BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  June 20, 2016


                     ASSEMBLY COMMITTEE ON REVENUE AND TAXATION


                           Sebastian Ridley-Thomas, Chair





          SB  
          1458 (Bates) - As Amended April 6, 2016


          Majority vote.  Fiscal committee.


          SENATE VOTE:  39-0


          SUBJECT:  Property taxation:  exemptions:  disabled veterans


          SUMMARY:  Expands eligibility for the disabled veterans'  
          exemption from property tax to include a person who has been  
          discharged under "other than dishonorable conditions," as  
          provided.   Specifically, this bill:  


          1)Revises the definition of "veteran," which is used in  
            determining eligibility for the disabled veteran's property  
            tax exemption, to do both of the following:



             a)   Eliminate a cross-reference to Section 3(o) of Article  
               XIII of the California Constitution that requires that a  








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               "veteran" be discharged under honorable conditions from  
               military service.  



             b)   Provide that the term "veteran" includes an otherwise  
               qualified person who has been discharged from military  
               service under "other than dishonorable conditions" and  
               determined by the United States (U.S.) Department of  
               Veterans Affairs to be eligible for federal veterans'  
               health and medical benefits.





          2)Specifies that no appropriation is made and the state shall  
            not reimburse local agencies for property tax revenues lost by  
            them pursuant to this bill.



          3)Takes effect immediately as a tax levy. 



          EXISTING LAW:   


          1)Exempts from property tax, in whole or in part, the home of a  
            veteran who is totally disabled because of injury or disease  
            incurred in military service, or his/her surviving unmarried  
            spouse.  [Article XIII, Section 4, California Constitution;  
            Revenue and Taxation Code (R&TC) Section 205.5.]  The disabled  
            veterans' exemption is also available to the surviving spouse  
            of a person who has died as a result of service-connected  
            injuries while on active military duty.  The amount of the  
            exemption depends on the claimant's income.  The basic  
            exemption amount is $100,000, adjusted annually for inflation.  








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             For low-income claimants, the exemption amount is $150,000,  
            adjusted annually for inflation, when the veteran's household  
            income does not exceed $40,000, as adjusted.  For the fiscal  
            year (FY) 2016-17, the disabled veterans' exemption amount is  
            $191,266 of assessed value for those with a household income  
            below $57,258 (the "low-income" exemption), and $127,510 for  
            all other disabled veterans (the "basic" exemption).  

          2)Defines a "totally disabled veteran" as a veteran who has a  
            disability rating from the U.S. Department of Veterans  
            Affairs, or the military service from which the veteran was  
            discharged, at 100%, or has a disability compensation rating  
            at 100% because he/she is unable to secure or follow a  
            substantially gainful occupation.  

          3)Refers to the constitutional definition of "veteran" to  
            determine eligibility for the disabled veterans' exemption  
            from property tax, which includes a person:

             a)   Who is serving in the U.S. Army, Navy, Air Force,  
               Marines, Coast Guard, or Revenue marine Service, or served  
               in one of the listed services and was discharged under  
               honorable conditions;

             b)   Served either in time of war or in time of peace in a  
               campaign or expedition for which a medal has been issued by  
               Congress or in time of peace and because of a  
               service-connected disability was released from active duty;  
               and,

             c)   Resides in the State on the current lien date.  [Article  
               XIII, Section 3(o), California Constitution; R&TC Section  
               205.5.]  

          4)Requires a disabled veteran to file a claim with the local  
            county assessor to receive the exemption.  To receive the  
            basic exemption, a claimant needs to file a claim only once.   
            To receive the larger low-income exemption, the claimant must  
            file a claim each year to verify income eligibility.  








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          FISCAL EFFECT:  The State Board of Equalization (BOE) staff  
          estimates that for every 100 additional qualifying disabled  
          veteran-owned homes, this bill would result in an annual revenue  
          loss of $126,880. 


          COMMENTS:  


           1)Author's Statement  .   The author has provided the following  
            statement in support of this bill:



          "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 do not 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% 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.  SB 1458 will ensure 100% disabled  
            veterans receive the benefits that they deserve."
          2)  "Disabled Veterans' Exemption":  Background .  Existing law  
            authorizes a property tax exemption for the principal  
            residence of a disabled veteran or for the unmarried surviving  
            spouse of a deceased disabled veteran.  For purposes of the  
            exemption, the disability rating must be 100%, generally  
            occurring for a veteran who is blind in both eyes, has lost  
            the use of two or more limbs, or is totally disabled.  This  
            exemption is commonly referred to as the "disabled veterans'  
            exemption." 









