BILL NUMBER: SB 314 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY FEBRUARY 9, 2012
AMENDED IN SENATE MAY 17, 2011
AMENDED IN SENATE MARCH 24, 2011
INTRODUCED BY Senator Vargas
FEBRUARY 14, 2011
An act to amend Section 107.4 of the Revenue and Taxation
Code, relating to taxation. An act to amend Section
214 of the Revenue and Taxation Code, relating to taxation, to take
effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
SB 314, as amended, Vargas. Taxation: military housing.
Property taxation: welfare exemption: leased property:
City of San Diego: Redevelopment Agency of the City of San Diego.
Existing property tax law, in accordance with the California
Constitution, provides for a "welfare exemption" for property that is
used exclusively for religious, hospital, scientific, or charitable
purposes and that is owned or operated by certain types of nonprofit
entities if certain qualifying criteria are met.
This bill would provide that property used exclusively for
charitable purposes and located within the former Naval Training
Center in San Diego and leased by the City of San Diego or the
Redevelopment Agency of the City of San Diego to a nonprofit entity
or to an entity controlled by the nonprofit entity shall be deemed to
be included within the welfare exemption and shall be entitled to a
partial exemption, as specified, in any year in which the development
of the property is being financed with funds made available through
specified federal tax credit programs.
This bill would make legislative findings and declarations as to
the necessity of a special statute.
By imposing new duties upon local tax officials with respect to
the welfare exemption, this bill would impose a state-mandated local
program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that, if the Commission on State Mandates
determines that the bill contains costs mandated by the state,
reimbursement for those costs shall be made pursuant to these
statutory provisions.
Section 2229 of the Revenue and Taxation Code requires the
Legislature to reimburse local agencies annually for certain property
tax revenues lost as a result of any exemption or classification of
property for purposes of ad valorem property taxation.
This bill would provide that, notwithstanding Section 2229 of the
Revenue and Taxation Code, no appropriation is made and the state
shall not reimburse local agencies for property tax revenues lost by
them pursuant to the bill.
This bill would take effect immediately as a tax levy.
Existing property tax law requires that all property subject to
tax be assessed at its full value, and includes certain possessory
interests among those property interests that are subject to tax.
Existing property tax law defines a taxable possessory interest to be
a use that is independent, durable, and exclusive. Existing property
tax law specifies that, for purposes of the definition of a taxable
possessory interest, a possession or use is not independent if it is
pursuant to a contract that includes, but is not limited to, a
long-term lease for the private construction, renovation,
rehabilitation, replacement, management, or maintenance of housing
for active duty military personnel or their dependents, or both, if
the housing units and the private contractor constructing the housing
meet specified criteria. One of these criteria requires any
reduction or, if the amount of reduction is unknown, the private
contractor's reasonable estimate of savings, in property taxes on
leased property used for military housing, as defined, inures solely
to the benefit of the residents of the military housing through
improvements.
Existing property tax law provides for escape assessments to be
made within 4 years after July 1 of the assessment year in which the
property escaped taxation or was under assessed.
This bill would authorize the county assessor, if the military
requires the property tax savings described above to be held in a
reserve account for specified use, to levy an escape assessment
within 4 years after July 1 of the assessment year in which the
property tax savings are withdrawn from the reserve account.
Vote: majority. Appropriation: no. Fiscal committee: no
yes . State-mandated local program: no
yes .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 214 of the Revenue
and Taxation Code is amended to read:
214. (a) Property used exclusively for religious, hospital,
scientific, or charitable purposes owned and operated by community
chests, funds, foundations, limited liability companies, or
corporations organized and operated for religious, hospital,
scientific, or charitable purposes is exempt from taxation, including
ad valorem taxes to pay the interest and redemption charges on any
indebtedness approved by the voters prior to July 1, 1978, or any
bonded indebtedness for the acquisition or improvement of real
property approved on or after July 1, 1978, by two-thirds of the
votes cast by the voters voting on the proposition, if:
(1) The owner is not organized or operated for profit. However, in
the case of hospitals, the organization shall not be deemed to be
organized or operated for profit if, during the immediately preceding
fiscal year, operating revenues, exclusive of gifts, endowments and
grants-in-aid, did not exceed operating expenses by an amount
equivalent to 10 percent of those operating expenses. As used herein,
operating expenses include depreciation based on cost of replacement
and amortization of, and interest on, indebtedness.
