BILL ANALYSIS �
SB 1113
Page 1
Date of Hearing: June 25, 2014
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Raul Bocanegra, Chair
SB 1113 (Knight) - As Amended: April 1, 2014
Majority vote. Fiscal committee.
SENATE VOTE : 36-0
SUBJECT : Property taxation: disabled veterans' exemption:
refunds: statute of limitations
SUMMARY : Extends the statute of limitations for filing a
property tax refund claim if the claim is filed in connection
with the disabled veteran's exemption. Specifically, this bill :
1)Contains legislative findings and declarations relating to the
disabled veterans' property tax exemption and its purpose of
relieving economic hardship on members of the military and
their families.
2)Extends the statute of limitations for filing a claim for a
property tax refund from four to eight years after making the
property tax payment sought to be refunded, but only if the
claim relates to the disabled veterans' exemption, as
specified.
3)Applies to claims for refund that are filed on or after
January 1, 2015, as specified.
4)Corrects an erroneous statutory cross-reference in Military
and Veterans Code Section 890.3 related to disabled veterans'
property tax exemption and property tax refund claims.
EXISTING LAW :
1)Exempts from property tax, in whole or in part, the home of a
veteran who is totally disabled because of injury or disease
incurred in military service, or his/her surviving unmarried
spouse. [Article XIII, Section 4, California Constitution;
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Revenue and Taxation Code (R&TC) Section 205.5.] The disabled
veterans' exemption is also available to the surviving spouse
of a person who has died as a result of service-connected
injuries while on active military duty. The amount of the
exemption depends on the claimant's income. The basic
exemption amount is $100,000, adjusted annually for inflation.
For low-income claimants, the exemption amount is $150,000,
adjusted annually for inflation, when the veteran's household
income does not exceed $40,000, as adjusted. For 2014, the
disabled veterans' exemption amount is $187,399 of assessed
value for those with a household income below $56,101 (the
"low-income" exemption), and $124,932 for all other disabled
veterans (the 'basic' exemption).
2)Defines a "totally disable veteran" as a veteran who has a
disability rating from the United States Department of
Veterans Affairs (USDVA), or the military service from which
the veteran was discharged, at 100%, or has a disability
compensation rating at 100% because he/she is unable to secure
or follow a substantially gainful occupation.
3)Allows a surviving spouse of a disabled veteran to receive the
exemption if the veteran's death is service-connected, as
determined by the USDVA.
4)Provides that a home becomes eligible for the disabled
veteran's exemption as of the effective date of a 100%
disability rating or on the day when the active duty service
person dies.
5)Requires a disabled veteran to file a claim with the local
county assessor to receive the exemption. To receive the
basic exemption, a claimant needs to file a claim only once.
To receive the larger low-income exemption, the claimant must
file a claim each year to verify income eligibility. The
annual filing period is between January 1 and February 15.
6)Specifies that, if a claim is filed after the deadline, the
exemption can still be obtained at a reduced level (either 90%
or 85% of the exemption amount), as outlined in R&TC Section
276. However, an exception to this "partial exemption" rule
is allowed in the case of late-filed claims where the USDVA
has not finished processing the veterans' disability rating
certification. If a person files a late claim due to a
pending disability rating from the USDVA, the full amount of
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the exemption will be granted retroactively, effective on the
date of a disability, but the claim must be filed no later
than 90 days after receiving a disability rating letter from
the USDVA, or before the next following lien date (January 1).
FISCAL EFFECT : The State Board of Equalization (BOE) staff
estimates that this bill will result in an annual property tax
revenue loss of $240,000.
COMMENTS :
1)The Author's Statement . The author has provided the following
statement in support of this bill:
"Qualified veterans who receive a 100 percent disability rating
from the U.S. Department of Veterans Affairs are given a
special property tax reduction in California. Currently, 100
percent disabled veterans are entitled to a property tax
reduction on the value of their home, 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 disability rating. Veterans are also entitled to
claim a refund for up to four years of back taxes paid. This
is especially useful when the disability rating is granted
retroactively.
"But some veterans struggle with the VA to get this rating, with
appeals and litigation. Some are incorrectly rated with
mistakes uncovered years later. Some veterans wait well
beyond the four-year statute of limitations to receive their
rating, to no fault of their own.
