BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 703 HEARING: 6/29/11
AUTHOR: Gordon FISCAL: Yes
VERSION: 5/24/11 TAX LEVY: Yes
CONSULTANT: Grinnell
PROPERTY TAX EXEMPTIONS FOR OPEN SPACE LANDS
Extends the property tax exemption for nature resources and
open space lands
Background and Existing Law
The California Constitution (Article XIII, Section One)
provides that all property is taxable unless explicitly
exempted by the Constitution or federal law. The
Constitution limits the maximum amount of any ad valorem
tax on real property at 1% of full cash value, plus any
locally-authorized bonded indebtedness. Assessors
reappraise property whenever it is purchased, newly
constructed, or when ownership changes. Property owned by
state and local agencies is exempt from the property tax,
but Assessors may assert possessory interests held by
private entities on public lands.
First enacted as an initiative in 1944, the Constitution
additionally allows the Legislature to exempt property used
for charitable purposes, and owned by nonprofit entities
organized and operated for charitable purposes, none of
whose income inure to the benefit of any private
shareholder or individual. The Legislature enacted this
exemption, commonly known as the "welfare exemption."
The Legislature additionally enacted a welfare exemption
from property tax for property that is used exclusively for
the preservation of native plants and animals, biotic
communities, geological or geographical formations of
scientific or educational interest, or open-space lands
used solely for recreation and for enjoyment of scenic
beauty (AB 1264, Biddle and AB 185, Bagley, 1971). The
land must be open to the general public subject to
reasonable restrictions, and owned and operated by a
scientific or charitable fund, foundation, limited
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liability company, or corporation, the primary interest of
which is to preserve the land
The exemption shall not apply to property that is reserved
for future development. The exemption also does not apply
to property of an organization that owns more than 30,000
acres in more than one county that were exempt before March
1, 1983, or that are proposed to be exempt, unless the
nonprofit organization holding the property is fully
independent of the owner of adjacent property. According
to BOE, properties exempt pursuant to this section include
qualified properties owned by nonprofit organizations such
as the Nature Conservancy, the Trust for Public Land,
Anza-Borrego Foundation, Big Sur Land Trust, Peninsula Open
Space Trust, Napa County Land Trust, Save the Redwoods
League, Santa Catalina Island Conservancy, and Mountains
Restoration Trust.
Last extended in 2001, the exemption becomes inoperative on
January 1, 2012, and is repealed on January 1, 2013 (SB
198, Chesbro).
Proposed Law
Assembly Bill 703 extends the inoperative date from January
1, 2012 to January 1, 2022 and the repeal date to January
1, 2023 for the exemption for nature resources and open
space lands.
State Revenue Impact
According to BOE, "The total current exempt value for these
properties does not exceed an estimated $1 billion. It is
difficult to determine the annual revenue loss from
extending this exemption, but it is estimated to be less
than $10 million annually ($1 billion x 1%). Additionally,
it is likely that the revenue loss will grow slightly over
time due to the Proposition 13 inflation factor."
Comments
1. Purpose of the bill . According to the Author, "As is
true in my district, open-spaces and parklands are vitally
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important to the quality of life in communities across
California. Each of us benefits from these preserved green
spaces, whether they are for the protection of wildlife,
for the outdoor education of our urban youth, or for
recreation by all who enjoy California's open-spaces. Many
of these green spaces are owned and operated by charitable
organizations for the public benefits they provide.
Existing property tax law has acknowledged the value of
this charitable service since 1971, affording these lands
with an exemption from property taxes. This exemption has
allowed non-profit organizations to focus their limited
funds on the long-term stewardship of these important
lands, and in many cases on providing the public with
educational programs not offered anywhere else. Without
extending the current 2012 sunset provision associated with
the exemption, these charitable services will be
threatened. AB 703 would extend this sunset for an
additional ten years. By doing so, AB 703 would provide
the same long-term property tax assurances to these
important green spaces that are currently afforded to
non-profit schools, hospitals, and churches.
AB 703 is vitally important not only to the dozens of
charitable conservation organizations that are dedicated to
protecting our open-spaces. It is vitally important to the
quality of life in each of our local communities."
2. Another way ? While the exemption extended by AB 703
has existed with minor changes since 1970, the amount of
open-space and natural resource lands subject to the
extension has expanded significantly, resulting in foregone
revenue to state and local agencies of around $10 million
according to BOE. Whenever a land trust takes ownership of
a previously privately owned property for open space
purposed, the property tax is no longer paid. Federal,
state, local agencies, and private interests have spent
millions on open space and habitat preservation in recent
years, often funded by state general obligation bonds such
as Proposition 50 (2000), further diminishing local revenue
bases. The Legislature enacted the exemption because at
the time, local agencies didn't want to forego the property
tax by dedicating land for open space and natural resource
purposes when construction led to more revenue. However,
given all the public resources dedicated to open space
preservation, and the precipitous drop in demand for land
for housing construction in the last few years, is a
statewide exemption still necessary? The exemption could
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be allowed for only those counties who want it and are
willing to take the fiscal hit, similar to taxpayers
seeking to transfer base-year value from one county to
another, and to last year's SB 157 (Anderson), that allowed
the County of San Diego to extend the period of time a
taxpayer affected by the Cedar Fire of 2003 to find a
replacement property eligible for the disaster base year
value transfer. However, Legislative Counsel frowns on
that approach, stating that it may be an unconstitutional
delegation of local authority to allow counties to set
rules for the property tax. The Committee may wish to
consider whether reenacting a blanket rule is worth the
foregone revenue.
Assembly Actions
Assembly Revenue and Taxation7-0
Assembly Appropriations 12-5
Assembly Floor 77-1
Support and Opposition (6/22/11)
Support : Pomona Valley Audubon Society; Los Angeles
Neighborhood Land Trust; Truckee-Donner Land Trust; The
Wildlands Conservancy; DMB Pacific LLC; Coastside and
Trust; Richardson Bay Audubon Center and Sanctuary; San
Francisco Bay Joint Venture; Sierra-Foothill Conservancy;
Land Trust of Napa County; Land Trust of Santa Cruz County;
Sonoma Land Trust; Peninsula Open Space Trust; Elkhorn
Slough Foundation; American River Conservancy; Rancho
Mission Viejo; Green LA Coalition; CA Assessor's
Association; CA League of Conservation Voters; Tuleyome;
Friends of the Desert Mountains; Trust for Public Land; CA
Council of Land Trust; Planning and Conservation League;
The Nature Conservancy; Audubon California; Tulare Basin
Wildlife Partners; Marin Agricultural Land Trust; Big Sir
Land Trust; Sierra Club California; Defenders of Wildlife;
San Joaquin River Parkway and Conservation Trust; Ducks
Unlimited.
Opposition : Unknown.
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