BILL ANALYSIS �
AB 769
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ASSEMBLY THIRD READING
AB 769 (Skinner)
As Amended January 6, 2014
Majority vote
REVENUE & TAXATION 9-0
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|Ayes:|Bocanegra, Dahle, Gordon, | | |
| |Harkey, Mullin, Nestande, | | |
| |Pan, | | |
| |V. Manuel P�rez, Ting | | |
| | | | |
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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.
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. (Revenue and Taxation Code (R&TC) Section 402.5.)
FISCAL EFFECT : This bill is keyed non-fiscal by the Legislative
Counsel.
COMMENTS : 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
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"valuation date" instead of the "lien date." These
two terms are not interchangeable and have caused
confusion among county assessors.
Background: Assessors, when valuing property, may use a
Comparative Sale Approach. Under this approach, the appraiser:
1)Selects comparable properties based on their similarities to
the property being appraised;
2)Compares the selected properties to the subject property; and,
3)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."
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
after the lien date. The section has caused confusion because
the lien date can either be the annual assessment date of
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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.
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.
Analysis Prepared by : Carlos Anguiano / REV. & TAX. / (916)
319-2098
FN: 0002954
AB 769
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