BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 1113 HEARING: 4/24/14
AUTHOR: Knight FISCAL: Yes
VERSION: 2/19/14 TAX LEVY: No
CONSULTANT: Grinnell
PROPERTY TAX: DISABLED VETERANS' EXEMPTION
Extends the deadline for County Tax Collectors to refund
taxes for the disabled veterans' exemption from four to
eight years.
Background and Existing Law
The California Constitution provides that all property is
taxable unless explicitly exempted by the Constitution or
federal law, but allows the Legislature to partially or
wholly exempt from property taxes the value of a disabled
veteran's home if the veteran has lost one or more limbs,
is totally blind, or is totally disabled, as a result of a
service-connected injury, known as the "disabled veterans'
exemption." The Legislature enacted this exemption, so
disabled veterans and their unmarried surviving spouses can
reduce the taxable value of their property each year by the
inflation adjusted value of either $115,060 or $172,592,
depending on the taxpayer's income.
Property becomes eligible for the exemption on the
effective date of a 100% disability rating, or for
surviving spouses, the date the veteran died. Taxpayers
eligible for the exemption must file a claim for the
exemption once with the Assessor. Taxpayers who file
claims after February 15th obtain partial exemptions of
either 85% or 90% for the first year, then the full
exemption in subsequent years; however, taxpayers may
obtain a cancellation of taxes and a refund for a claim
filed after that date when the U.S. Department of Veterans
Affairs (USDVA) has not finished processing the veteran's
disability rating certification.
County tax collectors can refund property taxes paid when
the taxes were:
Paid more than once,
SB 1113 (Knight) - 2/19/14 -- Page 2
Erroneously or illegally collected, assessed, or
levied,
Overpaid due to an assessor's error,
Paid on an assessment of improvements that did not
exist,
Paid on an assessment in excess of an assessment
appeals board's determination, or
Paid on an assessment that was later found by an
audit to be excessive.
However, refunds may only be issued when verified by the
taxpayer, and within either four years of the overpayment
Proposed Law
Senate Bill 1113 provides that County Tax Collectors can
refund taxes paid up to eight years ago when a taxpayer
subsequently becomes eligible for the disabled veterans'
exemption for claims filed on or after January 1, 2015.
The bill contains legislative findings and declarations
supporting its purposes. The measure also corrects an
erroneous cross reference.
State Revenue Impact
The State Board of Equalization estimates property tax
revenue losses of $238,960 annually.
Comments
1. Purpose of the bill . According to the author, "SB 1113
changes the statute of limitations on refunds associated
with disabled veterans, allowing a disabled veteran to
receive a refund of property taxes paid within the last
eight years, instead of the current four, when the federal
government issues the veteran a retroactive 100 percent
disability rating. Qualified veterans who receive a 100
percent disability rating from the U.S. Department of
Veterans Affairs are given a special property tax reduction
(up to $124,932 or $187,399 in 2014 and equivalent amounts
adjusted for inflation in future years). California law
specifies that a home becomes eligible for the exemption as
of the effective date of the veteran's 100 percent
SB 1113 (Knight) - 2/19/14 -- Page 3
disability rating. Veterans are entitled to claim a refund
for taxes overpaid for up to four years of back taxes paid,
but some veterans encounter bureaucratic delays long than
four years and therefore lose the ability to claim the full
exemption. SB 1113 seeks to balance Veterans' need to
receive added relief, with government's need for certainty
and closure, by extending the statute of limitations to 8
years, which is the amount of time that back taxes may be
collected from taxpayers for escape assessments related to
unrecorded changes in ownership."
2. Why is more time needed ? Generally, a four-year
statute of limitations applies for California taxes,
allowing taxpayers to file claims for refund for previous
taxes, or for tax enforcement agencies to perform and audit
and assess any additional taxes, penalties, or interest.
SB 1113 departs from the general rule for taxpayers
eligible for the disabled veteran's exemption from property
tax, but with good reason. BOE points out in its analysis:
The existing statute of limitations on refunds can
undercut the provision of law allowing the disabled
veteran to receive their exemption as of their
disability effective date. This tends to occur when
(1) a veteran successfully appeals or litigates their
rating; (2) the USDVA issues a new rating to correct
an initial rating error; or (3) the USDVA experiences
processing backlogs or lost paperwork. On occasion,
veterans or their advocates contact the BOE with
backdated disability effective dates of more than 20
years, seeking help to obtain refunds beyond the
allowable four years. These disabled veterans are
disheartened that, after years of struggling with the
federal government to obtain a 100% disability rating,
California law limits available property tax relief.
These disabled veterans express frustration that
another level of government is preventing them from
receiving the benefits to which they understood they
were entitled.
Support and Opposition (4/21/14)
Support : California Assessors' Association; 5California
State Board of Equalization; California Taxpayers
Association; Howard Jarvis Taxpayers Association.
SB 1113 (Knight) - 2/19/14 -- Page 4
Opposition : None received.