BILL ANALYSIS �
AB 769
Page 1
Date of Hearing: January 13, 2014
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Raul Bocanegra, Chair
AB 769 (Skinner) - As Amended: January 6, 2014
Majority vote.
SUBJECT : Property taxation: valuing property: comparable
sales
SUMMARY : Makes a technical and clarifying change to property
tax law. Specifically, this bill replaces the term "lien date"
with "valuation date" for purposes of the comparable sales
valuation method.
EXISTING LAW :
1)Defines "lien date" as either the date on which taxes on the
supplemental roll become a lien on the property resulting from
a change in ownership or, under the regular roll, the date on
which all tax liens attach annually on January 1. [Revenue
and Taxation Code (R&TC) Sections 75.54 and 2192.]
2)Provides that the term "near in time to the valuation date"
does not include any sale more than 90 days after the lien
date. (R&TC Section 402.5.)
FISCAL EFFECT : None.
COMMENTS :
1)The author has provided the following statement in support of
this bill:
AB 769 amends state law regarding comparable values for
property sales in order to conform to rules about
comparable values at the Board of Equalization (BOE). The
aim is to eliminate potential confusion for taxpayers and
[taxpayer] agents.
Current BOE rules state that when making comparable sales,
the value of property must be assessed at the "valuation
date" instead of the "lien date." These two terms are not
AB 769
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interchangeable and have caused confusion among county
assessors.
2)Background . Assessors, when valuing property, may use a
Comparative Sale Approach. Under this approach, the
appraiser:
a) Selects comparable properties based on their
similarities to the property being appraised;
b) Compares the selected properties to the subject
property; and,
c) Adjusts the sales prices of the comparable properties to
reflect significant differences between the subject and
comparable properties. The comparable sales approach is
based on the principle of substitution, which states that
an informed participant would not pay more for a property
than the cost of acquiring a substitute property of equal
utility.
A comparable property must be sufficiently comparable in
terms of location, physical characteristics, and use.
Additionally, a sale of a comparable property must have
occurred "near in time to the valuation date" of the
subject property. Specifically, R&TC Section 402.5
provides that "'near in time to the valuation date' does
not include any sale more than 90 days after the lien
date."
3)Construction of current law : A lien date is the day on which
taxes are levied against property. R&TC Section 2192 defines
the regular roll "lien date" by reference to all the tax liens
that attach annually on January 1. This attachment occurs
during the county assessor's annual assessment of all taxable
property in the county. However, under the supplemental roll
"lien date" of R&TC Section 75.54, a lien may also attach to
real property on the day the property changes ownership or
upon completion of new construction. This change in ownership
has also been referred to as the "valuation date." Despite
having two separate definitions, "lien date" is more commonly
associated with the annual assessment date of January 1st.
R&TC Section 402.5 provides that the phrase "near in time to the
valuation date" does not include any sale more than 90 days
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after the lien date. The section has caused confusion because
the lien date can either be the annual assessment date of
January 1st, or can refer to the date on which the property
changes ownership or the date new construction is completed.
To make things clear, the BOE has determined that "lien date,"
for purposes of R&TC Section 402.5, is synonymous with
"valuation date," i.e., the change of ownership date [BOE Rule
342(d)]. Without this clarification, taxpayers may attempt to
eliminate the use of certain comparable properties during an
assessment appeals hearing by restricting properties to those
sold no more than 90 days after January 1st. The BOE's
interpretation also accomplishes the legislative intent of
using "near in time" comparable sales under R&TC Section
402.5. For example, under a strict reading of the term "lien
date," if a home were sold on August 1, 2012, the selection of
comparable sales would be limited to those sold before April
1st of that year. This would prevent the use of a comparable
sale made on August 2, 2012, even though it occurred a day
after the sale of the subject property.
According to the California County Assessors' Association, the
method of property tax assessment in the State of California
changed substantially after the passage of Proposition 13.
Prior to its passage, the "lien date" of January 1st was the
date used for estimating the valuation of property.
Proposition 13 adopted an acquisition system of taxation,
utilizing the date of change in ownership or completion of
construction as the date of valuation. In 1980, two years
after the passage of Proposition 13, R&TC Section 402.5 was
amended to replace the term "lien date" with "valuation date"
in two places but missed a third. This bill will rectify the
problem by making an additional amendment to that section.
4)Is there a change in law : Current law provides that "near in
time to the valuation date" does not include any sale more
than 90 days after the lien date. Since the BOE has
determined that "lien date" and "valuation date," for purposes
of R&TC Section 402.5, are synonymous, this bill would only
provide technical clarification to existing law.
REGISTERED SUPPORT / OPPOSITION :
Support
AB 769
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American Federation of State, County, and Municipal Employees,
(AFSCME), AFL-CIO
Opposition
None on file
Analysis Prepared by : Carlos Anguiano / REV. & TAX. / (916)
319-2098