BILL ANALYSIS
AB 82
Page 1
Date of Hearing: January 12, 2004
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Ed Chavez, Chair
AB 82 (Dutton) - As Amended: January 5, 2004
Majority vote. Tax levy. Fiscal Committee.
SUBJECT : Taxation: Homeowners' Property Tax Exemption:
Renter's Credit
SUMMARY : Increases the amount of the homeowners' exemption for
property taxes and the amount of the renters' credit against
personal income tax. Specifically, this bill :
1)Increases the amount of the homeowners' property tax exemption
to $32,000.
2)Requires the Board of Equalization (BOE), for the property tax
lien date in 2005 and each year thereafter, to:
a) Annually recompute the amount of the exemption based
upon the change in the California Consumer Price Index
(CCPI) for all items; and
b) Provide written notification to each county assessor of
the new exemption amount on or before the following
property tax lien date.
3)Increases the amount of the renters' credit available to
reduce personal income tax to:
a) $370 for married couples filing joint tax returns, heads
of household and surviving spouses, and
b) $185 for other individuals.
4)Requires the Franchise Tax Board (FTB), for taxable years
beginning on or after January 1, 2005, annually to recompute
the amount of the renters' credit based upon changes to the
CCPI.
5)Eliminates the current restrictions on the availability of the
renter's credit based upon the taxpayer's adjusted gross
AB 82
Page 2
income (AGI).
EXISTING LAW :
1)Provides an annual property tax exemption for homeowners equal
to $7,000 of the assessed value of the property. No provision
exists to revise the exemption amount for inflation.
2)Allows a credit against the personal income tax to a taxpayer
that rented a principal place of residence in California for
at least 50% of the time in a taxable year.
a) The credit is $120 for the following taxpayers:
i) Married filing a joint return, head of household and
surviving spouse, provided that
the taxpayer's AGI does not exceed $50,000 (as adjusted
annually by changes to the CCPI beginning with January 1,
1999); and
ii) For other individuals, the annual credit is $60,
provided that the taxpayer's AGI does not exceed $25,000
(as adjusted annually by changes to the CCPI beginning
with January 1, 1999).
b) No provision exists to revise the amount of the renters'
credit for inflation
FISCAL EFFECT :
1)The BOE estimates that the revenue impact to California,
through subvention to counties, of the increased homeowner's
exemption will be as follows:
a) $1.479 billion for fiscal year (FY) 2004-05;
b) $1.498-$1.574 billion for FY 2005-06;
c) $1.517-$1.673 billion for FY 2006-07; and
d) $1.537-$1.778 billion for FY 2007-08.
2)The FTB estimates that the net revenue impact to the state of
the increased homeowner's property tax exemption and the
increased renter's credit in this bill will be as follows:
AB 82
Page 3
a) $530 million for FY 2004-05;
b) $485 million for FY 2005-06; and
c) $460 million for FY 2006-07.
COMMENTS :
1)The author intends that this bill will increase the viability
of home ownership for Californians by increasing the amount of
the homeowners' property tax exemption. The minimum amount of
the homeowners' property tax exemption is set in California
Constitution, Article XIII, Section 3(k), and authorizes the
Legislature to increase the annual exemption.
2)The homeowners' property tax exemption has been set at $7,000
since 1974. The author states that, in 1974, the homeowners'
exemption represented approximately 20% of a home's value;
currently, the homeowners' exemption represents approximately
2% of a home's value. The current homeowners' exemption
yields a benefit of approximately $75 per claim ($7,000 times
an average rate of .0107%). The benefit from the proposed
increased exemption amount would begin at approximately $342
($32,000 times an average rate of .0107%).
3)Many bills to increase the amount of the homeowners' exemption
have been introduced since 1974. In the 2001-2002 Legislative
Session, two bills were introduced that impacted the
homeowners' exemption. AB 1844 (Mountjoy) increased the
exemption amount to $17,000 for persons over age 62, disabled,
or blind. AB 1844 was held in the Assembly Revenue and
Taxation Committee. SB 48 (McClintock) increased the amount
to $25,000, plus added an inflation index. SB 48 was held in
the Senate Appropriations Committee. AB 211 (Maze),
introduced in the 2003 Legislative Session, proposes to
increase the amount of the homeowners' exemption to $17,000
for persons aged 62 and older. AB 211 was held in the
Assembly Committee on Revenue and Taxation.
4)The renters' credit had existed as a refundable credit until
taxable year 1993 and was reinstated in California law as a
nonrefundable credit in 1998. The FTB revises the maximum AGI
annually, as required by statute. For taxable year 2003, the
maximum AGI for taxpayers that file as married filing jointly,
AB 82
Page 4
head of household and surviving spouse is $58,108; the maximum
AGI for all other individuals is $29,050.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Realtors*
Opposition
California Tax Reform Association*
Department of Finance (dated 2/28/03)*
* Referencing bill as introduced on January 6, 2003.
Analysis Prepared by : Kimberly Bott / REV. & TAX. / (916)
319-2098