BILL ANALYSIS
AB 1341
Page A
CONCURRENCE IN SENATE AMENDMENTS
AB 1341 (Bonnie Lowenthal)
As Amended August 2, 2010
Majority vote
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|ASSEMBLY: | |(May 18, 2009) |SENATE: |34-0 |(August 18, |
| | | | | |2010) |
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(vote not relevant)
Original Committee Reference: REV. & TAX.
SUMMARY : Provides that there is no taxable possessory interest
if the possession is pursuant to a project agreement entered
into by the Judicial Council with a nongovernmental entity for
the purpose of replacing the Long Beach Courthouse, and if other
specified criteria are met.
The Senate amendments delete the Assembly version of this bill,
and instead:
1)Include the following legislative findings:
a) The existing courthouse located at 415 West Ocean
Boulevard in the City of Long Beach is in unsatisfactory
physical condition, is a potential public safety risk to
court staff and the public, and is in need of immediate
replacement;
b) This bill is designed to expedite the facility's
replacement by resolving a disputed property tax issue that
could potentially delay the replacement project and add an
element of unpredictable financial risk to the project's
public sponsor;
c) It is the Legislature's intent in enacting this bill to
provide legislative direction to county assessors, the
State Board of Equalization, the courts, and other involved
parties regarding the interpretation of the term
"independent" as it relates to the Long Beach Courthouse;
and,
d) A special law is necessary because of the need to
resolve the property tax issues potentially delaying the
AB 1341
Page B
Long Beach Courthouse replacement project and to mitigate
the attendant risks of that delay to the citizens of Los
Angeles County and the State of California.
2)Provides that there is no "independent" possession or use of
land or improvements (and, therefore, no taxable possessory
interest) if the possession is pursuant to a project agreement
entered into by the Judicial Council (JC) with a
nongovernmental entity in accordance with Government Code (GC)
Section 70391.5 for the purpose of replacing the Long Beach
Courthouse, and if all the following conditions are met:
a) The nongovernmental entity is required to design, build,
finance, operate, and maintain the Long Beach Courthouse;
b) The JC establishes performance expectations and
benchmark criteria for the court facility proposal in
accordance with GC Section 70391.5 that serve as the basis
for selecting the nongovernmental entity;
c) The JC and other governmental entities have exclusive
use and control of the Long Beach Courthouse for court and
related activities for 35 years;
d) The JC holds title to the land and improvements of the
Long Beach Courthouse;
e) The nongovernmental entity is not treated as the owner
of the improvements of the Long Beach Courthouse for any
purpose, including federal income tax purposes, and does
not deduct any depreciation on the improvements; and,
f) Any lease-leaseback of land and improvements of the Long
Beach Courthouse with the nongovernmental entity is solely
for the purpose of providing security for the payment by
the JC of the service fee for services provided by the
nongovernmental entity in connection with a court facility.
3)Provides that this possessory interest safe harbor shall not
apply to any lease of, or improvements to, the Long Beach
Courthouse by the JC with a nongovernmental entity to the
extent the land or improvements are used by the
nongovernmental entity as commercial office space, retail
space, or paid parking spaces not designated for use for
AB 1341
Page C
governmental purposes or court facilities.
4)Provides that, notwithstanding existing law, the state shall
not reimburse any local agency for any property tax revenue
lost as a result of this bill.
5)Takes immediate effect as a tax levy.
EXISTING LAW :
1) Requires all property subject to tax to be assessed at
its full value. For property tax purposes, full value
generally equals the post-Proposition 13 acquisition price,
adjusted annually for inflation (not to exceed 2%).
Although public land is exempt from property tax, private
real property interests held in connection with public land
may be taxed as "possessory interests."
2) Provides that, for a taxable possessory interest to be
found, the possession must generally be "independent,"
"durable," and "exclusive" of rights held by others in the
property.<1> Possession is considered "independent" if the
holder has the ability to exert control over the property's
management, separate and apart from the public owner's
rules and policies. In other words, a possession or use is
independent if it is sufficiently autonomous to constitute
something more than a mere agency.
3)Provides that, if specified conditions are met, there is no
"independent" possession of land or improvements if the
possession is pursuant to a contract that includes a
long-term lease for the private construction, renovation,
or maintenance of housing for active duty military
personnel and their dependents.
AS PASSED BY THE ASSEMBLY , this bill:
1)Deleted obsolete references to the disabled veterans' basic
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<1> Property Tax Rule 20(a)(1) additionally requires that the
possessor derive a "private benefit" from the property's use. A
"private benefit" means "that the possessor has the opportunity
to make a profit, or to use or be provided an amenity, or to
pursue a private purpose in conjunction with its use of the
possessory interest."
AB 1341
Page D
exemption amount of $40,000 and the low-income exemption
amount of $60,000, which were increased by the Legislature in
1989 to $100,000 and $150,000, respectively.
2)Corrected a transposition error in Revenue and Taxation Code
(R&TC) Section 276, intending a cross reference to R&TC
Section 4985, rather than Section 4895, relating to a disabled
veterans' partial exemption for outstanding property taxes.
3)Made a minor, technical change to the provision relating to
the procedure for canceling outstanding property taxes when a
claim for the exemption is filed late.
FISCAL EFFECT : This bill would result in foregone possessory
interest taxes in Los Angeles County of between $4 million and
$5 million. However, the JC indicates that, in the absence of
this bill, the state would be required to pay any possessory
interest taxes related to the Long Beach Courthouse on behalf of
the nongovernmental entity, which could result in annual General
Fund payments of $4 million to $5 million.
COMMENTS : The author has provided the following statement in
support of this bill:
Long Beach is ready for its new courthouse. In fact,
it is long overdue. Experts say its existing
50-year-old facility is perhaps the worst in the state
when it comes to security, safety and overcrowding.
The Administrative Office of the Courts has found a
way to deliver the project three years earlier than
might otherwise occur, by use of a public-private
partnership.
Unfortunately, a dispute over property tax has arisen,
which, if left unresolved, could increase the cost of
the project to the point it would no longer be
fiscally viable.
To resolve this problem without creating precedent or
altering existing code, AB 1341 declares that the
unique needs and nature of the Long Beach courthouse
project exempt its state functions from possessory
interest taxation.
AB 1341
Page E
If the courthouse were funded the traditional way,
possessory tax revenue would of course not exist.
Likewise, if the courthouse construction were
postponed, there would be no economic activity of any
kind to tax. Any revenue to be gained by applying
possessory tax to this project is an illusion.
Committee staff notes that this bill was substantially amended
in the Senate and the Assembly-approved provisions of this bill
were deleted. This bill, as amended in the Senate, is
inconsistent with Assembly Actions.
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098
FN: 0006072