(2) No part of the net earnings of the owner inures to the benefit
of any private shareholder or individual.
(3) The property is used for the actual operation of the exempt
activity, and does not exceed an amount of property reasonably
necessary to the accomplishment of the exempt purpose.
(A) For the purposes of determining whether the property is used
for the actual operation of the exempt activity, consideration shall
not be given to use of the property for either or both of the
following described activities if that use is occasional:
(i) The owner conducts fundraising activities on the property and
the proceeds derived from those activities are not unrelated business
taxable income, as defined in Section 512 of the Internal Revenue
Code, of the owner and are used to further the exempt activity of the
owner.
(ii) The owner permits any other organization that meets all of
the requirements of this subdivision, other than ownership of the
property, to conduct fundraising activities on the property and the
proceeds derived from those activities are not unrelated business
taxable income, as defined in Section 512 of the Internal Revenue
Code, of the organization, are not subject to the tax on unrelated
business taxable income that is imposed by Section 511 of the
Internal Revenue Code, and are used to further the exempt activity of
the organization.
(B) For purposes of subparagraph (A):
(i) "Occasional use" means use of the property on an irregular or
intermittent basis by the qualifying owner or any other qualifying
organization described in clause (ii) of subparagraph (A) that is
incidental to the primary activities of the owner or the other
organization.
(ii) "Fundraising activities" means both activities involving the
direct solicitation of money or other property and the anticipated
exchange of goods or services for money between the soliciting
organization and the organization or person solicited.
(C) Subparagraph (A) shall have no application in determining
whether paragraph (3) has been satisfied unless the owner of the
property and any other organization using the property as provided in
subparagraph (A) have filed with the assessor a valid organizational
clearance certificate issued pursuant to Section 254.6.
(D) For the 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 the property for meetings conducted by any
other organization if the meetings are incidental to the other
organization's primary activities, are not fundraising meetings or
activities as defined in subparagraph (B), are held no more than once
per week, and the other organization and its use of the property
meet all other requirements of paragraphs (1) to (5), inclusive, of
this subdivision. The owner or the other organization also shall file
with the assessor a copy of a valid, unrevoked letter or ruling from
the Internal Revenue Service or the Franchise Tax Board stating that
the other organization, or the national organization of which it is
a local chapter or affiliate, qualifies as an exempt organization
under Section 501(c)(3) or 501(c)(4) of the Internal Revenue Code or
Section 23701d, 23701f, or 23701w.
(E) Nothing in subparagraph (A), (B), (C), or (D) shall be
construed to either enlarge or restrict the exemption provided for in
subdivision (b) of Section 4 and Section 5 of Article XIII of the
California Constitution and this section.
(4) The property is not used or operated by the owner or by any
other person so as to benefit any officer, trustee, director,
shareholder, member, employee, contributor, or bondholder of the
owner or operator, or any other person, through the distribution of
profits, payment of excessive charges or compensations, or the more
advantageous pursuit of their business or profession.
(5) The property is not used by the owner or members thereof for
fraternal or lodge purposes, or for social club purposes except where
that use is clearly incidental to a primary religious, hospital,
scientific, or charitable purpose.
(6) The property is irrevocably dedicated to religious,
charitable, scientific, or hospital purposes and upon the
liquidation, dissolution, or abandonment of the owner will not inure
to the benefit of any private person except a fund, foundation, or
corporation organized and operated for religious, hospital,
scientific, or charitable purposes.
