BILL ANALYSIS
AB 1029
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Date of Hearing: January 11, 2010
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Charles M. Calderon, Chair
AB 1029 (Blumenfield) - As Amended: January 4, 2010
Majority vote. Fiscal committee.
SUBJECT : Taxation: property tax postponement.
SUMMARY : Revises the Senior Citizens and Disabled Citizens
Property Tax Postponement (PTP) Law, allows the State Controller
(SC) to accept applications for property tax postponement under
that law, and authorizes county tax collectors to cancel any
delinquent penalties and interest owed by claimants for the
2009-10 and 2010-11 fiscal years (FY), as specified.
Specifically, this bill :
1)Repeals Government Code (GC) Section 16180 that continuously
allocates funds to the SC to pay certificates of eligibility
for the postponement of property taxes and, instead, creates
the Senior Citizens and Disabled Citizens Property Tax
Postponement Fund (Fund) in the State Treasury.
2)Authorizes the SC to use moneys in the Fund, upon
appropriation by the Legislature, to make property tax
payments on behalf of claimants and to pay costs incurred in
administering the program or the Fund.
3)Specifies that all expenses incurred in administering the
revised PTP Law must be paid for solely from the Fund, and no
liability or obligation shall be imposed upon the state.
4)Repeals the SC's authority to issue a certificate of
eligibility to a claimant, or to make payments directly to a
lender, mortgage company, escrow company, or county tax
collector for the property taxes owed on behalf of a qualified
claimant. Instead, requires the SC to issue, on behalf of a
qualified claimant, a PTP payment to the county tax collector,
upon receipt of a specified verification from the collector.
5)Requires a county tax collector to accept PTP payments issued
by the SC to pay property tax, special assessment, or other
charge or user fee appearing on the county tax bill.
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6)Provides that all amounts postponed shall become due and
payable as provided by GC Section 16190.
7)Reduces the amount of maximum household income for eligible
claimants from $39,000 to $35,500.
8)Modifies the definition of household "income" to exclude
losses or other noncash expenses.
9)Provides that the definition of "residential dwelling" of a
claimant does not include any residential dwelling in which
the SC determines that the owners do not have sufficient
equity to adequately protect the state's interest.
10)Requires the SC to secure a first-priority lien in favor of
the state upon the real property, possessory interest, or
mobilehome for which property taxes have been postponed that
is sufficient to secure the state's interest in loan
repayment. Specifies that the lien shall have the same
priority as a county property tax lien pursuant to Revenue and
Taxation Code (R&TC) Section 2192.1.
11)Requires the SC to prescribe a maximum annual postponement
loan amount and changes the rate of interest for any deferrals
made on or after January 1, 2010, as provided. Allows the SC
to assess an annual fee of $75 to all claimant accounts for
which property taxes are deferred on or after January 1, 2010.
12)Revises the postponement claim form to include a provision
authorizing the SC to pay the claimant's property taxes, if
approved, and a promise by the claimant to repay the loan, as
required.
13)Modifies the dates for filing a claim for postponement and
requires a claim to be filed between July 1 of the calendar
year in which the FY for which postponement is claimed begins
and September 30 of that FY. Provides that any claim for
postponement for FY 2009-10 must be filed after the effective
date of this bill and on or before April 9, 2010.
14)Makes conforming changes to related provisions of the PTP
Law.
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15)Reauthorizes, by repealing the suspension of the PTP program,
eligible claimants to file PTP applications and allows the SC
to accept those applications.
16)Authorizes tax collectors to cancel any delinquent penalties
and interest owed by the claimant for the 2009-10 and 2010-11
FYs, if a postponement claim is filed in a timely manner.
17)Repeals the Senior Citizens Tenant-Stockholder Property Tax
Postponement Law.
EXISTING LAW :
1)Establishes the PTP program and authorizes the SC's Office
(SCO) to administer it for the specific purpose of allowing
eligible homeowners - those 62 years of age or older, or blind
or disabled individuals - to defer payment of property taxes
due on their personal residences until the homeowner moves
from or sells the residence, or passes away.
