BILL ANALYSIS �
AB 1700
Page 1
Date of Hearing: March 21, 2012
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 1700 (Butler) - As Introduced: February 15, 2012
SUBJECT : Property taxation: change in ownership: exclusion:
cotenancy interests.
SUMMARY : Provides that a "change-of-ownership" reassessment of
property is not triggered when one co-owner of a principal
residence dies and his or her interest in the property is
transferred to the other owner, as specified. Specifically,
this bill :
1)Revises existing property tax law to provide that a transfer,
occurring on or after January 1, 2013, of a co-tenancy
interest in real property from one co-tenant to the other that
takes effect upon the death of the transferor cotenant does
not constitute a "change in ownership" only if all the
following requirements are satisfied:
a) The transfer is solely between and by two individuals
who, together, own 100% of the real property in a joint
tenancy or as tenants in common;
b) As a result of the death of the transferor cotenant, the
deceased cotenant's tenancy in common or joint tenancy
interest in the real property is transferred to the
surviving cotenant, which results in the surviving cotenant
holding a 100% ownership interest in the real property
immediately after the transfer, thereby terminating the
cotenancy;
c) For the one-year period immediately preceding the
transfer, the real property was co-owned by the transferor
and the transferee, and both cotenants have been the owners
of record of that real property;
d) The real property constituted the principal residence of
both cotenants immediately preceding the transfer
cotenant's death;
e) The transferor and the transferee continuously resided
at that residence for the one-year period immediately
AB 1700
Page 2
preceding the transfer; and,
f) The transferee has signed, under penalty of perjury, an
affidavit affirming that he or she continuously resided
with the transferor at the residence for the one-year
period immediately preceding the transfer.
2)Specifies that a transfer of cotenancy interest in real
property from one cotenant to the other shall take effect upon
the death of the transferor cotenant under any of the
following circumstances:
i) Pursuant to the transferor cotenant's will or trust,
upon the death of the transferor cotenant;
ii) Through intestate succession from the transferor
cotenant; or,
iii) By operation of law, upon the death of the
transferor cotenant.
3)Defines "cotenancy interest" to mean an interest in real
property held only as tenants in common or joint tenants.
4)Defines "principal residence" to mean a dwelling eligible for
either the homeowners' exemption or the disabled veterans'
exemption.
5)Provides that no reimbursement is required because of the
creation of a new crime or infraction, unless the Commission
on State Mandates determines that this bill contains costs
mandated by the state.
6)Declares that no appropriation is made by this act and
therefore the state shall not reimburse any local agency for
any property tax revenues lost.
7)Takes immediate effect as a tax levy.
EXISTING LAW :
1)Limits ad valorem taxes on real property to 1% of the full
cash value of that property.
2)Requires a reassessment of real property to current fair
market value upon a "change of ownership of that property," as
AB 1700
Page 3
defined.
3)Provides that a transfer of property due to death results in a
property tax reassessment, unless the transfer qualifies for
one of numerous exemptions available under existing law,
including a transfer between spouses, domestic partners,
parents and their children, grandparents and grandchildren or
between persons who own property in a joint tenancy where the
surviving joint tenant has the "original transferor" status.
FISCAL EFFECT : Unknown
COMMENTS :
1)Existing law protects from property tax increase transfers of
real property between married people, registered domestic
partners, parents and their children, grandparents and their
grandchildren, and also joint tenants who are "original
transferors." This bill creates an exclusion from property
tax reassessment for transfers of interest in principal
residences between any two people who live together, including
unmarried people, persons who are not registered domestic
partners, siblings, friends, companions or just roommates who
share the cost of housing. While existing law centers around
family members, this bill widens the net further in the case
of co-tenants who are not family members. The Committee may
wish to discuss whether this bill creates a precedent.
2)According to the author, this bill protects surviving
co-owners from the financial hardship of property reassessment
when a loved one passes away. The author notes that people
who live and own a home together and are unmarried, whether by
choice or because of the law, should be treated equally to
married couples.
The sponsor, Equality California, writes that California has a
strong policy interest in keeping surviving co-owners in their
homes, especially in times of crisis or when they are grieving
the loss of a loved one. Equality California believes that AB
1700 "would benefit many Californians, including same-sex
couples, seniors and families."
3)This is not the first attempt at creating an exemption from
property tax re-assessment for a co-owner of a principal
residence when the other co-owner passes away. Similar
AB 1700
Page 4
legislation in prior years includes AB 2735 (De Leon, 2010),
which would have applied to transfers between the dates of
January 1, 2011 and January 1, 2021, and AB 103 (De Leon,
2009) which would have applied to transfers between the dates
of January 1, 2010 and January 1, 2020. Both bills died in
the Assembly Appropriations Committee.
SB 153 (Migden) was introduced in the 2007-08 Legislative
Session and was vetoed by Governor Schwarzenegger with the
following veto message:
"Existing law already provides that real property transferred
between spouses and registered domestic partners, or between
parents, grandparents, and children is exempt from
reassessment. Further, co-owners not covered by any of these
exemptions have the option of changing a real property title
to a joint tenancy, thus ensuring that a reassessment does not
occur upon the death of one joint tenant. Given these
exemptions and options provided under existing law, this bill
is not necessary."
SB 565 (Migden), Chapter 416, Statutes of 2005, exempts from
reassessment to current fair market value a transfer of any
interest in real property between registered domestic
partners.
Since similar previous bills have either been vetoed or failed
passage during the legislative process, the Committee may wish
to ask the author and sponsor to explain how this situation
has changed from prior years.
4)This bill contains provisions that specify that no
reimbursement is required for local agencies implementing the
bill's provisions and that no appropriation is to be made for
reimbursement of any local agency for any lost property tax
revenues. In this way, there is a fiscal cost to local
agencies because of annual property tax reductions that will
be assumed to occur because of the prohibition to reassess
properties under the provisions of the bill. Additionally,
reductions in property taxes to K-12 and community college
districts would need to be offset by the state's General Fund.
5)Support argument : Supporters argue that this bill will protect
surviving co-owners from the financial hardship of property
AB 1700
Page 5
reassessment when a loved one passes away.
Opposition argument : This bill may result in reduced property
taxes to local agencies which will impact the state's general
fund because of the need to backfill schools.
6)AB 1700 is double-referred to the Assembly Revenue & Taxation
Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
Equality California �SPONSOR]
Opposition
None on file
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958