(7) The property, if used exclusively for scientific purposes, is
used by a foundation or institution that, in addition to complying
with the foregoing requirements for the exemption of charitable
organizations in general, has been chartered by the Congress of the
United States (except that this requirement shall not apply when the
scientific purposes are medical research), and whose objects are the
encouragement or conduct of scientific investigation, research, and
discovery for the benefit of the community at large.
The exemption provided for herein shall be known as the "welfare
exemption." This exemption shall be in addition to any other
exemption now provided by law, and the existence of the exemption
provision in paragraph (2) of subdivision (a) of Section 202 shall
not preclude the exemption under this section for museum or library
property. Except as provided in subdivision (e), this section shall
not be construed to enlarge the college exemption.
(b) Property used exclusively for school purposes of less than
collegiate grade and owned and operated by religious, hospital, or
charitable funds, foundations, limited liability companies, or
corporations, which property and funds, foundations, limited
liability companies, or corporations meet all of the requirements of
subdivision (a), shall be deemed to be within the exemption provided
for in subdivision (b) of Section 4 and Section 5 of Article XIII of
the California Constitution and this section.
(c) Property used exclusively for nursery school purposes and
owned and operated by religious, hospital, or charitable funds,
foundations, limited liability companies, or corporations, which
property and funds, foundations, limited liability companies, or
corporations meet all the requirements of subdivision (a), shall be
deemed to be within the exemption provided for in subdivision (b) of
Section 4 and Section 5 of Article XIII of the California
Constitution and this section.
(d) Property used exclusively for a noncommercial educational FM
broadcast station or an educational television station, and owned and
operated by religious, hospital, scientific, or charitable funds,
foundations, limited liability companies, or corporations meeting all
of the requirements of subdivision (a), shall be deemed to be within
the exemption provided for in subdivision (b) of Section 4 and
Section 5 of Article XIII of the California Constitution and this
section.
(e) Property used exclusively for religious, charitable,
scientific, or hospital purposes and owned and operated by religious,
hospital, scientific, or charitable funds, foundations, limited
liability companies, or corporations or educational institutions of
collegiate grade, as defined in Section 203, which property and
funds, foundations, limited liability companies, corporations, or
educational institutions meet all of the requirements of subdivision
(a), shall be deemed to be within the exemption provided for in
subdivision (b) of Section 4 and Section 5 of Article XIII of the
California Constitution and this section. As to educational
institutions of collegiate grade, as defined in Section 203, the
requirements of paragraph (6) of subdivision (a) shall be deemed to
be met if both of the following are met:
(1) The property of the educational institution is irrevocably
dedicated in its articles of incorporation to charitable and
educational purposes, to religious and educational purposes, or to
educational purposes.
(2) The articles of incorporation of the educational institution
provide for distribution of its property upon its liquidation,
dissolution, or abandonment to a fund, foundation, or corporation
organized and operated for religious, hospital, scientific,
charitable, or educational purposes meeting the requirements for
exemption provided by Section 203 or this section.
(f) Property used exclusively for housing and related facilities
for elderly or handicapped families and financed by, including, but
not limited to, the federal government pursuant to Section 202 of
Public Law 86-372 (12 U.S.C. Sec. 1701q), as amended, Section 231 of
Public Law 73-479 (12 U.S.C. Sec. 1715v), Section 236 of Public Law
90-448 (12 U.S.C. Sec. 1715z), or Section 811 of Public Law 101-625
(42 U.S.C. Sec. 8013), and owned and operated by religious, hospital,
scientific, or charitable funds, foundations, limited liability
companies, or corporations meeting all of the requirements of this
section shall be deemed to be within the exemption provided for in
subdivision (b) of Section 4 and Section 5 of Article XIII of the
California Constitution and this section.
The amendment of this paragraph made by Chapter 1102 of the
Statutes of 1984 does not constitute a change in, but is declaratory
of, existing law. However, no refund of property taxes shall be
required as a result of this amendment for any fiscal year prior to
the fiscal year in which the amendment takes effect.
