BILL ANALYSIS
SENATE REVENUE & TAXATION COMMITTEE
Senator Lois Wolk, Chair
SB 1494-
Committee on Revenue and Taxation
Introduced: March 15, 2010
Hearing: April 14, 2010 Fiscal: No
SUMMARY: Makes Eight Changes to Property Tax Law
I. Renumbering Error
EXISTING LAW California Constitution) provides that
all property is taxable unless explicitly exempted by the
Constitution or federal law, and imposes property tax on
all taxable real and personal property. The Constitution
provides that taxation of "real" property (structures
affixed to the ground, etc.) is limited to the 1975
valuation adjusted for new construction plus an annual
inflation factor of no more than 2%. When a change in
ownership takes place, or the property is newly
constructed, assessors revalue real property at full market
value as of the year the transaction or construction takes
place.
EXISTING LAW provides that the creation, termination,
and transfer of certain leasehold interests with a term of
more than 35 years can be a change in ownership resulting
in reassessment.
THIS BILL corrects a drafting error inadvertently
created by recent amendments made by Ch. 364, Stats. 2006
(AB 3076, Committee on Revenue and Taxation) by adding
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paragraph designations (R&T 61).
II. Allowing Trustees to Apply for and Inspect
Parent-Child Transfers and Base Year Value
Transfers
EXISTING LAW (California Constitution) provides an
exception to "change of ownership" for property transfers
between spouses under specified circumstances, for
transfers between parents and children (Proposition 58,
1986), and for transfers between grandparents and
grandchildren (Proposition 193, 1996), subject to certain
limits.
EXISTING LAW provides that a change of ownership has
not occurred when parents transfer the principal residence
and the first $1 million of full cash value of all other
real property to their children when a claim is filed.
Existing law defines "children" as:
Any child born of the parent or parents
except a child adopted by another person.
Any stepchild of the parent or parents
and the spouse of that stepchild while the
relationship of stepparent and stepchild exists.
Any son or daughter-in-law of the
parents.
Any child adopted by the parent or
parents pursuant to statute.
Claims for the parent-child change in ownership must
be filed, signed, and may be inspected only by the persons
specified above. Trustees are not expressly listed;
however, the State Board of Equalization (BOE) has opined
that trustees may file for parent-child transfers as part
of their fiduciary duty.
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THIS BILL adds a trustee of a trust to that list (R&T
63.1).
EXISTING LAW allows homeowners over the age of 55 and
disabled persons one opportunity to transfer their base
year values to homes of equal or lesser value within the
same county (Proposition 60, 1988), or to homes in counties
that adopt ordinances allowing the transfer (Proposition
90, 1990), under specified conditions. Currently, Alameda,
Los Angeles, Orange, San Diego, San Mateo, Santa Clara, and
Ventura Counties allow these out-of-county transfers. Base
year transfers allow taxpayers to continue to pay property
taxes at the amount and rate of growth of their previous
home and prevent reassessments to the cash value of their
newly purchased home. Coowners who are joint tenants, a
tenant in common, or a community property owner may claim a
base year value transfer. BOE has opined that the present
beneficial owner of the trust, not the trustee, may claim
the base year value transfer.
THIS BILL adds present beneficial trustees to the list
of eligible base year value claimants.
III. Relieving the Disaster of Disaster Relief
EXISTING LAW provides a homeowners' exemption from
property taxes equal to $7,000 in assessed value (at a one
percent property tax rate, the exemption reduces property
taxes by roughly $70) for owner-occupied homes. Once
granted, homeowners' exemptions are generally permanent.
However, an Assessor may deny a homeowner's exemption if
the property becomes vacant or is under construction as of
the January 1st lien date. The homeowners' exemption is
disallowed if, on the January 1 lien date, a home
previously receiving the exemption has been totally
destroyed and has not been rebuilt and reoccupied by its
owners. However, when there is a Governor declared state
of emergency for a natural disaster, legislation is usually
enacted for each disaster to allow the exemption to remain
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- the Code now contains 22 separate protections for
taxpayers from the assessor revoking the homeowners'
exemption in such a case, occasionally referred to as "the
sadistic assessor provision."
THIS BILL enacts general language precluding assessors
from revoking homeowners' exemptions for disaster-affected
property upon a declaration of disaster from the Governor,
thereby avoiding the need for special purpose legislation
for each individual disaster.
IV. Extending Sunset on Intercounty Pipeline Valuation
Methodology
EXISTING LAW requires that assessors value intercounty
pipeline rights-of-way according to a codified assessment
valuation methodology (AB 1286, Takasugi, 1996), codifying
an agreement between assessors and intercounty pipeline
right-of-way owners after litigation transferred the
assessment duty from BOE to assessors in 1993 (Southern
Pacific Pipe Lines, Inc. v. State Board of Equalization, 14
Cal.App.4th 42). Essentially, assessors determine value
based on the density classification of the pipeline on a
per-mile basis, and that value is rebuttably presumed to be
correct. The Legislature has once before extended the
methodology (AB 2612, Brewer, 2000).
THIS BILL extends this methodology for use to the
2015-16 fiscal year.
V. Cleanup to Assessment Appeals Statutes
EXISTING LAW provides that assessment appeals boards
must hear and decide appeal applications within two years
of the filing of the application. If the two-year time
period is not met, then the taxpayer's opinion of value
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will be enrolled for the tax year covered by the appeal and
in some cases will remain in effect until the appeals board
makes a final determination.
THIS BILL makes clarifying nonsubstantive amendments
identified by a working group of the Tax Section of the
California State Bar.
VI. Cleanup to AB 824, Assessment Appeals Board Conflict
of Interest
EXISTING LAW bars certain county officials and
employees from representing, for compensation, property
owners in assessment appeal hearings in the county where
they work. Last year, the Legislature consolidated all
affected individuals into one section of law (AB 824,
Harkey, 2009).
THIS BILL repeals provisions in R&T 1624.3, 1636.2,
and 1636.5 rendered outdated and duplicative in AB 824.
VII. Cleanup to Roll Correction Statutes
EXISTING LAW states that incorrect entries on the
assessment roll that has been completed by the county
assessor and delivered to the county auditor may be
corrected within certain time limits depending upon the
nature of the error or omission.
THIS BILL makes clarifying nonsubstantive amendments
identified by a working group of the Tax Section of the
California State Bar.
VIII. Delete Erroneous Cross Reference
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EXISTING LAW requires that property taxes paid must be
refunded if the assessment appeals board reduces an
assessed value after an appeal, under R&T 1613. However,
R&T 1613 was repealed and its provisions imported into
R&T1610.8 (SB 1063, Committee on Revenue and Taxation,
2003)
THIS BILL corrects the cross reference error.
FISCAL EFFECT:
BOE estimates that SB 1494 has no revenue impact.
COMMENTS:
A. Purpose of the Bill
SB 1494 consolidates eight items that make minor,
technical changes to property tax law sponsored by BOE.
The bill improves the administration of property tax laws
to help both taxpayers and tax administration agencies.
Consolidating the measures into a single bill negates the
need for individual bills to enact each change.
Additionally, the measure only contains items with
universal agreement; items that are controversial or
problematic will be removed from the bill
Support and Opposition
Support:State Board of Equalization (Sponsor)
Oppose:None received
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Consultant: Colin Grinnell