BILL ANALYSIS �
AB 2207
Page 1
ASSEMBLY THIRD READING
AB 2207 (Gordon)
As Amended May 7, 2012
Majority vote. Tax levy.
REVENUE & TAXATION 8-0 APPROPRIATIONS 17-0
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|Ayes:|Lara, Harkey, Beall, |Ayes:|Fuentes, Harkey, |
| |Charles Calderon, | |Blumenfield, Bradford, |
| |Cedillo, Fuentes, Gordon, | |Charles Calderon, Campos, |
| |Nestande | |Davis, Donnelly, Gatto, |
| | | |Ammiano, Hill, Lara, |
| | | |Mitchell, Nielsen, Norby, |
| | | |Solorio, Wagner |
| | | | |
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SUMMARY : Clarifies the scope and application of the welfare
property tax exemption. Specifically, this bill :
1)Provides that, commencing with the 2013-14 fiscal year (FY),
for purposes of determining whether the property is used for
the actual operation of the exempt activity, consideration
shall not be given to the use of property for the following
activities:
a) Activities resulting in direct or in-kind revenues, but
only if those activities further the conservation
objectives of the property as provided in a qualified
conservation management plan for the property; and,
b) Any lease of the property for a purpose that furthers
the conservation objectives of the property as provided in
a qualified conservation management plan for the property.
2)States that the direct or in-kind revenues may include
revenues derived from grazing leases, fees for events or
recreational activities, or fees for permits.
3)Specifies that the activities and lease of the property may
not generate unrelated business income.
4)Defines a "qualified conservation management plan" as a plan
that satisfies all of the following requirements:
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a) Identifies that the foremost purpose and use of the
property is for the preservation of native plants or
animals, biotic communities, geological or geographical
formations of scientific or educational interest, or as
open-space lands used solely for recreation and for the
enjoyment of scenic beauty;
b) Identifies the overall conservation management goals,
including identification of permitted activities, and
actions necessary to achieve the goals;
c) Describes the natural resources and recreational
attributes of the property and potential threats to the
conservation values or areas of special concern; and,
d) Contains a timeline for planned management activities
and for regular inspections of the property, including
existing structures and improvements.
5)Is operative beginning with the lien date of the 2013-14 FY.
6)States that, if the Commission on State Mandates determines
that this bill contains costs mandated by the state,
reimbursement to local agencies and school districts for those
costs will be made pursuant to Government Code Part 7
(commencing with Section 17500) of Division 4 of Title 2.
7)Provides that no appropriation is made by this act and the
state shall not reimburse any local agency for any property
tax revenues lost by it pursuant to this act.
8)Takes effect immediately as a tax levy.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)In the absence of this bill, approximately $300,000 of
property tax would be allocated to other units of local
government according to existing law on the distribution of
local property tax. To the extent this bill prevents these
revenues from flowing to school districts, there would be a
corresponding cost to the General Fund (GF) as the property
tax would otherwise offset GF obligations to schools, pursuant
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to the Proposition 98 minimum funding guarantee. Assuming
approximately 40% of local property tax revenue is allocated
to schools; this bill would have a cost to the GF of
approximately $120,000.
2)Mandates state reimbursements to county assessors of
approximately $50,000 for costs of administering the bill's
provisions.
COMMENTS :
Author's Statement . The author states that "AB 2207 provides
the needed clarifying language concerning the state's property
tax exemption for lands held by nonprofit organizations for
habitat, open space and recreational uses.
"It directs that such activities do not disqualify the
nonprofit from the exemption so long as the activity is
consistent with the management plan for the property.
"If the bill is successfully passed, the result will be an
important clarification of the law, properties throughout
California will be treated similarly for the purposes of this
law, and the purpose for which the exemption was created will
be advanced."
Arguments in Support . The proponents of this bill state that
AB 2207 is needed to clarify "the application of the state's
property tax exemption for habitat, open space and recreation
lands when held by nonprofit organizations." Specifically,
the proponents assert that existing laws "provide ambiguous
guidance to local governments assessing the eligibility of
land for general welfare tax exemption" when the land
generates revenue from management practices, such as cattle
grazing, hunting of invasive species or other activities "that
are consistent with and in furtherance of the property's
conservation objectives." The proponents argue that AB 2207
would improve the ability of "the land conservation community
to protect and steward California's open-space lands" by
ensuring that "all properties are treated similarly and the
benefits of grazing and similar activities for habitat and
open space lands in California can be realized."
History of the Welfare Exemption for Nature Resources and
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Open-Space Lands . In 1970, the Assembly Revenue and Taxation
Committee held an interim hearing and conducted several
studies regarding alternative tax policies intended to
encourage natural lands preservation in the state. The staff
report submitted to the Committee indicated that local
governments were reluctant to preserve open space areas,
recreational areas, and ecologically valuable areas because
they heavily rely on property tax revenues. �The Fiscal
Implications of Environmental Control: an Appendix to Final
Report of the Assembly Committee on Revenue and Taxation,
Interim Activities (1970), pp. 90-92]. Moreover, the
assessment practices used by local county assessors to value
open space areas lacked uniformity and varied widely among
counties.
