BILL ANALYSIS
AB 230
Page 1
Date of Hearing: January 11, 2010
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Charles M. Calderon, Chair
AB 230 (Charles Calderon) - As Amended: January 4, 2010
Majority vote.
SUBJECT : Property tax: parent-child "change in ownership"
exclusion: trustee.
SUMMARY : Authorizes a trustee to sign a claim for the
parent-child "change in ownership" exclusion and provides that
principal residences held in trust are eligible for base year
value transfers. Specifically, this bill :
1)Adds a trustee to the list of persons who can file claims for
the parent-child and grandparent-grandchild "change in
ownership" exclusion claims on behalf of eligible transferors
and transferees.
2)Authorizes a trustee to inspect otherwise confidential claims
for the exclusion previously filed.
3)Provides that, for purposes of the "base year value" transfer,
the definition of "person" includes an individual who is the
present beneficiary of a trust.
EXISTING LAW :
1)Provides that all property is taxable unless explicitly
exempted by the California Constitution or federal law.
Limits ad valorem taxes on real property to 1% of the full
cash value of that property as set forth in the California
Constitution. "Full cash value" is defined as the assessor's
valuation of real property as shown on the 1975-76 tax bill
or, thereafter, the appraised value of that real property when
purchased, newly constructed, or a change in ownership has
occurred.
2)Requires a reassessment of real property to current fair
market value upon a "change of ownership of that property,"
which means that the value of the property, for property tax
purposes, is redetermined based on current market value. The
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value of the property established for property tax purposes
initially, or redetermined where appropriate, is referred to
as "base year value", which is subject to annual increases for
inflation, not to exceed 2%.
3)Defines the phrase "a change in ownership" as a transfer of a
present interest in real property, including the beneficial
use thereof, the value of which is substantially equal to the
value of the fee interest. [Revenue and Taxation Code (R&TC)
Section 60].
4)Provides that a transfer between parents and their children of
a principal residence or other real property with the full
cash value of $1 million or less is eligible for the "change
in ownership" exclusion. (Proposition 58, 1986). This
exclusion also applies to transfers of real property from
grandparents to grandchildren, if the parents of the
grandchildren are deceased as of the date of transfer.
(Proposition 193, 1996). A property transferred under these
circumstances would retain its low Proposition 13 base year
value, subject to a maximum increase of only 2% a year. The
Legislature's authority to create statutory exemptions from
property tax reassessment was affirmed by the courts. [See,
e.g., Strong v. Board of Equalization (2007) 155 Cal.App.4th
1182].
5)Provides that a transfer of real property between parents and
children through the medium of a trust is eligible for the
exclusion from reassessment [R&TC Section 63.1(9)]; however,
it does not expressly list a trustee as the person who may
file and sign the claim for the exclusion.
6)Allows any person over the age of 55 years and any disabled
person to transfer the "base year value" of that person's
primary residence to a newly acquired or constructed
replacement residence. The definition of "person" means an
individual and expressly excludes any type of legal entity.
FISCAL EFFECT : Unknown.
COMMENTS :
1)The purpose of this bill . This bill, sponsored by the State
Board of Equalization (BOE), is intended to codify BOE's
existing administrative practice and procedures related to the
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transfer of real property from parents to children and to the
base year value transfers.
2)Parent-child exclusion . In its Letter to Assessors 2008/018,
BOE has advised assessors that a trustee can sign a claim form
requesting a parent-child exclusion from reassessment. The
BOE reasoned that, since the trustee has the fiduciary
responsibility to carry out the terms of the trust and can
sign legal documents on behalf of the trust, it follows that,
under existing law, he/she/it is authorized to sign the
parent-child exclusion claim. Nonetheless, many practitioners
and some property owners are concerned that R&TC Section
63.1(d), which lists persons who may sign the claim, does not
expressly include trustees.
3)Base Year Value Transfer . A person over the age of 55, or a
disabled person of any age, may sell his/her principal
residence and transfer its base year value to a replacement
principal residence within the same county or another county
that accepts inter-county transfers. In its Letter to
Assessors 2006/010, BOE has advised that the individual who
has the present beneficial interest in a trust is considered a
claimant for purposes of the base year value transfer, if all
of otherwise applicable requirements are met. However,
existing law - R&TC Section 69.5 - does not expressly address
trusts and, therefore, causes uncertainty and confusion among
property owners and practitioners. Hence, this bill is
necessary to clarify existing law and to eliminate that
uncertainty and confusion.
REGISTERED SUPPORT / OPPOSITION :
Support
Board of Equalization (sponsor)
Opposition
None on file
Analysis Prepared by : Oksana G. Jaffe / REV. & TAX. / (916)
319-2098