2)Specifies that the program is available to a person with
household income of $35,500 or less in 2008, $39,000 or less
in 2009, and $39,000 as adjusted for inflation in 2010 and
thereafter, who has at least 20% equity in his/her home.
Requires that the claimant owned and occupied the residential
dwelling on December 31 of the calendar year for which the
household income is computed.
3)Enacts the Governor's proposal to suspend indefinitely the PTP
program, disallows eligible persons to file a claim for PTP,
and prohibits the SC from accepting applications for
postponement under the PTP law.
FISCAL EFFECT : The SCO estimates that, based on prior years,
the PTP program would cost approximately $9 million or less.
The SCO reports that, over the last 15 years, loan expenditures
averaged $12.32 million while loan repayments averaged $15.1
million.
COMMENTS :
1)Author's Statement . The author states that, "Many program
participants are on fixed incomes, face a rising cost of
living, a decline in property values, and generally cannot
generate the cash needed to pay their property taxes.
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Suspension of the program means many of the 2009 participants
will be unable to pay when their property taxes become due in
December 2009, April 2010, and thereafter. Many program
participants will forgo basic necessities to pay their
property taxes, face hefty delinquency penalties, or face
foreclosure proceedings once the property taxes become
delinquent. Although existing law prohibits counties from
forcing the sale of property due to nonpayment of taxes for a
period of five years, no similar prohibition is in effect on
home mortgage lenders. Controller's Office reports that, in
2008-09, half of the program participants had mortgages."
2)The purpose of this bill . This bill is intended to restore
funding for the PTP program in order to help seniors and
disabled individuals as well as to alleviate the negative
impact of the program suspension on local governments'
revenues.
3)Arguments in Support . The proponents of this bill state that
this measure is the result of ongoing discussions between
state and local entities focusing on restoring the PTP program
and developing a workable program that does not result in a
cost to the state General Fund (GF). They emphasize that,
historically, the program had a minimal start-up costs and, in
most years, generated revenue for the state GF.
4)The PTP Law . California has several property tax programs
benefiting the elderly and disabled individuals, including
property tax reappraisal relief, property tax assistance, and
PTP. Unlike the property tax assistance program that refunds
a percentage of property taxes paid, the PTP program allows
eligible homeowners to defer payment of all or a portion of
the property taxes on their residences. The program was
enacted in 1977, after the passage of a constitutional
amendment authorizing the postponement of property taxes
(California Constitution, Article 13, Section 8) and is
administered by the SCO. The constitutional amendment was in
response to concerns that senior homeowners on fixed incomes
could lose their homes because of the inability to pay rising
property tax bills. Originally designed for persons over 62
years of age, the program is now also available to eligible
blind and disabled persons, regardless of age. The claimants
must also meet other criteria, including having 20% equity in
their homes and annual household income of $39,000 or less.
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Claimants are required to file applications annually with the
SCO, between May 15th and December 10th of each calendar year
for the FY beginning July 1 of that year. The SC may grant a
reasonable extension for filing, but no later than the end of
the FY for which postponement is claimed. Once the
application has been approved, the SC sends two certificates
of eligibility beginning in November for that FY.
Certificates are made out in the name of the claimant and the
county tax collector, and may be used to postpone all or part
of the property taxes on the home. The term "property taxes"
includes everything on the claimants' secured property tax
bill, including special assessment, charges, and user fees, in
addition to ad valorem taxes. However, special assessments
levied independently of the county tax bill are not eligible
for postponement.
The PTP program is a loan program from the state to eligible
property owners. Each year, the state imposes interest on the
amount it pays to the county on behalf of the taxpayer. The
loan is secured by the property and is repaid, with interest,
when the taxpayer dies, sells the home, moves, or allows a
"senior lien" to become delinquent. There is no maximum
amount of postponed property taxes that can be accumulated
under the program.
Over the last 30 years, the PTP program has provided assistance
to more than 200,000 homeowners. Nearly every county has at
least one program participant, and most counties have several
dozen participants. Los Angeles County accounts for 21% of
program participants. San Diego, San Bernardino, Riverside
and Orange counties have 28%, and the nine San Francisco - Bay
Area counties have about 19% of the program participants.