Property used exclusively for housing and related facilities for
elderly or handicapped families at which supplemental care or
services designed to meet the special needs of elderly or handicapped
residents are not provided, or that is not financed by the federal
government pursuant to Section 202 of Public Law 86-372 (12 U.S.C.
Sec. 1701q), as amended, Section 231 of Public Law 73-479 (12 U.S.C.
Sec. 1715v), Section 236 of Public Law 90-448 (12 U.S.C. Sec. 1715z),
or Section 811 of Public Law 101-625 (42 U.S.C. Sec. 8013), shall
not be entitled to exemption pursuant to this subdivision unless the
property is used for housing and related facilities for low- and
moderate-income elderly or handicapped families. Property that would
otherwise be exempt pursuant to this subdivision, except that it
includes some housing and related facilities for other than low- or
moderate-income elderly or handicapped families, shall be entitled to
a partial exemption. The partial exemption shall be equal to that
percentage of the value of the property that is equal to the
percentage that the number of low- and moderate-income elderly and
handicapped families occupying the property represents of the total
number of families occupying the property.
As used in this subdivision, "low and moderate income" has the
same meaning as the term "persons and families of low or moderate
income" as defined by Section 50093 of the Health and Safety Code.
(g) (1) Property used exclusively for rental housing and related
facilities and owned and operated by religious, hospital, scientific,
or charitable funds, foundations, limited liability companies, or
corporations, including limited partnerships in which the managing
general partner is an eligible nonprofit corporation or eligible
limited liability company, meeting all of the requirements of this
section, or by veterans' organizations, as described in Section
215.1, meeting all the requirements of paragraphs (1) to (7),
inclusive, of subdivision (a), shall be deemed to be within the
exemption provided for in subdivision (b) of Section 4 and Section 5
of Article XIII of the California Constitution and this section and
shall be entitled to a partial exemption equal to that percentage of
the value of the property that the portion of the property serving
lower income households represents of the total property in any year
in which any of the following criteria applies:
(A) The acquisition, rehabilitation, development, or operation of
the property, or any combination of these factors, is financed with
tax-exempt mortgage revenue bonds or general obligation bonds, or is
financed by local, state, or federal loans or grants and the rents of
the occupants who are lower income households do not exceed those
prescribed by deed restrictions or regulatory agreements pursuant to
the terms of the financing or financial assistance.
(B) The owner of the property is eligible for and receives
low-income housing tax credits pursuant to Section 42 of the Internal
Revenue Code of 1986, as added by Public Law 99-514.
(C) In the case of a claim, other than a claim with respect to
property owned by a limited partnership in which the managing general
partner is an eligible nonprofit corporation, that is filed for the
2000-01 fiscal year or any fiscal year thereafter, 90 percent or more
of the occupants of the property are lower income households whose
rent does not exceed the rent prescribed by Section 50053 of the
Health and Safety Code. The total exemption amount allowed under this
subdivision to a taxpayer, with respect to a single property or
multiple properties for any fiscal year on the sole basis of the
application of this subparagraph, may not exceed twenty thousand
dollars ($20,000) of tax.
(D) (i) The property was previously purchased and owned by the
Department of Transportation pursuant to a consent decree requiring
housing mitigation measures relating to the construction of a freeway
and is now solely owned by an organization that qualifies as an
exempt organization under Section 501(c)(3) of the Internal Revenue
Code.
(ii) This subparagraph shall not apply to property owned by a
limited partnership in which the managing partner is an eligible
nonprofit corporation.
(2) In order to be eligible for the exemption provided by this
subdivision, the owner of the property shall do both of the
following:
(A) (i) For any claim filed for the 2000-01 fiscal year or any
fiscal year thereafter, certify and ensure, subject to the limitation
in clause (ii), that there is an enforceable and verifiable
agreement with a public agency, a recorded deed restriction, or other
legal document that restricts the project's usage and that provides
that the units designated for use by lower income households are
continuously available to or occupied by lower income households at
rents that do not exceed those prescribed by Section 50053 of the
Health and Safety Code, or, to the extent that the terms of federal,
state, or local financing or financial assistance conflicts with
Section 50053, rents that do not exceed those prescribed by the terms
of the financing or financial assistance.
