BILL ANALYSIS                                                                                                                                                                                                    �




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de Le�n, Chair


          SB 1113 (Knight) - Property Taxation: Disabled Veterans'  
          Exemption Refund: Statute of Limitations
          
          Amended: April 1, 2014          Policy Vote: G&F 7-0
          Urgency: No                     Mandate: Yes
          Hearing Date: May 23, 2014      Consultant: Robert Ingenito
          
          SUSPENSE FILE.


          Bill Summary: SB 1113 would extend from four years to eight  
          years the period of time during which a taxpayer may claim a  
          refund under the disabled veterans' property tax exemption. 

          Fiscal Impact:
                 This measure is estimated to result in reduced local  
               property taxes of about $332,000 annually. Under  
               Proposition 98, this reduction in local property tax  
               revenues would lead to an increase in state General Fund  
               support for K-14 education of approximately 40 to 50  
               percent, or potentially $166,000 annually. The exact amount  
               would depend on the specific factors which determine the  
               annual Proposition 98 minimum funding guarantee.

                 BOE would incur minor costs (less than $10,000) to  
               inform and advise county assessors and the public of the  
               law changes and address implementation issues.
                
          
          Background: Current law provides qualified disabled veterans and  
          their unmarried surviving spouses with a property tax exemption  
          that applies to their home's assessed value. Exemption  
          eligibility provisions require that the claimant obtain a United  
          States Department of Veterans Affairs (USDVA) disability rating  
          that either (1) rates the veteran's disability at 100 percent or  
          (2) rates the veteran's disability compensation at 100 percent  
          because the veteran is unable to secure and maintain gainful  
          employment. 
          For 2014, the exemption amount is $124,932. The exemption amount  
          increases to $187,399 for households with incomes under $56,101.  
          Each year, 31,055 homes in California receive the disabled  
          veterans' exemption and 5.5 million homes receive the  








          SB 1113 (Knight)
          Page 1


          homeowners' exemption in the lesser amount of $7,000.

          Proposed Law: This measure would extend the deadline for county  
          tax collectors to refund taxes for the disabled veterans'  
          exemption from four to eight years. The bill also corrects an  
          erroneous cross reference.

          Staff Comments: Current law affects disabled veterans by  
          curtailing their ability to claim the exemption if their  
          disabled status is under review at the federal level, or if they  
          are appealing or litigating their rating. If these actions take  
          longer than four years, veterans lose the ability to claim the  
          full exemption when they received their disabled status.

          While this bill allows four additional years of refunds, the BOE  
          cites evidence that situations requiring the full four years  
          would be infrequent. Specifically, discussions with counties  
          that have the greatest number of disabled veterans' exemption  
          claims suggest that annually, 116 disabled veterans (2 per  
          county) would be able to receive a refund for two additional  
          years of property taxes paid. BOE reports that the average  
          disabled veterans' exemption is $110,000 ($103,000 when the  
          $7,000 homeowners' exemption previously granted on the same  
          property is backed out). Consequently, $103,000 in assessed  
          value is subject to additional exemption.

          BOE reports that the average statewide property tax rate in  
          2012-13 was 1.139 percent. When all the factors are multiplied  
          together, the local property tax revenue loss associated with  
          this measure would be about $332,000.
          .