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            The property tax exemption amount is equal to the assessed  
            value of the property, up to $100,000.  If the household  
            income does not exceed $40,000, the maximum property tax  
            exemption is increased to $150,000.  The exemption amounts and  
            income limitation are adjusted annually for the change in the  
            California Consumer Price Index for all items, as determined  
            by the California Department of Industrial relations.  For the  
            2016-17 fiscal years, the basic exemption amount is $127,510;  
            the low-income exemption amount is $191,266; and the maximum  
            household income for low-income classification is $57,258. 



            The exemption is only available on a veteran's principal place  
            of residence.  The eligible veteran must file a timely claim  
            with the county assessor by the specified deadlines to receive  
            the full amount of the property tax exemption.  Since the home  
            may only receive one property exemption, if a homeowners'  
            exemption has been granted on a property and the owner  
            subsequently qualifies for the disabled veterans' exemption,  
            the homeowners' exemption should be cancelled to allow for the  
            disabled veterans' exemption as it provides the greater  
            benefit. 
           3)What is the Problem  ?  In order to qualify for the property tax  
            exemption, a veteran must receive a disability certification  
            from either the United States Department of Veterans' Affairs  
            (USDVA) or the military service from which the veteran was  
            discharged.  Currently, existing law applies only to veterans  
            honorably discharged.   Thus, many veterans who were  
            discharged under conditions other than honorable served with  
            sufficient distinction to be eligible for benefits but are  
            unable to obtain the exemption.   


           4)Types of Military Discharges  .  According to the Senate  
            Committee on Veterans Affairs, the military separates its  
            personnel from active service by formally discharging them.   
            The types of discharges fall under one of two categories:   








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            either "administrative" or "punitive" (which are reserved for  
            the most negative cases).  Each of the five different  
            categories of discharge is determined by the characterization  
            of an individual's service, ranging from "honorable" at the  
            high end to "dishonorable" at the low end.  


             a)   Administrative discharges include the following three  
               categories of discharge:


               i)     Honorable.  This is the most common discharge  
                 status, which 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.


               ii)    General (under honorable conditions).  This type of  
                 discharge is sometimes referred to as a "General  
                 Discharge" and is granted if an individual's commander  
                 determines that the service has been generally honest and  
                 faithful.  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.


               iii)   Other than Honorable (OTH).  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.  OTH 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.








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             b)   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:


               i)     Bad Conduct Discharge.  This discharge may be  
                 imposed by both special and general courts-martial and 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.


               ii)    Dishonorable Discharge.  This type of discharge is  
                 the worst type of military discharge a service member can  
                 receive and may 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.


           5)Proposed Solution  .   This bill revises the eligibility  
            standard from a discharge under "honorable conditions" to a  
            discharge under "other than dishonorable conditions," provided  
            other applicable criteria are met.  Thus, disabled veterans  
            who received OTH and Bad Conduct discharges would be eligible  
            for the disabled veterans' exemption so long as they qualify  
            for federal veterans' health and medical benefits.   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  








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            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 the  
            USDVA 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.  However, in these cases, the USDVA, as  
            administering agency of benefits, may be asked to make an  
            independent assessment of the character of service.  The USDVA  
            will review 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, the USDVA will  
            determine 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.   This bill would align  
            state and federal benefits for disabled veterans by allowing  
            veterans with a 100% disability rating to receive the state's  
            property tax exemption, provided they qualify for federal  
            health and medical benefits and were discharged under "other  
            than dishonorable conditions."

           6)Operative Date.   As noted by the BOE staff in its analysis,  
            this bill will go into effect immediately as a tax levy.  For  
            ease of administration, the Committee may wish to consider  
            delaying the operative date to coincide with the 2017-18 lien  
            date.  The Committee may also wish to consider whether this  
            bill's provisions relating to the change in eligibility for  
            the disabled veterans' exemption from property tax should  
            apply only prospectively. 


           7)Double-Referral  .  This bill was referred to both Assembly  
            Committee on Veterans Affairs and this Committee.  This bill  








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            passed the Assembly Committee on Veterans Affairs on June 14,  
            2016, on a 7-0 vote.

          REGISTERED SUPPORT / OPPOSITION:




          Support


          Member George Runner, State Board of Equalization (sponsor)


          State Board of Equalizations


          California Assessors' Association


          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 Veterans Council


          Military officers Association of America


          California Council of Chapters








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          VFW-Department of California


          Vietnam Veterans of America-California State Council




          Opposition


          None on file




          Analysis Prepared by:Oksana Jaffe / REV. & TAX. / (916)  
          319-2098