(ii) In the case of a limited partnership in which the managing
general partner is an eligible nonprofit corporation, the restriction
and provision specified in clause (i) shall be contained in an
enforceable and verifiable agreement with a public agency, or in a
recorded deed restriction to which the limited partnership certifies.
(B) Certify that the funds that would have been necessary to pay
property taxes are used to maintain the affordability of, or reduce
rents otherwise necessary for, the units occupied by lower income
households.
(3) As used in this subdivision, "lower income households" has the
same meaning as the term "lower income households" as defined by
Section 50079.5 of the Health and Safety Code.
(h) Property used exclusively for an emergency or temporary
shelter and related facilities for homeless persons and families and
owned and operated by religious, hospital, scientific, or charitable
funds, foundations, limited liability companies, or corporations
meeting all of the requirements of this section shall be deemed to be
within the exemption provided for in subdivision (b) of Section 4
and Section 5 of Article XIII of the California Constitution and this
section. Property that otherwise would be exempt pursuant to this
subdivision, except that it includes housing and related facilities
for other than an emergency or temporary shelter, shall be entitled
to a partial exemption.
As used in this subdivision, "emergency or temporary shelter"
means a facility that would be eligible for funding pursuant to
Chapter 11 (commencing with Section 50800) of Part 2 of Division 31
of the Health and Safety Code.
(i) Property used exclusively for housing and related facilities
for employees of religious, charitable, scientific, or hospital
organizations that meet all the requirements of subdivision (a) and
owned and operated by funds, foundations, limited liability
companies, or corporations that meet all the requirements of
subdivision (a) shall be deemed to be within the exemption provided
for in subdivision (b) of Section 4 and Section 5 of Article XIII of
the California Constitution and this section to the extent the
residential use of the property is institutionally necessary for the
operation of the organization.
(j) (1) Property used exclusively for charitable purposes and
located within the former Naval Training Center in San Diego and
leased for a term of 35 years or more by the City of San Diego or the
Redevelopment Agency of the City of San Diego to an entity that has
received an organizational clearance certificate pursuant to Section
254.6 (nonprofit entity) or to an entity controlled by that nonprofit
entity (controlled entity), shall be deemed to be within the
exemption provided for in subdivision (b) of Section 4 and Section 5
of Article XIII of the California Constitution and this section and
shall be entitled to a partial exemption equal to that percentage of
the value of the property that the portion of the property is being
used exclusively for charitable purposes represents of the total
property in any year in which the development of the property is
being financed with funds made available through the federal New
Markets Tax Credit Program or the federal Tax Credit Program for
Qualified Rehabilitation Expenditures with respect to Certified
Historic Structures. This exemption shall apply notwithstanding that
the property is subleased by the nonprofit entity or the controlled
entity to another controlled entity.
(2) For purposes of this section, an entity is controlled by a
nonprofit entity if the nonprofit entity, or an entity in which the
nonprofit entity owns 50 percent or more of the stock, profits
interest, or capital interests of that entity, is sole general
partner or sole managing member of the controlled entity.
(j)
(k) For purposes of this section, charitable purposes
include educational purposes. For purposes of this subdivision,
"educational purposes" means those educational purposes and
activities for the benefit of the community as a whole or an
unascertainable and indefinite portion thereof, and do not include
those educational purposes and activities that are primarily for the
benefit of an organization's shareholders. Educational activities
include the study of relevant information, the dissemination of that
information to interested members of the general public, and the
participation of interested members of the general public.
(k)
(l) In the case of property used exclusively for the
exempt purposes specified in this section, owned and operated by
limited liability companies that are organized and operated for those
purposes, the State Board of Equalization shall adopt regulations to
specify the ownership, organizational, and operational requirements
for those companies to qualify for the exemption provided by this
section.
