BILL ANALYSIS
AB 852
Page 1
Date of Hearing: April 27, 2009
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Charles M. Calderon, Chair
AB 852 (Fong) - As Amended: April 23, 2009
Majority vote. Fiscal committee.
SUBJECT : Property taxation: statement.
SUMMARY : Authorizes county assessors to require electronic
filing of annual business property statements in the format
prescribed by the Board of Equalization (BOE). Requires BOE to
adopt standard equipment codes for purposes of completing
business property statements. Specifically, this bill :
1)Authorizes a county assessor to require a taxpayer that owns
taxable personal property with an assessed value of $100,000
or more to electronically file a business property statement.
2)Provides a one-year grace period for the taxpayer to comply
with the electronic filing requirement.
3)Allows the taxpayer to file business property statements in a
paper format during the one-year grace period.
4)Requires BOE to prescribe a format and method for filing
annual business property statements, including those filed
electronically.
5)Permits a county assessor to reject property statements that
are not filed in the requested format.
6)Requires BOE to adopt, on or before January 1, 2011, equipment
category codes and specifies that BOE must consult with the
California Assessors' Association and taxpayer
representatives.
7)Provides that, on and after January 1, 2012, taxpayers filing
property tax statements must use the equipment category codes
adopted by BOE.
EXISTING LAW :
AB 852
Page 2
1)Imposes an ad valorem tax on all assessable personal property
used in a trade or business. The ad valorem tax is collected
annually and is based on the current fair market value of the
personal property. Personal property is not subject to the
limitations imposed by Article XIII A of the California
Constitution (Proposition 13).
2)Requires taxpayers to submit, under penalty of perjury, an
annual business property statement to the local county
assessor, reporting the cost of their property, if the
aggregate cost of the taxable personal property is at least
$100,000. [Revenue and Taxation Code (R&TC) Section 441].
The business property statement shows all taxable property,
both real and personal, owned, claimed, possessed, controlled,
or managed by the person filing the property statement.
3)Requires BOE to prescribe the content and detail of the
business property statement. (R&TC Section 452).
4)Allows taxpayers to file property statements using electronic
media, provided that the statement is authenticated as
specified by the local assessor and approved by BOE. Defines
"electronic media" to include computer modem, magnetic media,
optical disk, and facsimile machine. (R&TC Sections 441 and
441.5).
5)Requires BOE to prepare and issue instructions to assessors
designed to promote uniformity throughout the state and its
local taxing jurisdictions in the assessment of property for
purposes of taxation. (Government Code Section 15606).
6)Requires BOE to issue data to assessors relating to the costs
of property and other information that will promote uniformity
in appraisal practices and is assessed values throughout the
state. (R&TC Section 401.5).
FISCAL EFFECT : The BOE staff estimates that this bill will have
no direct impact on state revenues.
COMMENTS :
1)The author states that, "AB 852 directs the Board of
Equalization to adopt equipment category descriptions, in
consultation with assessors and taxpayers, and allows an
assessor to require a business to file electronically. This
AB 852
Page 3
bill will provide incentives to assessors and businesses to
make the necessary transitions in their electronic processing
systems such that Business Property Statements can be filed
and accepted electronically statewide. AB 853 will decrease
the amount of paper filings, which in turn will reduce human
errors and costs associated with postage, processing, and data
entry."
2)According to the author, the purpose of this bill is to
provide incentives to assessors and businesses to make the
necessary transitions in their electronic processing systems,
such that business property statements can be filed and
accepted electronically statewide.
3)The California Assessors' Association, sponsor, states that AB
852, by requiring businesses to file their business property
statements electronically, will establish uniformity and will
reduce errors and costs associated with paper filings.
4)The Committee staff notes all of the following:
a) Electronic filing of business property statements .