On February 20, 2009, the PTP program was indefinitely suspended
as part of the budget reductions to the state's GF programs.
[SB x3 8 (Ducheny), Chapter 4, Statutes of 2009]. The
funding for the program was eliminated and the SC was
prohibited from accepting any new applications after February
20, 2009. Consequently, the SCO notified the counties and
each claimant who was approved for postponement in FY 2008-09
that their application could not be accepted. Most
applications submitted by claimants in FY 2008-09 were
processed before the suspension became effective.
5)The Impact of the Suspension on Program Participants and
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Counties . For more than 30 years, the PTP program helped
thousands of low and moderate income elderly, blind and
disabled individuals to remain in their homes. Historically,
the loan repayments, with few exceptions, have equaled or
exceeded the annual program expenditures and administrative
costs. The SCO reports that, over the long-term, the program
is self-supporting, and that the program, since the year 2000,
has collected $35 million more in PTP loan repayments than it
disbursed in PTP loans. The program allows participants to
remain in their homes, reduces county property tax default
rates and increases county tax collection revenues.
According to the survey conducted by the SCO, the program
suspension has had a direct negative impact, not only on the
program participants but also, on the counties. The program
participants expressed fear of losing their homes to tax
default sales and foreclosures by lenders because of the
failure to pay property taxes directly or through an impound
account initiated by the lender. They are also concerned with
becoming homeless or dependent on family members and not being
able to afford basic necessities. Many claimants have been in
the program for over 20 years and have been counting on the
loan program to pay their property taxes. More than 50% of
the program participants are 75 years of age or older, and 208
claimants approved for FY 2008-09 are older than 90 years of
age.
Furthermore, the counties have also been negatively impacted
by the program suspension. The county tax collectors reported
a decrease in revenue due to higher delinquencies rates, an
increase in related workload, including the number of
properties that the counties are forced to sell as
tax-defaulted, and an increased strain on county services by
displaced homeowners.
6)The Proposed PTP program . Under existing law, until February
20, 2009, the PTP program received only GF moneys. This bill
would revise the financing mechanism for the PTP program by
establishing a revolving special fund that would allow the
property tax deferral program to be self-financing and not
reliant as much on an annual GF appropriation. However, it is
unclear to the Committee staff, from reading this bill, as to
what revenues, besides GF appropriations, would be deposited
in the Fund. According to the sponsor, the intent is to
transfer the annual fee, interest, and any loan repayment
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amounts to the Fund. The sponsor's objective is to make this
fund self-sustaining and to use the loan repayments to fund
future loans.
Under the PTP program, the state places a lien on the property
for which property taxes have been postponed through a state
loan. The state lien does not have the same priority as a
county lien for delinquent property tax payments, which has
resulted in occasional losses to the state. This bill would
give the PTP lien the same status as that currently afforded
to a county property tax lien.
This bill would also increase the PTP interest rate, require a
nominal annual fee, which would be added to the loan amount,
for approved claimants to defray the SCO's administrative
costs, revise the eligibility requirements, and provide for an
annual cap on PTP loans to avoid paying very high property tax
bills. It is estimated that the last three measures could
result in annual savings of at least $500,000.
7)Author's Proposed Amendments . Committee staff is informed
that the author will offer additional amendments in Committee
during the hearing on January 11, 2010. The amendments would
add Civil Code Section 2923.57 to impose a five-year
moratorium on foreclosures for PTP program participants for
non-payment of property taxes (similar to the version of this
bill as amended on September 3, 2009), clarify the status of a
state lien for PTP loans, further modify the definition of
"residential dwelling" and re-instate the provision relating
to impound accounts.
REGISTERED SUPPORT / OPPOSITION :
Support
The State Controller's Office
The Urban Counties Caucus
California State Association of Counties
Opposition
None on file
Analysis Prepared by : Oksana G. Jaffe / REV. & TAX. / (916)
319-2098
AB 1029
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