( l )
(m) The amendments made by Chapter 354 of the Statutes
of 2004 shall apply with respect to lien dates occurring on and after
January 1, 2005.
SEC. 2. The Legislature finds and declares that a
special law is necessary and that a general law cannot be made
applicable within the meaning of Section 16 of Article IV of the
California Constitution because of the need to resolve the property
tax issues imposing severe financial burdens on an entity leasing
from the City of San Diego or the Redevelopment Agency of the City of
San Diego.
SEC. 3. If the Commission on State Mandates
determines that this act contains costs mandated by the state,
reimbursement to local agencies and school districts for those costs
shall be made pursuant to Part 7 (commencing with Section 17500) of
Division 4 of Title 2 of the Government Code.
SEC. 4. Notwithstanding Section 2229 of the
Revenue and Taxation Code, 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.
SEC. 5. This bill would take effect immediately as
a tax levy.
SECTION 1. Section 107.4 of the Revenue and
Taxation Code is amended to read:
107.4. (a) For purposes of paragraph (1) of subdivision (a) of
Section 107, there is no independent possession or use of land or
improvements if that possession or use is pursuant to a contract that
includes, but is not limited to, a long-term lease, for the private
construction, renovation, rehabilitation, replacement, management, or
maintenance of housing for active duty military personnel or their
dependents, or both, if all of the following criteria are met:
(1) The military housing constructed and managed by private
contractor is situated on a military facility under military control,
and the construction of that housing is performed under military
guidelines in the same manner as construction that is performed by
the military.
(2) All services normally provided by a municipality are required
to be purchased from the military facility or from a provider
designated by the military.
(3) The private contractor is not given the right and ability to
exercise any significant authority and control over the management or
operation of the military housing, separate and apart from the rules
and regulations of the military.
(4) The number of units, the number of bedrooms per unit, and the
unit mix are set by the military, and may not be changed by the
contractor without prior approval by the military.
(5) Tenants are designated by a military housing agency.
(6) Financing for the project is subject to the approval of the
military in its sole discretion.
(7) Rents charged to military personnel or their dependents are
set by the military.
(8) The military controls the distribution of revenues from the
project to the private contractor, and the private contractor is
allowed only a predetermined profit or fee for constructing the
military housing.
(9) Evictions from the housing units are subject to the military
justice system.
(10) The military prescribes rules and regulations governing the
use and occupancy of the property.
(11) The military has the authority to remove or bar persons from
the property.
(12) The military may impose access restrictions on the contractor
and its tenants.
(13) (A) Any reduction or, if that amount is unknown, the private
contractor's reasonable estimate of savings, in property taxes on
leased property used for military housing under the Military Housing
Privatization Initiative (10 U.S.C. Sec. 2871 et seq.) shall inure
solely to the benefit of the residents of the military housing
through improvements, such as a child care center provided by the
private contractor.
(B) Notwithstanding Section 532, if the military, in writing or by
contract, requires the property tax savings to be held in a reserve
account for use as provided by subparagraph (A), the county assessor
may levy an escape assessment within four years after July 1 of the
assessment year in which the property tax savings are withdrawn from
the reserve account.
(14) The military housing is constructed, renovated,
rehabilitated, remodeled, replaced, or managed under the Military
Housing Privatization Initiative, or any successor to that law.
(b) This section shall not apply to a military housing unit
managed by a private contractor that is rented to a tenant who is an
unaffiliated member of the general public.
(1) "Unaffiliated member of the general public" means a person who
is not a current member of the military. A housing unit rented to or
occupied by a person employed as management or maintenance personnel
for the military housing property shall not be considered to be a
unit rented to an unaffiliated member of the general public.
(2) The private contractor shall annually notify the assessor by
February 15 of any housing units rented to unaffiliated members of
the general public as of the immediately preceding lien date. The
private contractor shall
be responsible for any property taxes on housing units rented to
unaffiliated members of the general public.
(c) For purposes of this section, "military facility under
military control" means a military base that restricts public access
to the military base.