BILL ANALYSIS
AB 157
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Date of Hearing: May 18, 2009
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Charles M. Calderon, Chair
AB 157 (Anderson) - As Amended: March 24, 2009
SUSPENSE
Majority vote. Tax levy. Fiscal committee.
SUBJECT : Property taxation: transfer of base year value:
disaster relief
SUMMARY : Extends the time period for acquiring replacement
property following a state-declared disaster. Specifically,
this bill :
1)Increases, from five years to seven years, the amount of time
a property owner has to acquire or construct property to
replace property substantially damaged or destroyed by a
state-declared disaster and remain eligible to receive a base
year value transfer.
2)Applies to any comparable replacement property acquired or
constructed as a replacement for property substantially
damaged or destroyed by a disaster occurring on or after July
1, 2007, and to the determination of base year values for the
2007-08 fiscal year (FY) and FYs thereafter. Applies, in
addition, to any comparable replacement property acquired or
constructed to replace property substantially damaged or
destroyed by the Cedar Fire in San Diego County that began in
October of 2003, and to the determination of base year values
for the 2003-04 FY and FYs thereafter.
3)Contains legislative findings and declarations regarding the
need for special legislation. Specifically, the findings note
that many homeowners are still struggling to replace homes
lost in the wildfires that occurred in San Diego County in
October of 2003.
4)Takes immediate effect as a tax levy.
EXISTING LAW :
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1)Values property at its 1975 fair market value, with annual
increases thereafter limited to the amount of inflation or 2%,
whichever is less, until the property changes ownership or new
construction occurs. Once a "reassessable" event occurs, the
value of the property for tax purposes is re-determined based
on its market value. The value initially established, or
re-determined where appropriate, is referred to as the "base
year value".
2)Provides for various situations where the base year value of a
property is either retained (notwithstanding new construction
or a change of ownership), or transferred to another property.
These special situations are provided under various
constitutional amendments modifying the original Proposition
13 framework and serve to avoid the otherwise required
reassessment of a property to its current market value.
3)Provides that persons who own property substantially damaged
or destroyed in a state-declared disaster may transfer the
base year value of that property to a property acquired or
constructed as a replacement if it is acquired within five
years of the disaster.
FISCAL EFFECT : The Board of Equalization (BOE) estimates
property tax losses of no more than $10,000 per year.
COMMENTS :
1)The author states, "Assembly Bill 157 is a disaster relief
bill that would extend the timeframe for survivors of the
devastating 2003 Cedar Fire to replace their fire-destroyed
properties." The author goes on to state, "Nothing will ever
be the same again for survivors of these catastrophic fire
events, but we can help. The time it takes to rebuild homes
and lives cannot be underestimated, and for many, restoration
is an ongoing challenge. Even now, property owners struggle
to resolve the necessary but time-consuming issues surrounding
the replacement of their [homes]. I introduced Assembly Bill
157 as a simple way to ensure a realistic timetable for
addressing the losses that survivors have suffered."
2)Proponents state, "Resolving compensation issues with an
insurer after a disaster damages or destroys an individual's
home can sometimes be a very protracted process. AB 157
recognizes this fact and, as a result, proposes to extend the
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period of time within which a homeowner can transfer the
property tax base year value to a replacement property an
additional two years."
3)BOE states:
a) Base year value transfers provide tax relief to disaster
victims . "Permitting a person to 'transfer' their base
year value from one property to another property provides
tax relief by allowing the property owner to continue
paying taxes on the replacement property equivalent to that
paid on the property from which they were displaced.
Without a base year value transfer, the taxes on the new
property would likely be significantly more because, under
the general change in ownership laws, the taxes would be
based on the property's current fair market value. The
rationale for providing a base year value transfer is that
the tax laws should not further afflict disaster victims by
imposing upon them higher property taxes. If the disaster
had not occurred, those individuals would not have been
compelled to relocate and thereby forfeit their Proposition
13 protected base year values."
b) Five years might not be enough time . "While most
property owners will likely fit into the existing five year
period, the financial impact to the individual property
owner that doesn't can be significant. Delays occur for a
variety of reasons: unsettled insurance claims, uninsured
or underinsured property owners, limited supply of
replacement properties available for purchase, and lack of
construction workers. This is especially true where the
disaster creates mass destruction in a localized area. And
in present times, there are added reasons for delays, such
as difficulties in obtaining financing or purchasers that
are experiencing unprecedented delays in completing the
purchase of a bank owned home."
c) This bill does not amend the three year timeframe for
Revenue and Taxation Code (R&TC) Section 69.3 base year
value transfers because of constitutional constraints .
"[R&TC] Section 69.3 provides similar tax relief for
replacement principal places of residence located in a
different county. However, the three year limit is
expressly specified in the constitutional provision
authorizing these transfers. Consequently, to extend this
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timeframe would require a constitutional amendment."
4)Committee Staff Notes:
a) This bill applies, by specific reference, to property
damaged or destroyed by the Cedar Fire that began in
October of 2003 in San Diego County. It is Committee
staff's understanding that the severe fires that ravaged
Southern California in 2003 also impacted other counties,
including San Bernardino County. As currently written, it
is unclear whether the relief provided by this bill would
be available to Californians who lost their property in
these other counties.
b) Under existing law, victims of the Cedar Fire had until
October of 2008 to acquire replacement property eligible
for a base year value transfer. Property purchased after
this date would, generally, be assessed at its fair market
value. Under this bill, a victim of the Cedar Fire who
purchased comparable replacement property after October of
2008 would be entitled to retroactive application of a base
year value transfer.
c) Committee staff is unclear why this bill applies
retroactively, in cases other than the Cedar Fire, to
disasters occurring on or after July 1, 2007. Is there a
reason this particular date was chosen?
d) SB 824 (Committee on Revenue and Taxation), introduced
in the current legislative session, amends the same R&TC
Section this bill amends. SB 824 passed off the Senate
Floor by a unanimous vote and is currently in the Assembly.
Double-jointing language may become appropriate should
these bills both continue to progress through the
Legislature.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Realtors
Opposition
None on file
AB 157
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Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098