BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 1090|
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THIRD READING
Bill No: AB 1090
Author: Blumenfield (D)
Amended: 5/31/11 in Assembly
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 9-0, 07/06/11
AYES: Wolk, Huff, DeSaulnier, Fuller, Hancock, Hernandez,
Kehoe, La Malfa, Liu
ASSEMBLY FLOOR : 75-0, 06/02/11 - See last page for vote
SUBJECT : Taxation: property tax deferment
SOURCE : Author
DIGEST : This bill enacts the County Deferred Property
Tax Program for Senior and Disabled Citizens and allows
each county to elect to participate in the program.
ANALYSIS :
I. Property Tax Assistance Program . Current law
establishes the Senior Citizens and Disabled Citizens
Property Tax Postponement Law (PTP), which allows the
Controller to pay property taxes to county tax collectors
on behalf of individuals over the age of 62 or disabled
persons making less than $39,000 in income per year. The
claimant must repay the Controller upon sale of the home,
who secures the loan by recording a lien. Loans do not
become due and payable if the claimant or the claimant's
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spouse continues to occupy the home secured by the lien.
The Controller's lien for a property tax postponement loan
is not afforded "super priority" status, similar to liens
recorded by county treasurer tax collectors for unpaid
property taxes, which means that the county lien is paid
before all others if the secured property is sold. PTP is
distinct from the Senior Citizens Property Tax Assistance
Program (PTAP), administered by the Franchise Tax Board,
which is a direct grant program to income-eligible senior
citizens. The state has not funded PTAP since the 2007-08
Budget, so the state has not paid claims more recently than
those made in 2007. In 2009, the Legislature also
prohibited persons from filing new claims for property tax
postponement, and the Controller from accepting
applications (SBX3 8, Ducheny, 2009).
This bill enacts the County Deferred Property Tax Program
for Senior Citizens and Disabled Citizens. Counties may
elect to participate in the program by adopting a
resolution indicating the county's intention to participate
in the program. Eligible claimants in participating
counties may apply for deferment on a form created by the
participating county, which the county tax collector shall
review to ensure that the claimant meets eligibility
criteria. Participating counties must establish a Property
Tax Deferral Fund within its Treasury, which shall be used
solely to make subvention payments and pay administrative
costs.
County Tax Collectors must defer property taxes on the
claimant's residential dwelling due and owing for that
fiscal year if the claimant is eligible, timely files an
application, and there are sufficient funds in the county's
Property Tax Deferral Fund. If the county tax collector
defers the tax, then he or she must issue a subvention
payment from the Property Tax Deferral Fund to the County,
for processing in the same manner as all other property tax
payments. The payment must then be apportioned as if the
taxpayer had paid the tax. The county sends the taxpayer a
letter confirming program participation.
The bill prohibits counties from charging penalties or
undertaking collections actions on taxpayers granted a
deferment. Counties may defer property taxes retroactively
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for the time period since the suspension of the PTP law,
unless the payment affects a vested right of a private
party.
The measure allows counties to charge a fee when a claimant
applies to pay for its administration costs and foreclosure
costs when they cannot be collected through collections
actions. Counties may also charge recording fees to pay
for the recording and releasing of liens, payable to the
County Recorder.
The bill further provides definitions for many of its
terms, many imported from PTP law.
II. Claims . The prior PTP law defined "claimants" as
persons who:
Are 62 years of age or older or blind or disabled
on the last day of the calendar year or approved
fiscal year.
Own a "residential dwelling," as defined, which
requires at least 20% equity of the fair market or
assessed valuation.
Has household income of less than $39,000 in the
2009 calendar year, as defined.
Claimants must file postponement applications with the
Controller between May 15th and December 10th of the
calendar year in which the fiscal year of postponement is
requested.
This bill defines a "claimant" as a person who:
Applies in a participating county.
Has attained eligibility for social security
benefits on the last day of the filing period for the
fiscal year or is blind or disabled. For retroactive
deferment, then the age of eligibility is 62.
Owns a "residential dwelling," with an updated but
functionally identical definition. To be eligible,
the owner must have at least 20% equity of the fair
market or assessed valuation as measured by the amount
which the fair market value exceeds the total amount
of liens.
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Has household income of less than $35,500, using
the existing definition, but does not allow business
losses to reduce household income for eligibility
purposes.
