BILL ANALYSIS
AB 321
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Date of Hearing: April 13, 2009
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Charles M. Calderon, Chair
AB 321 (Niello) - As Introduced: February 18, 2009
Majority vote. Fiscal committee.
SUBJECT : Property tax: base year transfers: spouses as
separate claimants.
SUMMARY : Allows each spouse to make a separate, one-time claim
for a base year value transfer property tax relief available to
homeowners over the age of 55. Repeals the requirement for a
property owner, whose claim for the base year value transfer has
been granted, to notify an assessor within 30 days of completing
otherwise assessable new construction on a replacement property.
Specifically, this bill:
1)Includes legislative findings and declarations regarding the
inequity of considering a married couple to be a single
claimant for purposes of claiming the base year value transfer
property tax benefit.
2)Declares legislative intent to delete the existing requirement
imposed on a homeowner to notify the assessor in writing,
within 30 days, of the completion of new construction, as
defined, performed on a replacement dwelling after the
base year value was transferred from the original residence to
that dwelling.
3)Revises the definition of "claimant" to provide that a spouse
of the person claiming the base year transfer property tax
relief is not considered a "claimant" and, thus, allows that
spouse to claim another base year value transfer in the
future.
4)Applies to persons who file a claim on or after January 1,
2010, and who have not been previously granted the base year
transfer property tax relief.
5)Makes conforming changes to the provisions of Revenue and
Taxation Code Section 69.5 related to spouses.
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6)Repeals the requirement imposed on a property owner, who has
been granted the base year value transfer from his/her
original residence to a replacement dwelling, to notify an
assessor within 30 days of completing otherwise
assessable new construction performed on the replacement
property.
7)Provides that, if the Commission on State Mandates determines
that this bill contains costs mandated by the state,
reimbursement of these costs must be made pursuant to specific
statutory provisions.
EXISTING LAW :
1)Provides that all property is taxable unless explicitly
exempted by the California Constitution or federal law. The
Constitution limits the maximum amount of any ad valorem tax
on real property at 1% of full cash value, and the annual
increases to that value are limited to the rate of inflation,
not to exceed 2%.
2)Requires a reassessment of real property to current fair
market value upon a change of ownership, but creates
exceptions to numerous transfers. The value of the property
established initially for property tax purposes is
generally referred to as "base year value", which is subject
to annual increases for inflation, not to exceed 2%.
3)Allows property owners over 55 years of age or disabled
persons once-in-a-lifetime opportunity to transfer the base
year value of their principle residence, within two years from
the sale of the original residence, to a
replacement home of equal or lesser value within the same
county (Proposition 60, 1988), or to a replacement home in
counties that have adopted ordinances allowing the
transfer (Proposition 90, 1990), provided certain conditions
are met and the county assessor is properly notified.
Currently, Alameda, Los Angeles, Orange, San Diego, San Mateo,
Santa Clara, and Ventura Counties allow these out-of-county
transfers. Base year transfers allow taxpayers to continue to
pay property taxes at the amount and rate of growth of their
previous home and prevent reassessments of their newly
purchased homes to full market value.
4)Defines any person claiming the base year transfer property
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tax relief as a "claimant" and specifies that spouses are
deemed to be a single claimant. Provides that a person is
eligible to claim a base year value transfer as a claimant
only if neither that person nor his/her spouse, who is a
record owner of the new home, has previously received that
property tax relief.
5)Provides that each co-owner of real property, including
domestic partners or unmarried couples, is considered to be a
separate claimant for purposes of the base year value property
tax relief.
6)Allows a homeowner, who has been granted a base year value
transfer from his/her original residence to a replacement
dwelling, to perform new construction on the replacement
property subsequent to the transfer and exempts the new
construction from assessment. The new construction must be
completed within two years of the sale of the original
property and its value may not exceed the sales price of the
original property.
7)Requires homeowners to notify the assessor in writing of the
completion of new construction within 30 days in order for the
new construction to be eligible for the property tax relief.
FISCAL EFFECT : The State Board of Equalization (BOE) estimates
some minor absorbable costs that it will incur in informing
local county assessors, the public, and staff of the changes in
existing law and in making appropriate changes to the
claim forms.