Subsequently, in 1971, Revenue and Taxation Code (R&TC)
Section 214.02 was enacted to extend the application of the
welfare property tax exemption to land in its natural state.
The application of the exemption was limited to property
acquired by nonprofit organizations that is used exclusively
for the preservation of native plants and animals or of
geographical formations of scientific or educational interest
or open space lands used solely for recreation and for the
enjoyment of scenic beauty. According to the staff at the
Board of Equalization (BOE), "�T]he intent of the original
legislation enacting R&TC Section 214.01 was to assist
nonprofit organizations that purchased open-space and similar
lands, held the lands temporarily, and then sold or donated
the lands to public agencies for permanent use as park
facilities." A sunset date was included in the original
legislation as a result of a Senate Revenue and Taxation
Committee hearing to ensure that the charitable organizations
sold or donated the lands rather than hold them indefinitely.
Since that time, it appears that "many charitable
organizations may be the permanent owners of lands due, in
part, to the limited ability of public agencies to acquire
additional parklands." When the original exemption expired
after the lien date in 1982, it has continuously been
extended, first, until 1992, and most recently to January 1,
2023.
What Is the Problem ? According to the sponsor of this bill,
nonprofit organizations that own habitat or open space lands
sometimes receive revenue from activities that further the
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conservation purposes for which the properties are held. For
example, grazing has proven to be an important activity to
maintain native grasses and wildflowers. Other activities,
such as hunting of invasive species that destroy native
habitat, may also provide conservation benefits to open space
lands.
Assessors in five counties disallowed the welfare property tax
exemption, in whole or part, for open-space lands held by
nonprofit organizations because those organizations had
received income on the property from grazing leases or hunting
fees. The issue was raised as to whether cattle grazing or
hunting for invasive species, among other activities, qualify
as allowable for purposes of the welfare exemption for
open-space lands. The existing law does not address this
issue, but there are somewhat conflicting court decisions and
individual opinions from the BOE. Under R&TC Section 254.5,
county assessors have full discretion in determining whether
the property is eligible for the welfare exemption. The
sponsor is seeking to ensure that specified activities do not
disqualify open-space lands from the welfare exemption as long
as the activities are consistent with the conservation
purposes of the exemption and the management plan for the
property. Furthermore, the sponsor states that this bill is
needed to create uniformity in the administration of the
exemption and ensure that properties are treated similarly
throughout California.
Is Clarification Needed ? Under existing law, a non-profit
organization must use the property exclusively for charitable
purposes. (R&TC Section 241). While the statute does not
define the phrase "used exclusively," courts have held that it
includes any use of the property that is "incidental to and
reasonably necessary for the accomplishment of the �exempt]
purpose." (Cedars of Lebanon v. County of Los Angeles (1950)
35 Cal.3d 729, 736). For example, the court in Santa Catalina
Island Conservancy v. Los Angeles (1981) 126 Cal. App. 3d 221,
concluded that motor tours offered by a for-profit
organization on the open-space land, which was otherwise used
for charitable purposes, provided an instructive opportunity
for people to see and enjoy conservancy property and thus,
were reasonably necessary and incidental to the preservation,
instructive and recreational purposes of the Conservancy.
Similarly, a hunting program conducted by another independent
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for-profit operator was found to be essential to the good
management of Conservancy property.
With respect to the issue of whether a cattle grazing activity
qualifies as an incidental and reasonably necessary use of
open-space land, the BOE staff issued legal opinions to the
Sonoma County and Monterey County assessors. The BOE staff
opined that, pursuant to the particular facts in those two
cases, property subject to a cattle grazing lease did not
qualify for the welfare exemption because the cattle grazing
activity was not incidental nor was it reasonably necessary
for the accomplishment of the exempt purpose. The opinions
were advisory and not binding on any county assessor.
As explained by the BOE staff in its analysis of this bill,
since there is no express threshold or standard in law as to
what constitutes "incidental to and reasonably necessary for,"
county assessors' interpretations may differ. The lack of
clarity may account for the fact that some counties consider
grazing and hunting on certain properties as incidental and
reasonably necessary activities, while others do not.
The Proposed Solution . This bill would provide that any
activity or lease that furthers the conservation objectives,
as provided in the conservation management plan for the
property, will be considered incidental to, and reasonably
necessary for, the accomplishment of the preservation of the
open-space lands. A similar argument - that the cattle
grazing leases are a management tool incidental to land
preservation and essential to the proper management of the
property - was made by the non-profit organizations in the two
cases mentioned above. The BOE staff, however, rejected this
argument.
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098
FN: 0003795
AB 2207
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