BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 2231|
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THIRD READING
Bill No: AB 2231
Author: Gordon (D), Levine (D), and Patterson (R)
Amended: 8/21/14 in Senate
Vote: 27 - Urgency
SENATE GOVERNANCE & FINANCE COMMITTEE : 7-0, 6/25/14
AYES: Wolk, Knight, Beall, DeSaulnier, Hernandez, Liu, Walters
SENATE APPROPRIATIONS COMMITTEE : 5-0, 8/14/14
AYES: De Le�n, Hill, Lara, Padilla, Steinberg
NO VOTE RECORDED: Walters, Gaines
ASSEMBLY FLOOR : 77-0, 5/27/14 - See last page for vote
SUBJECT : State Controller: property tax postponement
SOURCE : Author
DIGEST : This bill largely recreates the property tax
postponement (PTP) program by reestablishing the Senior Citizens
and Disabled Citizens PTP Fund (PTP Fund) as an interest bearing
fund to pay for the State Controller's (Controller) costs for
administering the PTP and paying for disbursements to PTPs. Any
loan repayments are also deposited into the PTP Fund, but the
Controller must transfer to the General Fund (GF) any amounts in
the PTP Fund that exceed $20 million commencing June 30, 2017,
and $15 million commencing each June 30 thereafter. This bill
allows counties to enact an ordinance to delay tax sales for
properties formerly funded by the program that may be eligible
for the reenacted program.
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Senate Floor Amendments of 8/21/14 (1) reduce repayments to the
GF from the Senior Citizens and Disabled Citizens PTP Fund from
amounts over $10 million to amounts over $20 million commencing
on June 30, 2017, and $15 million commencing each June 30
thereafter; (2) replace the current interest rate that accrues
on property tax payments from the annual yield of the Pooled
Money Investment Account to 7%; (3) clarify in four relevant
sections that outstanding balances include tax payments,
interest, and other fees and penalties, less any payments made
on the loan; (4) replace current family income eligibility
requirements applicable to applications made in specific years
with a fixed amount of $35,500; and (5) make technical and
conforming changes.
ANALYSIS : The Senior Citizens and Disabled Citizens PTP Law
allows the Controller to pay property taxes to county tax
collectors on behalf of individuals over the age of 62 or
disabled persons making less than $39,000 in income per year.
The claimant must repay the Controller, who secures the loan by
recording a lien, upon sale of the home. Loans do not become
due and payable if the claimant or the claimant's spouse
continues to occupy the home secured by the lien. The
Controller's lien for a PTP loan does not have "super priority"
status, similar to liens recorded by county treasurer-tax
collectors for unpaid property taxes, which means that the
county lien is paid before all others if the secured property is
sold.
When the Legislature enacted the PTP Law in 1983, it
continuously appropriated $12.7 million annually to pay the face
amount of all certificates of eligibility for the PTP program.
In 2009, due to budgetary constraints, the Legislature
prohibited persons from filing new claims for PTP, and the
Controller from accepting applications (SB 8X3, Ducheny, Chapter
4, Third Extraordinary Session).
This bill largely recreates the PTP program by reestablishing
the PTP Fund as an interest bearing fund to pay for the
Controller's costs for administering the program and paying for
disbursements to PTPs. Any loan repayments are also deposited
into the PTP Fund, but the Controller must transfer to the GF
any amounts in the PTP Fund that exceed $20 million commencing
on June 30, 2017, and $15 million commencing each June 30
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thereafter.
This bill allows counties to enact an ordinance to delay tax
sales for properties formerly funded by the program that may be
eligible for the reenacted program.