Personal property used in a trade or business is,
generally, taxable, and the taxpayer who owns that property
must annually report the cost of that property to the local
assessor by filing a property statement (Form 571). Many
assessors provide an opportunity for businesses to file
their property statements electronically, via an
interactive, online filing system. In 2004, local county
assessors created a Joint Powers Agreement (JPA) for
Standard Data Record Development (SDR) and Year to Year
Support. Currently, more than 40 counties participate in
the program. The SDR system is designed to simplify the
process of filing annual property statements for businesses
that have multiple locations in one or more California
counties. The system allows a business to upload data
directly from its internal data processing system into SDR,
which will deliver the data to the corresponding county
assessor. The goal of the SDR system is to allow major
corporations to bypass filing a business property statement
in every county in which they have a business presence. In
addition, assessors could reduce the costs associated with
processing data from the paper statements if statements are
filed electronically. Finally, business filing
electronically via the SDR system would receive their
AB 852
Page 4
estimated assessed values earlier and the assessors could
process filings with fewer errors.
The SDR system, however, only accepts business property
statements that are filed electronically in the approved
XML file format, and, in order to create SDR files, a
business must have the SDR software and special
programming. Arguably, the level of effort and investment
may not be practical for businesses that are filing for a
single location.
b) Other Electronic filing Methods . Some counties allow
taxpayers to submit their business property statements via
the Internet, requiring no special data format. Generally,
this sort of e-filing is designed for small and medium
business owners.
c) One-year grace period . This bill specifies that the
electronic filing requirement applies only to taxpayers
that own taxable personal property with the aggregate cost
of $100,000 or more in the prior year. To ensure
uniformity amongst various counties, BOE is required to
prescribe the form and methods of electronic filing for
property statements.
This bill also grants a one-year grace period to taxpayers
that are required by the assessors to file electronically.
Thus, the taxpayer would have one year to comply with this
electronic requirement, and during the one-year period, the
taxpayer may file its business property statements in a
paper format. It is unclear, however, how the taxpayer
would know whether or not it is subject to the electronic
filing requirement. Committee staff suggests that this
bill be amended to provide that an assessor must notify a
taxpayer in writing that the taxpayer is subject to the
electronic filing requirement, and to clarify that the
one-year grace period begins from the day the notification
was sent to the taxpayer.
d) Equipment Category Codes . Personal property is valued
each lien date at current fair market value. Since it is
not administratively feasible to determine annually the
fair market value of every item of personal property used
by all of the California businesses, the annual assessment
process is based on certain mass appraisal techniques.
Generally, the valuation of personal property is based on
AB 852
Page 5
the acquisition cost of the property multiplied by a price
index (an inflation trending factor based on the year of
acquisition) and a depreciation index. Annually, BOE
publishes Assessors' Handbook Section 581 "Equipment Index
and Percent Good Factors". Section 581 of the Handbook
contains several tables of equipment index factors, percent
good, and valuation factors that aid assessors in the mass
appraisal of various types of personal property and
fixtures.
When a business fills out a business property statement, the
business must report its machinery and equipment. BOE does
not publish a standard list of equipment category codes,
and there is no catalogue of equipment descriptions that
are accepted by all 58 counties. Because of this lack of
uniformity, businesses use different approaches in
describing their equipment and machinery classification.
To address this problem, the California Assessors'
Association has created a uniform set of equipment category
descriptions. Each category description has a code that
serves to identify the nature and use of equipment that the
taxpayer uses in conducting the business. For example,
small bakeries have a code "C0901" and breweries have a
code of "I0502". AB 852 requires BOE to adopt equipment
category codes by January 1, 2011, and provides that
taxpayers filing a business property statement with the
assessor after January 1, 2012, must use the equipment
category codes adopted by BOE. This bill also specifies
that BOE must consult with the California Assessors'
Association and taxpayer representatives in creating those
equipment category codes.
e) Similar Legislation .
SB 2092 (Senate Revenue and Taxation Committee), Chapter 775,
Statutes of 2002, authorizes assessors to accept business
property statements filed electronically and allows
taxpayer to authenticate their signatures by means other
than a traditional signature.
5)Technical amendments. BOE staff suggest the following two
amendments:
AMENDMENT 1
AB 852
Page 6
On page 3, line 33, strike out "of"
AMENDMENT 2
On page 4, breaking up subdivision (k) into subdivisions (k) and
(l) has moved the definition of "electronic media" into
subdivision (l), but the term is first used in subdivision
(k). That definition should be included in the new
subdivision (k) instead of subdivision (l).
REGISTERED SUPPORT / OPPOSITION :
Support
California Assessors' Association (sponsor)
Lawrence E. Stone, Assessor, County of Santa Clara
Opposition
None on file
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098