3 spouses with a property tax exemption that applies to their home's assessed value. Eligibility provisions require that the claimant demonstrate award of disability rating from the USDVA that: 1)Rates the veteran's disability at 100%; or 2)Rates the veteran's disability compensation at 100% because the veteran is unable to secure and maintain gainful employment. The law allows surviving spouses to receive the exemption if the spouse's death was service-connected. To be eligible for the exemption, surviving spouses must receive a USDVA determination that the spouse's death was service-connected. A USDVA determination is necessary for (1) active duty personnel deaths (i.e., the service person was not a "veteran") and (2) veterans without a 100% rating when alive, but whose cause of death is deemed service-connected. Surviving spouses of veterans with a 100% disability rating during their lifetime continue to receive the exemption after the veteran's death so long as they do not remarry. The exemption amount depends upon the claimant's income. According to the State Board of Equalization (BOE), Fiscal Year 2016-17, the basic exemption adjusted for inflation will be $127,510. If the claimant's income is less than $57,258, the exemption amount will be $191,266. For Fiscal Year 2015-16, 37,653 disabled veterans or their unmarried surviving spouses were granted the exemption. Types of Military Discharges. The military separates its personnel from active service by formally discharging them. Discharges may be either administrative or punitive. Each of the five different discharge statuses is determined by the characterization of an individual's service. The character of service slides along a scale with "honorable" at the high end and "dishonorable" at the low end. The types of discharges fall under one of two categories: "Administrative" or "punitive." 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. SB 1458 Page 4 Enlisted personnel may be administratively separated with a characterization of service or a description of separation. Administrative discharges include: 1)Honorable. The most common discharge status, it presumes creditable service and good behavior. All service members earn an Honorable Discharge unless they experience significant problems and receive a lower type of discharge, 2)General (under honorable conditions). Sometimes referred to as a "General Discharge," it is granted if an individual's commander determines that service has been generally honest and faithful, even if the person ran into some trouble. General Discharges are given for a various reasons, including failure to progress in training; failure to maintain military standards in appearance, weight, or fitness; or disciplinary infractions, including drug or alcohol abuse. 3)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: 1)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. 2)Dishonorable Discharge. The worst type of military discharge, it can be imposed only by a general court-martial. In most cases, a Dishonorable Discharge also involves being sentenced to serve time in a military prison. SB 1458 Page 5 Discharge Requirements for Veterans Benefits. 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, VA 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 VA benefits can be established. Therefore, while recipients of OTH and Bad Conduct discharges were not separated "under honorable conditions," for the purposes of determining benefit eligibility, they may be found to have been separated "under other than dishonorable conditions." Related/Prior Legislation SB 1104 (Stone, 2016) fully exempts the home of a disabled veteran from property tax and prohibits any future Proposition 13-related inflation adjustments to the assessed value of homes of honorably discharged veterans over the age of 65. Pending in Senate Committee on Appropriations. SB 1183 (Bates, 2016) fully exempts from property tax the home SB 1458 Page 6 of any person eligible for the disabled veterans' exemption. Pending in Senate Committee on Appropriations. AB 1556 (Mathis/Weber, 2016) is almost identical to SB 1183 (Bates, 2016). Pending in Assembly Committee on Appropriations. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No According to the Senate Appropriations Committee: The BOE indicates that this bill will result in an annual property tax revenue loss of $127,000 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). The BOE would incur minor implementation costs. SUPPORT: (Verified 5/27/16) Hon. George Runner, Member, State Board of Equalization (source) American G.I. Forum of California American Legion - Department of California AMVETS - Department of California California Association of County Veterans Service Officers California State Commanders Veteran Council Military Officers Association of America - California Council of Chapters State Board of Equalization Veterans of Foreign Wars - Department of California Vietnam Veterans of American - California State Council OPPOSITION: (Verified5/27/16) SB 1458 Page 7 None received Prepared by:Wade Cooper Teasdale / V.A. / (916) 651-1503 5/28/16 16:46:15 **** END ****