BILL ANALYSIS
SB 824
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Date of Hearing: June 15, 2009
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Charles M. Calderon, Chair
SB 824 (Committee on Revenue and Taxation) - As Introduced:
March 10, 2009
Majority vote. Fiscal committee.
SENATE VOTE : 36-0
SUBJECT : Property tax: administration
SUMMARY : Makes various changes to the administrative provisions
of the property tax law. Specifically, this bill :
1)Deletes the requirement that the Board of Equalization (BOE)
hold regular meetings at the State Capital each month and,
instead, authorizes BOE to hold the required monthly meetings
at times and places within the state, as directed by the
chairperson, provided that BOE holds at least one regular
meeting in Sacramento each quarter.
2)Revises the definition of real property "substantially damaged
or destroyed" by a disaster to specify that land and
improvements made on that land are considered to be separate
units for purposes of determining whether the property
sustained physical damage amounting to more than 50% of its
full cash value immediately prior to the disaster and whether
the taxpayer qualifies for a base-year transfer property tax
relief.
3)Revises the filing procedures and requirements applicable to a
church or a nonprofit organization claiming a property tax
welfare exemption in the case of a property leased to public
schools in a shared or joint use arrangement.
4)Expands the list of eligible lessees that may lease property
from a church or a non-profit organization, in accordance with
the requirements of the property tax welfare exemption, to
include public schools and the University of California.
5)Deletes the existing "Preliminary Change in Ownership Report"
form, as it appears in the statute, and instead, requires BOE,
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after consultation with the California Assessors' Association
and interested parties, to prescribe the contents of that form
consistent with the contents of other BOE-prescribed forms,
including a description of the property, the parties to the
transaction, the date of acquisition, the amount of the
consideration paid for the property, and the terms of the
transaction.
6)Deletes obsolete references to outdated disabled veterans'
exemption amounts and corrects a transposition error in
Revenue and Taxation Code (R&TC) Section 276.
7)Clarifies that a cross-reference to "Section 408" in
Government Code (GC) Section 15641 refers to R&TC Section 408
rather than the GC.
8)Specifies that no appropriation is made by this bill and that
the state will not reimburse local agencies for property tax
revenues lost by those agencies pursuant to this bill.
Provides that, if the Commission on State Mandates determines
that this bill contains costs mandated by the state,
reimbursement for those costs shall be made pursuant to those
statutory provisions.
EXISTING LAW :
1)Requires BOE to hold regular meetings at the State Capital
each month and special meetings at such places and times as
the chairperson directs. Currently, public meetings are held
throughout the year, monthly in Sacramento, as required by
law, and other times in the Los Angeles area.
2)Allows disaster victims to transfer the base year value of
property that is "substantially damaged or destroyed" in a
governor-declared disaster to a replacement property within
five years after the disaster. A base year value "transfer"
from the original property to a replacement property allows
the owner to continue to pay the same amount of property taxes
on the replacement property as he/she paid on the original
property. The phrase "substantially damaged" is defined as
physical damage to a property amounting to more than 50% of
its current market value immediately prior to the disaster.
For purposes of determining whether a property is
"substantially damaged or destroyed", existing law does not
treat land and improvements as separate appraisal units.
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Under those provisions, a disaster victim may not be eligible
for the base year value transfer tax relief if his/her damaged
house was worth less than the land on which the house was
constructed. For example, if a fire damages a property worth
$800,000, with $450,000 of land value and $350,000 of value of
the house, the homeowner would not be eligible for a base year
value transfer, even if the house is completely destroyed,
because the land's total value is much higher than the value
of the house, and the 50% threshold is not met.
3)Provides an exemption from taxation for property that is
irrevocably dedicated to religious, hospital, scientific, or
charitable purposes, if the property is used for the actual
operation of the exempt activity and is owned by a nonprofit
entity qualified as an exempt organization by the Internal
Revenue Service, the Franchise Tax Board, or both (the
so-called 'welfare exemption') [Article XIII, Section 4, of
the California Constitution; RT&C Section 214]. Also,
property that is privately owned but leased to public schools,
including those of collegiate grade, is exempt from property
tax under the lessor's exemption, provided that the property
is exclusively used for school purposes. Finally, a property
owned by a nonprofit organization or a church is exempt from
property tax under the welfare exemption if it is leased to
public schools or colleges. Many facilities owned by both
public and private parties are leased to schools and colleges
for shared or joint uses. Existing law provides for different
filing requirements for the same property under the welfare
exemption, the lessor's exemption, and the religious
exemption.
4)Requires reassessment of real property to its current fair
market value whenever a "change in ownership" occurs and
specifies the forms that must be filed by a property owner
with the local assessor to ensure that the property is
reassessed when the ownership changes. Statutorily prescribes
the specific contents of the "Preliminary Change of Ownership
Report" form, a confidential document that provides the
assessor with information necessary to value the property for
tax purposes and also helps the assessor to identify property
that may be eligible for various exclusions. That form may be
revised by BOE for purposes of maintaining statewide
uniformity but any other changes to the form may be made only
by the Legislature.
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FISCAL EFFECT : BOE staff estimates minor costs (under $10,000)
and projects that this bill will have no impact on General Fund
revenues.
COMMENTS :
1)The purpose of this bill is to make minor, technical changes
to the administrative provisions of the property tax law. SB
824 consolidates those changes into a single bill to eliminate
the need for individual bills. According to the author, SB
824 contains only non-controversial items, and any items that
are found to be controversial or problematic will be removed
from this bill.
2)BOE staff notes that BOE's workload fluctuates throughout the
year, with the number of taxpayer appeals scheduled in the Los
Angeles area significantly exceeding the number of cases heard
in Sacramento. SB 824 provides BOE with flexibility to hold
hearings in other locations in this state, which may be
necessary to better serve taxpayers or to balance workload for
both staff and Board Members in preparations for those
meetings.
3)BOE staff notes that the issue of land values comprising more
than 50% of a property's total value is an emerging issue that
recently came to light as a result of the 2007 fires in San
Diego County.
4)BOE staff notes that many facilities owned by nonprofit
organizations or churches are leased to public schools and
colleges in a shared or joint use arrangement. Occasionally,
both the lessor (a nonprofit organization or a church) and the
lessee (a public school) file exemption claims for the same
property because the same property may qualify for various
types of property tax exemptions. However, different filing
requirements apply to claims filed pursuant to the welfare
exemption and the lessor's exemption. This bill would specify
the annual filing procedure when a welfare exemption claimant
leases property to public schools. SB 824 would also clarify
that churches claiming the religious exemption must annually
file a church lessor's exemption claim, to be developed by the
BOE.
5)BOE's recent survey on change of ownership issues demonstrated
that the "Preliminary Change of Ownership Report" form may be
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improved to make it more user-friendly. However, because the
contents of the form are statutorily prescribed, BOE cannot
revise that form without a legislative act.
6)Committee staff notes that SB 1777 (Senate Committee on
Revenue and Taxation), introduced in the 2007-08 Legislative
Session, was similar to this bill. SB 1777 was vetoed by the
Governor, along with other measures, with the following veto
message:
"The historic delay in passing the 2008-09 State Budget has
forced me to prioritize the bills
sent to my desk at the end of the year's legislative session.
Given the delay, I am only signing bills that are the highest
priority for California. This bill does not meet that
standard and I cannot sign it at this time."
REGISTERED SUPPORT / OPPOSITION :
Support
State Board of Equalization
Opposition
None on file
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098