The bill further states that claimants must file annually,
only one claimant per residential dwelling may have
property taxes deferred, and the claimant may be required
to furnish evidence of eligibility every year to continue
participation. If the claimant fails or refuses to furnish
any information, or files a fraudulent claim, then the
county obligation is null and void. The record of a
deferred payment on the tax roll shall be canceled, the tax
or assessment shall be a lien as though no payment had been
made, and the amount of the lien shall be increased by any
penalties or interest resulting from the delinquency.
This bill requires claimants to file postponement
applications with the county tax collector starting October
1st and ending December 10th of each year, although
counties can grant reasonable extensions for good cause at
any time before the end of the fiscal year for which
deferment is requested. Counties may require any
information necessary to process the claimant's
application, and shall contain a written declaration that
the information therein was provided under penalty of
perjury. If a claim is filed timely, any delinquent
penalties and interest are cancelled unless the failure to
perfect the claim is due to the claimant or the claimant's
agent willful neglect. In such a case, the subvention
payment may be used only if it is accompanied by sufficient
amounts to pay the delinquent interest and penalties. The
county shall refund any overpayment to the party entitled
thereto.
The measure provides that the county shall charge an
interest rate the higher of 7% per year or the effective
annual yield earned in the prior fiscal year by the Pooled
Money Investment Account plus 2%, rounded to the nearest
full percent, and imports other parts of existing law
regarding interest calculation into the local program
applicable to the state program. The county must disclose
the interest rate to the taxpayer.
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III. Liens . Current law allows a county to issue a tax
lien against property when an owner is late on paying
property taxes, and provides that a judgment is satisfied,
and the tax lien removed when the property tax is paid, or
the property is sold to satisfy the lien. Upon sale, tax
liens are paid out of proceeds in the order recorded;
however, property tax and special assessment liens have
priority over all other liens regardless of the time of its
creation.
This bill provides that the amounts of property taxes
deferred, plus interest accrued, shall be secured by a
judgment lien. The lien shall be evidenced by a notice of
lien for deferred property taxes executed by the county,
and shall secure all sums deferred and owing, including
amounts deferred subsequent to the initial deferment. The
notice of lien must contain a description of the property
and the names of all record owners of the property upon
which the taxes were deferred. The county tax collector
shall index the lien according to the names of each record
owner and the county.
The bill requires the county tax collector or assessor,
upon receipt of the notice of lien, to enter on the notice
a description of the property and the names of all record
owners on the notice for the property for which taxes are
deferred, and to enter on the assessment records that the
taxes have been deferred. The assessor shall immediately
forward the notice to the tax collector after the entry.
The assessor shall inform the tax collector of any changes
in ownership of the real property for which taxes are
deferred. The tax collector shall maintain a record
containing specified information of all residential
dwellings against which he or she has filed a notice of
lien for deferred property taxes.
The bill further requires the county to reduce the amount
secured by the lien by the amount of any payment, and
increase it to reflect interest accrual or subsequent
deferral for the claimant. Payments shall be applied to
the oldest deferral amount in order of lien recordation
date. If the lien is paid in full, the county tax
collector shall record a release with the county recorder
evidencing the satisfaction of all amounts secured by the
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lien, and remove specified information from the secured
roll and assessment records required when property taxes
are postponed. The amount of the lien increases to reflect
the accrual of interest.
This bill provides that the taxes are immediately due and
payable if the claimant:
Dies
Ceases to own the building due to sale, conveyance,
or condemnation.
Ends his or her permanent residence dwelling.
Experiences a fall in equity value below the
program's eligibility criterion.
Refinances existing loans on the property.
Was erroneously granted deferment because he or she
did not meet eligibility criteria.
IV. Limitations on Mortgagors . Current PTP law posits
that the postponement of property taxes under the state
program does not affect the obligation of a borrower to
make payments to a lender with respect to an impound,
trust, or other type of account established before 1978.
That law also precluded lenders from requiring the borrower
to maintain an impound, trust, or other type of account in
regard to taxes once the borrower chooses to postpone
taxes, unless required by federal law or regulation, in the
case of a mortgage guaranteed or insured by a federal
government lending or insurance agency, or if the
prohibition would impair the express obligations of a loan
agreement.
This bill enacts identical provisions for this program, and
further prohibits a mortgagee, trustee, or other person
authorized to take sale on real property as a result of the
mortgagor or trustor's failure to pay property taxes from
filing a notice of default if the mortgagor or trustor
shows evidence of participation in the property tax
postponement program. The measure duplicates this
provision but states that a notice of default cannot be
filed for five years following the initial authorization to
take sale mortgagor or trustor shows evidence of
participation in the property tax postponement program.