Additionally, this bill:
Deletes the past program's $12 million continuous
appropriation,
Repeals the prohibition on the Controller accepting new
applications for the program, allowing the Controller to start
accepting new applications on
July 1, 2016,
Sweeps any current amounts in impound accounts into the PTP
Fund,
Removes mobilehomes, houseboats, and floating homes, a part of
the past program, from the reenacted program, and provides a
wind down process for existing loans made to mobilehomes,
Increases from $10 to $30 the fee the Controller can charge
for providing the lien amount to a person with a legal or
equitable interest in the property,
Clarifies that the lien is secured when the Controller
transfers funds to the county on the taxpayer's behalf,
Provides that the lien must be recorded within 14 days of the
transfer of funds and the notice of lien to the county by the
Controller,
Repeals the Controller's ability to subordinate the PTP lien
if the state's interests are adequately protected, or pay the
taxpayer's delinquent taxes, interest, and penalties in the
event of a foreclosure on a senior lien,
Replaces the current interest rate that accrues on property
tax payments from the annual yield of the Pooled Money
Investment Account to 7%,
Requires the tax collector or assessor to notify the
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Controller within 60 days of processing that a change in
ownership of the property enrolled in the program,
Provides that amounts postponed become due and payable when
the taxpayer refinances the home or enters into a reverse
mortgage,
Requires proceeds of a sale or condemnation of real property
where the Controller recorded a PTP lien to instead flow to
the PTP Fund, instead of an impound account, and prohibits the
taxpayer from drawing on the proceeds in the PTP Fund,
Deletes references to certificates of eligibility, and
replaces them with electronic transfers to properly reflect
the modern information technology that would implement the
program,
Requires the tax collector or assessor to inform the
Controller of all amounts secured by a lien that becomes tax
defaulted,
Directs the Controller to provide the tax collector with
information necessary to execute a tax sale, requires the tax
collector to certify under penalty of perjury that the
information is necessary for the tax sales, and provides that
this information is not a public record due to social security
numbers needed for the sale,
Requires the tax collector or assessor to include the
outstanding balance of a PTP loan in the minimum bid in the
event of a tax-defaulted sale, and specify that if the minimum
bid is not achieved, the proceeds will be divided between the
SCO and the tax collector on a proportionate basis,
Requires that a notice of lien for postponed property taxes be
processed expeditiously,
Converts to zero all losses and nonexpenses when determining
whether the taxpayer's income qualifies for enrollment in the
program,
Increases from 20% to 40% for each postponement claim the
amount of equity in the property necessary for a taxpayer to
enroll in the program,
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Clarifies the definition of property taxes,
Provides that taxpayers may file applications from September 1
to April 10 of the fiscal year, instead of May 15 to December
10 of the calendar year,
Requires, in the event of willful neglect, the Controller to
notify the claimant and provide a copy of the notification to
the tax collector of the taxes due and the 30-day deadline for
payment, and allows the tax collector to return funds and deny
the claim,
Replaces current family income eligibility requirements
applicable to applications made in specific years with a fixed
amount of $35,500,
Requires the Controller to notify the claimant when it
electronically transfers property taxes after initially
reversing its decision to deny the claim,
Clarifies that outstanding balances include tax payments,
interest, and other fees and penalties, less any payments made
on the loan.
This bill requires the minimum price at which a tax-defaulted
property may be offered for sale, and the ultimate sales price,
must include the outstanding balance of any PTP loan. This bill
authorizes a county to elect to cancel any delinquent penalties,
costs, fees, and interest associated with a tax-defaulted
property that is eligible to file a PTP claim with the
Controller prior to January 1, 2017.
This bill enacts several technical and conforming changes to
implement this bill's provisions, makes legislative findings and
declarations regarding taxpayer information not being public
records for purposes of the California Constitution's provisions
for public records, and states that state reimbursement of any
mandate created by this bill does not apply for specific
reasons.
Comments
PTP is distinct from the Senior Citizens Property Tax Assistance
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Program (PTAP), administered by the Franchise Tax Board, which
is a direct grant program to income-eligible senior citizens.
The state has not funded PTAP since the 2007-08 Budget, so the
state has not paid claims more recently than those made in 2007.
