BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1250|
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UNFINISHED BUSINESS
Bill No: SB 1250
Author: Ducheny (D)
Amended: 8/9/10
Vote: 21
SENATE REVENUE & TAXATION COMMITTEE : 5-0, 4/14/10
AYES: Wolk, Walters, Alquist, Ashburn, Padilla
SENATE APPROPRIATIONS COMMITTEE : 10-0, 5/27/10
AYES: Kehoe, Alquist, Corbett, Denham, Leno, Price,
Walters, Wolk, Wyland, Yee
NO VOTE RECORDED: Cox
SENATE FLOOR : 33-0, 6/3/10
AYES: Alquist, Ashburn, Calderon, Cedillo, Cogdill,
Corbett, Correa, Denham, DeSaulnier, Ducheny, Dutton,
Florez, Hancock, Huff, Kehoe, Leno, Liu, Lowenthal,
Negrete McLeod, Oropeza, Padilla, Pavley, Price, Romero,
Runner, Simitian, Steinberg, Strickland, Walters, Wolk,
Wright, Wyland, Yee
NO VOTE RECORDED: Aanestad, Cox, Harman, Hollingsworth,
Wiggins, Vacancy, Vacancy
ASSEMBLY FLOOR : 74-0, 8/18/10 - See last page for vote
SUBJECT : Property tax: military housing
SOURCE : County of San Diego
DIGEST : This bill expands the property tax exemption
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currently provided to private operators of family housing
on military bases to include non-family housing.
Assembly Amendments make clear that the safe harbor
provisions of Section 107.4 of the Revenue and Taxation
Code do not apply to a military housing unit managed by a
private contractor that is rented to a tenant who is an
unaffiliated member of the general public, and required
private contractors to be responsible for any property
taxes on housing units rented to unaffiliated members of
the general public.
ANALYSIS : Current law generally prohibits the taxation
of property owned by the federal government and other
public land, but imposes a "possessory interest" tax on
federally-owned property used by a private interest, such
as a private lease of public land, if the private use meets
three tests of independence, durability, and exclusivity.
Under the federal Military Housing Privatization
Initiative, which was enacted in 1996, the federal
government began privatizing military housing. The
authorization was initially limited to agreements between
the military and private developers for ownership,
maintenance, and operation of family housing via a 50-year
lease. In response, the Legislature enacted SB 451
(Ducheny), Chapter 853, Statutes of 2004, which specified
that a private developer's interest in military family
housing is not "independent" for purposes of imposing a
possessory interest tax, and therefore exempt from the
property tax. This exemption does not apply to
unaccompanied housing for single enlisted service members.
In 2003, Congress authorized the Department of the Navy to
undertake up to three pilot projects for the privatization
of unaccompanied housing, such as bachelor enlisted
quarters, barracks, and dormitories. The Navy selected a
private developer for a public-private venture to provide
housing for single military personnel at Naval Station San
Diego. This project, Pacific Beacon LLC, privatized 258
units of Navy-owned unaccompanied housing units and
provides for the construction of 941 apartments at Naval
Station San Diego, which the LLC will own, operate, and
manage for 50 years. Construction broke ground in January
2007 and was substantially completed in March 2009.
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This bill:
1. Eliminates the requirement that the housing be for
"military personnel and their dependents" and instead
specifies that the housing be for military personnel or
their dependents, or both, thereby allowing the
exclusion to apply to long-term leases of nonfamily or
"bachelor" housing.
2. Specifies that the safe harbor provisions shall not
apply to a military housing unit managed by a private
contractor that is rented to a tenant who is an
"unaffiliated member of the general public."
3. Defines an "unaffiliated member of the general public"
as a person who is not a current member of the military.
4. Provides that a housing unit rented to or occupied by a
person employed as management or maintenance personnel
for the military housing property shall not be
considered to be a unit rented to an "unaffiliated
member of the general public."
5. Requires the private contractor to notify annually the
assessor by February 15 of any housing units rented to
unaffiliated members of the general public as of the
immediately preceding lien date. The private contractor
shall be responsible for any property taxes on housing
units rented to unaffiliated members of the general
public.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
The Senate Appropriations Committee staff notes that San
Diego County has asked the Board of Equalization (BOE)
for a legal opinion of whether the Pacific Beacon project
constitutes a possessory interest under existing law.
BOE recently opined that the arrangement between Pacific
Beacon and the government does not result in the creation
of a taxable possessory interest, so any assessments on
the property will be cancelled and the project will be
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exempt from future property taxation. However, to the
extent this bill exempts future "bachelor housing"
developments on military bases from property tax, this
bill creates future General Fund impacts.
SUPPORT : (Verified 8/18/10)
County of San Diego (source)
Clark Realty Capitol
San Diego County Assessor
San Diego Regional Chamber of Commerce
ARGUMENTS IN SUPPORT : The author states: "In 2004 SB
451 was passed and signed into law and added [S]ection
107.4 to the Revenue and Taxation [C]ode. This new
provision clarified that 'military family housing' meeting
certain specified criteria did not rise to an 'independent'
possession of federal land. Section 107.4 does not apply
to housing designed for bachelor, or non-family military
personnel. The need for military housing exists for both
married and unmarried military personnel, and it is
important to ensure that all military [personnel] have
access to adequate housing."
The bill's sponsor, the County of San Diego, notes: "The
County is sponsoring SB 1250 to address an inadvertent
omission in SB 451 (Ducheny), Ch. 853 of the Statutes of
2004, which exempted military 'family' housing projects
from the possessory interest classification. The intent of
SB 451 was to also include unaccompanied or single housing
which is in short supply as well. SB 1250 will further
promote the development of on-base military housing,
thereby increasing the supply of available affordable
housing for all military personnel."
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall,
Bill Berryhill, Tom Berryhill, Block, Blumenfield,
Bradford, Brownley, Buchanan, Caballero, Carter, Chesbro,
Conway, Cook, Coto, Davis, De La Torre, De Leon, DeVore,
Eng, Feuer, Fletcher, Fong, Fuentes, Fuller, Furutani,
Gaines, Galgiani, Garrick, Gatto, Gilmore, Hagman, Hall,
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Harkey, Hayashi, Hernandez, Hill, Huber, Huffman,
Jeffries, Jones, Knight, Lieu, Bonnie Lowenthal, Ma,
Mendoza, Miller, Monning, Nava, Nestande, Niello,
Nielsen, V. Manuel Perez, Portantino, Ruskin, Salas,
Saldana, Silva, Skinner, Smyth, Solorio, Audra
Strickland, Swanson, Torlakson, Torres, Torrico, Tran,
Villines, Yamada, John A. Perez
NO VOTE RECORDED: Blakeslee, Charles Calderon, Evans,
Logue, Norby, Vacancy
DLW:mw 8/18/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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