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V. Local Agency Investments . Since 1913, state law has
allowed local officials to invest their temporarily idle
funds in various financial instruments. State law
originally limited these local investments to government
bonds, but over time legislators expanded the list to
include more sophisticated instruments. The Legislature
limits the percentage of funds that a local agency can
invest in particular instruments.
In 2002, the Legislature gave counties statutory
permission, until January 1, 2007, to put money into the
following high-quality, short-term investments (AB 2182,
Campbell, Chapter 162, Statutes of 2002):
U.S. Treasury and federal obligations
Federal agencies' bonds, notes, debenture, or
obligations.
California registered state warrants, treasury
notes, or bonds. Local agencies' bonds, notes,
warrants, or other indebtedness.
Banker's acceptances (bills of exchange, time
drafts) for international trade.
Short-term corporate promissory notes, or
commercial paper.
Commercial banks' certificates of deposit.
Repurchase agreements, reverse repurchase
agreements, or securities lending agreements.
Corporate or bank debt securities, including
medium-term notes.
Diversified management companies' shares of
beneficial interest.
Mortgage pass-through securities, collateralized
mortgage obligations, mortgage-backed bonds,
lease-backed certificates, consumer receivable
pass-through certificates, or consumer
receivable-backed bonds.
Insurance companies' contracts.
This bill adds investments in the Property Tax Deferral
Fund in each county to the list of investments that a
county treasurer can invest in.
Prior Legislation
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Last year, the former Revenue and Taxation Committee and
the Legislature approved AB 1718 (Blumenfield), which is
substantially similar to this bill, except that measure
allows treasurer-tax collectors to secure the deferral with
lien that has super priority status. Governor
Schwarzenegger vetoed the measure, stating:
The goal of this bill is laudable. However, the bill
inappropriately grants counties a super priority lien
on a participating senior or disabled individual's
residential property. Not only would an individual's
participation in a county program violate their
mortgage contract, it would most likely render them
unable to obtain future loans.
I believe that the lending and mortgage industry agree
with the intent of this measure. The author would be
well-served by working with them and the counties next
year to craft a solution that provides a workable and
legally acceptable tax deferral program for seniors
and disabled individuals struggling to maintain their
residential property.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 8/22/11)
AARP California
California Association of Realtors
California Senior Legislature
OPPOSITION : (Verified 8/22/11)
California Association of County Treasurers and Tax
Collectors
ARGUMENTS IN SUPPORT : According to the author, "For more
than 30 years, the state Senior and Disabled Citizens
Property Tax Postponement Program helped thousands of low
and moderate-income Californians remain in their homes by
postponing their property taxes. Relying on annual General
Fund support, the program was suspended indefinitely in
2009 due to state budget cuts. Program suspension leaves
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over 2,500 needy Californians fearful and vulnerable to
foreclosures, evictions, and potential victimization by
scam artists. Many former program participants can afford
their monthly mortgage payments, but they do not have
sufficient income to pay their property taxes. Without the
property tax postponement program, banks have begun
establishing impound accounts to collect overdue property
taxes. Homeowners that are unable to pay the additional
amount for the impound account are being pushed into
foreclosure. While a county must wait five years to
foreclose, banks can do so immediately. AB 1090 seeks to
re-create the Senior and Disabled Citizens Property Tax
Postponement Program at no state cost, to prevent persons
previously in the program from losing their homes due to
bank foreclosures, and to offer property tax relief to
other eligible homeowners in the future."
ASSEMBLY FLOOR : 75-0, 06/02/11
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Cedillo, Chesbro, Cook, Davis, Dickinson, Donnelly, Eng,
Feuer, Fletcher, Fong, Fuentes, Furutani, Beth Gaines,
Galgiani, Garrick, Gatto, Gordon, Grove, Hagman, Harkey,
Hayashi, Roger Hern�ndez, Hill, Huber, Hueso, Huffman,
Jeffries, Jones, Knight, Lara, Logue, Bonnie Lowenthal,
Ma, Mansoor, Mendoza, Miller, Mitchell, Monning, Morrell,
Nestande, Nielsen, Norby, Olsen, Pan, Perea, V. Manuel
P�rez, Portantino, Silva, Skinner, Smyth, Solorio,
Swanson, Torres, Valadao, Wagner, Wieckowski, Williams,
Yamada, John A. P�rez
NO VOTE RECORDED: Carter, Conway, Gorell, Halderman, Hall
AGB:nl 8/24/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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