BILL ANALYSIS Ó
SB 1458
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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