In 2010, the Legislature enacted the County Deferred Property
Tax Program for Senior Citizens and Disabled Citizens, which
allowed participating counties to operate PTP programs using its
own funds (AB 1090, Blumenfield, Chapter 133). Under the bill,
counties can enact an ordinance participating in the program,
set aside funds, accept claims, and defer taxes for eligible
claimants. The County Auditor allocates the revenue to other
local agencies such as cities, special districts, and school
districts using county revenue as if the tax had been paid until
the house is sold and the lien can be satisfied. The county
opt-in program largely relies on eligibility criteria used for
the state program, with some updates, and even allows counties
to grant retroactive relief for individuals who could not obtain
deferment when the Legislature defunded the program and
precluded claimants from filing new claims. So far, only Santa
Cruz County enacted an ordinance to grant postponements.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
The Controller administrative costs of approximately $3.64
million (37.2 personnel years (PY)) in 2015-16, $3.49 million
(37.2 PY) in 2016-17, $3.32 million (35.5 PY) in 2017-18, and
$3.11 million (33.8 PY) ongoing. Costs in the first three
years include IT improvements to the PTP accounting system and
associated databases. (GF)
Unknown GF costs, likely in the range of $10 million annually,
to disburse new property tax loan claims, beginning in
2016-17. Eventually loan payments and accumulated interest
would likely fully offset program expenditures.
Likely reimbursable mandate costs for duties imposed on county
tax administration officials. The previous PTP program was
deemed to have imposed reimbursable activities on local
agencies, resulting in annual GF expenditures of up to
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$285,000 before the program was suspended in 2009.
SUPPORT : (Verified 8/22/14)
California Assessors' Association
California Association of County Treasurers and Tax-Collectors
California Association of Realtors
California State Association of Counties
California Taxpayers Association
Counties of Butte, Contra Costa, Del Norte, Fresno, Madera,
Marin, Mariposa, Monterey, Napa, Nevada, Orange, Riverside,
San Benito, San Bernardino, San Luis Obispo, San Mateo, Santa
Clara, Santa Cruz, and Sonoma
Howard Jarvis Taxpayers Association
Los Angeles County Board of Supervisors
Retired Public Employees Association
Rural County Representatives of California
Veterans Caucus of the California Democratic Party
ARGUMENTS IN SUPPORT : According to the author:
Many California seniors and disabled citizens are living on
fixed incomes. Those who are property owners are increasingly
faced with tax bills they cannot afford. To assist,
California created several property tax programs benefiting
elderly and disabled individuals, including property tax
reappraisal relief and the currently suspended property tax
assistance and property-tax postponement (PTP) programs.
The PTP program allowed eligible homeowners to defer payment
of all, or a portion of, the property taxes on their
residences. It was essentially a loan program from the state
to eligible property owners. In exchange for paying a
qualified claimant's property taxes, the state placed a lien
on the property for which state funding was used. The loan
was secured by the property and was repaid, with interest,
when the property owner died, sold the home, moved, or allowed
a "senior lien" to become delinquent. Each year, interest
accrued on the amount that the state paid to the county on
behalf of the property owner. (Interest rates were set each
year based on the annual yield received by the state on its
Pooled Money Investment Account.) This interest would
eventually offset the State's cost of program administration.
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Unlike the property tax assistance program, the PTP did not
refund a percentage of property taxes paid but instead allowed
eligible homeowners to defer payment of all, or a portion of,
the property taxes on their residences. The advantage of
postponement (or deferral) over forgiveness was that the state
was, over time, kept whole.
ASSEMBLY FLOOR : 77-0, 5/27/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Ch�vez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,
Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hern�ndez,
Holden, Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,
Maienschein, Mansoor, Medina, Melendez, Mullin, Muratsuchi,
Nazarian, Nestande, Olsen, Pan, Perea, John A. P�rez, V.
Manuel P�rez, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas,
Skinner, Stone, Ting, Wagner, Waldron, Weber, Wieckowski,
Wilk, Williams, Yamada, Atkins
NO VOTE RECORDED: Patterson, Quirk-Silva, Vacancy
AB:k 8/22/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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