BILL ANALYSIS Ó
SB 1480
Page A
Date of Hearing: June 13, 2016
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Sebastian Ridley-Thomas, Chair
SB
1480 (Committee on Governance and Finance) - As Amended June 8,
2016
Majority vote.
SENATE VOTE: 37-0
SUBJECT: Property tax: local government property: application
SUMMARY: Makes technical amendments to the administrative
provisions of the property tax law. Specifically, this bill:
1)Extends the deadline for local governments to file appeals
with the State Board of Equalization (BOE) related to taxable
government-owned property from July 20 to November 30.
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2)Eliminates the requirement to use certain prescribed language
in the annual notice used to verify eligibility for the
welfare property tax exemption and instead directs the BOE to
consult with the California Assessors' Association in
designing the notice and prescribing other required
information, as provided.
3)Restores the authorization for the county auditor to deduct
specified costs of a tax sale prior to remitting the proceeds
into the county general fund.
4)Makes other conforming, non-substantive changes.
EXISTING LAW:
1)Provides that all property is taxable unless explicitly
exempted by the California Constitution or federal law and
limits the maximum amount of any ad valorem tax on real
property at 1% of full cash value.
2)Exempts local government-owned property from the property tax.
(Section 3(b), Article XIII, California Constitution).
However, the property that is located outside the local
government's jurisdictional boundaries is subject to property
tax if the property was taxable when acquired. (Section 11,
Article XIII, California Constitution.)
3)Provides that any assessment made in the case of the
properties owned by local governments (so-called "Section 11"
properties) may be reviewed, equalized or adjusted by the BOE,
not the local county assessment appeals board. (Section
11(g), Article XIII, California Constitution.)
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4)Sets a deadline for local agencies to file Section 11 appeals
with BOE of either July 20th, or two weeks from the date the
assessor delivers the property tax roll containing the
assessment to the auditor, whichever is later.
5)Provides an exemption from taxation for property that is
irrevocably dedicated to religious, hospital, scientific, or
charitable purposes, if the property is used for the actual
operation of the exempt activity and is owned by a nonprofit
entity qualified as an exempt organization by the Internal
Revenue Service, the Franchise Tax Board, or both (the
so-called 'welfare exemption') [Article XIII, Section 4, of
the California Constitution; Revenue and Taxation Code (RT&C)
Section 214]. The entity that owns the property is prohibited
from having any earnings that contribute to the benefit of any
private shareholder or individual. This welfare exemption has
been expanded over the years to add certain specific types of
property that do not otherwise qualify under the general
exemption.
6)Requires the county assessor to mail an annual notice to
recipients of the welfare, non-profit cemetery, or religious
exemption, along with a card asking if the property will
continue to be used for the exempt purpose.
7)Provides that, if property taxes are not paid within five
years of the notice of impending default, the property becomes
subject to sale and will be sold at a public auction. The tax
collector has the power to sell property that has been
tax-defaulted for five years or more, or three years or more
in the case of nonresidential commercial property.
8)Requires that proceeds from the sale of tax-defaulted property
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be deposited in the delinquent tax sale fund and then be
distributed to the State of California General Fund and the
county general fund for the costs incurred in connection with
the sale of tax-defaulted property. Any excess proceeds, not
otherwise claimed, may be transferred to the county general
fund.
FISCAL EFFECT: Unknown
COMMENTS:
1)Purpose of the Bill . According to the author's office, "SB
1480 makes three changes to property tax law recommended by
the State Board of Equalization, the California Assessors
Association, and the California Association of County
Treasurer Tax Collectors to improve property tax
administration: First, the measure changes the deadline for
Section 11 appeals to November 30th from the current dual
deadline of either July 20th, or two weeks from the date the
assessor delivers the property tax roll. The revised deadline
is familiar, as it is the same as those for taxpayers filing
appeals. Additionally, a later deadline will give the local
agency more time to decide whether to appeal. Second, the
measure strikes the contents of a card used by assessors to
establish eligibility for an exemption, and instead directs
BOE to design a general form in consultation with Assessors,
thereby allowing electronic filing. Lastly, the measure
restores previously enacted language that was inadvertently
deleted that allows tax collectors to recover specific costs
from the excess proceeds from tax sales prior to depositing
them in the county general fund. SB 1480 only contains items
with universal agreement; should anyone object to a provision
in the measure, it will be removed."
2)Extending the Deadline for Filing Section 11 Appeals . Section
11 appeals are unique in that they are filed with the BOE
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instead of the local county assessment appeals board.
According to the BOE staff, in the last 20 years five Section
11 appeals have been filed and the BOE has rendered only one
decision.<1> The remaining appeals were withdrawn because the
assessor and local government reached an agreement.