BOE staff estimates that, initially, this bill will not have any
revenue impact for fiscal year (FY) 2010-11, if this bill is to
apply only prospectively to claims filed on or after January 1,
2010. However, BOE staff projects that this bill will result in
a revenue loss of $38,000 in FY 2011-12, $76,000 in FY 2012-13,
and $114,000 in FY 2013-14. By FY 2019-20, the annual revenue
loss will be $345,000, which will continue to grow annually as
the number of potential claimants increases each year.
Proposition 98 Fiscal Effect : Unknown.
COMMENTS :
1)The author states that, "AB 321 will bring equity and
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efficiency to the application of the provisions of Proposition
60 and Proposition 90. Current law needs clarification, as
the original language of the propositions did not contain the
disparate treatment ultimately caused by the enabling
legislation. This bill is not expected to have an adverse
impact on local and state revenues."
2)The California Assessors' Association is sponsoring this bill.
The purpose of this bill is to close a loophole that unfairly
penalizes married senior citizen couples and to simplify the
administration of Proposition 60 and Proposition 90. This
bill will also eliminate the new construction notification
requirement imposed on property owners after a base year value
transfer. With regard to the notification requirement, the
sponsor notes that most property owners currently do not
comply with that requirement and, therefore, are excluded from
the relief. However, assessors are usually aware of new
construction because of the issuance of a building permit.
3)The sponsor also states that, while, at first glance, one
would anticipate this bill to result in a revenue loss, an
argument may be made that this proposal is revenue neutral and
may even increase state and local government revenues. The
sponsor argues that this measure will allow more senior
citizens to move and, therefore, more homes will be assessed
at current market value.
4)The proponents argue this bill addresses the existing inequity
and recognizes that a divorce "can wreak havoc with an
individual's finances - particular with those of a senior -
and that should not be compounded by a statute that fails to
recognize that marriages don't always last forever."
5)Currently, the Board of Equalization is required to collect
data from counties and maintain a database of base year value
transfer claimants and their spouses, if names of both spouses
are on the title to the new home. If claimant's spouse
subsequently claims another base year value transfer, the BOE
database would match the name and the claim will be denied.
This bill, however, would allow a married couple to move their
base year value twice but only if both spouses make a claim
for the first time after January 1, 2010. Because this bill
applies only prospectively, a spouse of the person who has
already been granted a base year value transfer will not be
able to claim a second base year value transfer.
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6)Committee staff notes that California has the lowest property
taxes of almost any state in the nation and provides the
greatest benefit to property owners, especially those that
have been in their homes for many years. Propositions 60 and
90 allow persons over 55 years of age and the disabled persons
to move without tax consequences, so long as the value of the
replacement home met the definition of "equal or lesser value"
provided in the statute.
The sponsor, however, argues that existing law creates a
"spousal penalty" by disallowing the benefits afforded by
Propositions 60 and 90 to a married person whose spouse has
already claimed a base year value transfer property tax
relief. As an example, the sponsor presents a situation
where, after one of the spouses (Ralph) has filed a claim, the
couple decides to divorce and, subsequently, the other spouse
(Betty), who has never filed a base year value transfer claim,
remarries. If, later on, the new couple decides to buy a
replacement property and Betty's new husband applies for a
base year value transfer relief, his claim will be denied
because of the prior claim made by Ralph. To address those
specific concerns, the Committee may wish to limit the
application of this bill to a married couple where (a) one of
the spouses was previously married and received a base year
value transfer on a home he/she, or his/her ex-spouse, owned
in the prior marriage, or (b) one of the spouses dies.
7)Committee staff notes that AB 2579 (Niello), introduced in the
2007-08 Legislative Session, was almost identical to this
bill. However, unlike this bill, AB 2579 would have
disallowed a claim made by a claimant who is under the age of
55, even if the claimant resides with a spouse who meets the
age or disability requirement. In addition, AB 2579 would
have required that the claimant be a record owner of both the
original principal residence and the replacement property.
Under existing law, a person of any age may make a base year
value transfer claim as long as that person resides with a
spouse who is over 55 or permanently disabled, even if the
spouse is not an owner of record of either the original or
replacement property. AB 2579 passed out of the Assembly with
a vote of 79-0 but, eventually, was held in the Senate
Appropriations Committee.
REGISTERED SUPPORT / OPPOSITION :
AB 321
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Support
California Assessors' Association
California Association of Realtors
Los Angeles County Board of Realtors
Opposition
None on file
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098