Existing law designates July 20th as the deadline for filing a
Section 11 appeal and extends that deadline by two weeks from
the date the county assessor completes and delivers the roll
to the county auditor (which is typically two weeks after July
31st). In contrast, the deadline that applies to filing
other locally assessed property appeals is generally November
30th (although nine counties have an earlier deadline of
September 15th). This bill proposes to create uniformity for
filing appeals for locally assessed property by designating
November 30th as the deadline for both Section 11 appeals and
appeals with the local assessment appeals boards. Arguably,
this uniform deadline, regardless of the county in which the
property is located, would ease administration of property tax
laws and would afford local governments the maximum amount of
time to file an appeal with the BOE.
3)"Welfare Exemption": Revising the Annual Notice of
Eligibility . The California Constitution provides that all
property is taxable unless explicitly exempt 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. The California Constitution allows the
Legislature to establish a property tax exemption for property
exclusively used for charitable purposes and owned by
nonprofit entities organized and operated for charitable
purposes. [California Constitution, Article XIII, Section
---------------------------
<1>
East Bay Municipal Utility District v. County of Calaveras
(2003).
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(4)(b).] The California Constitution also exempts from
property tax government-owned property; property used
exclusively for educational purposes by a nonprofit
institution of higher education; property used exclusively for
religious workshop, cemeteries, and growing crops; property
owned by veterans; property used for libraries and museums;
and property used by public schools, among others.
In 1954, the Legislature enacted the exemption, more commonly
known as the "welfare exemption." Once qualified for the
exemption, the recipients must annually verify their
eligibility. Existing law requires county assessors to send
an annual notice to recipients of the welfare, non-profit
cemetery, or religious exemption, along with a card that
contains specific questions relating to the property's exempt
purpose. The questions and the contents of the card are
prescribed by the state statute - Revenue and Taxation Code
Section 254.5. The California Assessors' Association (CAA)
asserts that this statutory prescribed form is inefficient.
The majority of the forms related to property tax
administration are developed by the BOE, after consultation
with the CAA. Furthermore, the use of that card is
unnecessary as taxpayers may file with the county assessor
electronically. This bill would delete the statutorily
prescribed questions that must be included in the card,
eliminate the requirement for the county assessor to mail the
card, and direct the BOE to designe the contents of the
notice, in consultation with the CAA.
4)Sale of Tax-Defaulted Property and Distribution of Tax Sale
Proceeds . Property is deemed in default if property taxes are
not paid when due and is subject to penalties and costs. Once
the real property is declared tax-defaulted, the county tax
collector publishes the information on the defaulted roll. If
the owner fails to redeem the property within five years (or
three years if the property is also subject to a nuisance
abatement lien) by full payment of the defaulted taxes,
interest and penalties, then the property may be sold to the
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highest bidder at a public sale. Once the property becomes
subject to sale, the county tax collector must attempt to sell
the property in order to collect the defaulted taxes. The
property may be offered for sale at public auction, a sealed
bid sale, or a negotiated sale to a public agency or qualified
non-profit organization. Public auctions are the most common
way of selling tax-defaulted property, and the property is
sold to the highest bidder. Generally, if no bid was received
when the property was last offered for sale at public auction,
the tax collector may re-offer property at a reduced price at
the same or next scheduled sale.
Once a tax-defaulted property is sold, tax sale proceeds must
be distributed to the State, the county and taxing agencies to
reimburse them for costs incurred and for the amount of
defaulted taxes. Following these distributions, lienholders
and the former owner may claim proceeds in excess of the taxes
and cost of the sale. Finally, any remaining amounts not
otherwise claimed may be transferred to the county general
fund. These amounts are known as "excess proceeds." Prior
to 2014, "excess proceeds" were dispersed in the final round
of distributions to the local taxing agencies entitled to
share in the proceeds. However, the county was authorized to
deduct the costs of maintaining the redemption and
tax-defaulted property files as well as the costs of
administering and processing the claims for "excess proceeds"
prior to the final distribution.
The law was changed in 2014 to allow the county auditor to
transfer excess proceeds to the county general fund instead of
dispersing the funds to the taxing agencies. (AB 2257
(Cooley), Chapter 501, Statutes of 2014.) Inadvertently, the
language authorizing the counties to recover the costs of
administering "excess proceeds" was deleted from the statute.
This bill proposes to restore this authority. This bill would
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maintain the county auditor's ability to transfer excess
proceeds to the county general fund, but only after the tax
collector is allowed to deduct specified costs relating to the
tax sale from the excess proceeds.
REGISTERED SUPPORT / OPPOSITION:
Support
California Assessors' Association
Opposition
None on file
Analysis Prepared by:Oksana Jaffe / REV. & TAX. / (916)
319-2098