"In these cases, 100 percent disabled veterans are paying more
taxes that they should while they fight for their 100 percent
disability rating from the VA, only to find that they have
exceeded the statute of limitations. As a result, some
disabled veterans miss out on thousands of dollars that
California has determined they are entitled to.
"Doubling the statute from four to eight years parallels the
provisions of law requiring eight years of back taxes to be
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collected from taxpayers for escape assessments related to
unrecorded changes in ownership.
"SB 1113 seeks to balance veterans' need to receive added relief
with government's need to certainty and closure. Veterans who
are 100 percent disabled as a direct result of serving our
country shouldn't be penalized for delays over which they have
no control.
"SB 1113 changes the statute of limitations on refunds
associated with disabled veterans by amending Revenue and
Taxation Code �5097 and Military and Veterans Code �890.3 to
allow 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.
"Veterans wounded in the defense of our country should not be
penalized by a slow bureaucratic process. SB 1113 is necessary
to give veterans better access to the full benefit that a
grateful California has determined they are entitled to."
2)Arguments in Support . The proponents of this bill state that
the disabled veterans' property tax exemption is an "important
benefit offered by California, and the state should make
certain not to exclude fully qualified veterans from receiving
the full benefit to which they are entitled." The proponents
argue that the current statute of limitations is problematic
because it limits the veterans' ability to claim the exemption
while the veterans' disabled status is under review by the
USDVA, or the rating determination is being appealed or
litigated.
3)The Bill's Purpose . This bill is intended to allow disabled
veterans to receive the maximum amount of the property tax
exemption on their home on a retroactive basis by extending
the statute of limitations for filing refund claims from four
to eight years.
4)Background . Under existing law, a veteran must receive a
disability certification from either the USDVA or the military
service, from which the veteran was discharged, in order to
qualify for the property tax exemption. In addition, the
eligible veteran must file a timely claim with the county
assessor by the specified deadlines to receive the full amount
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of the property tax exemption. However, it may take years for
a veteran to receive a final USDVA disability rating
certification, especially if the veteran appeals the initial
disability rating. In 2000, the law was changed to allow
disabled veterans to receive the maximum amount of the
property tax exemption retroactively, once they receive a
qualifying disability rating. [SB 1362 (Poochigian), Chapter
1085, Statutes of 2000.] Thus, under existing law, the
effective date of the exemption in those cases is considered
to be the same as the effective date of the disability as
determined by the USDVA or the military service.
Consequently, a disabled veteran who has already paid property
taxes may recover the payments by filing a claim for refund.
However, the four-year statute of limitations applicable to
refunds may, in some cases, preclude veterans from receiving
the benefit of the exemption as of the effective disability
date.
5)The Four-Year Statute of Limitation for Filing a Refund Claim .
This bill extends the existing four-year statute of
limitations for filing a claim for refund associated with the
disabled veterans' property tax exemption to eight years.
Generally, a four-year statute of limitations applies to refund
claims to recover already paid taxes in California. This bill
departs from the general rule to allow disabled veterans or
their surviving spouses to receive a refund for the property
taxes already paid beyond the four-year period if certain
specified requirements are met. As explained by the BOE staff
in the analysis of this bill, the existing statute of
limitations on property tax refunds "can undercut the
provision of law allowing the disabled veteran to receive the
exemption as of the disability effective date." For example,
even if a veteran successfully appeals or litigates the
disability rating issued by the USDVA or if the USDVA issues a
new rating to correct an initial rating error, the veteran may
still not be able to receive a refund for the property taxes
already paid because of the four-year statute of limitations
for filing claims for refund. Furthermore, because of the
processing backlogs or lost paperwork at the USDVA, it may
take more than four years for a veteran to obtain a 100%
disability determination from the USDVA. According to the BOE
staff, 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
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four years," and "are disheartened that, after years of
struggling with the federal government to obtain a 100%
disability rating, California law limits available property
tax relief." The proposed extension of the statute of
limitations to eight years is similar to an eight-year statute
of limitations applicable for "escape assessments," i.e. back
taxes collected from taxpayers for escape assessments related
to unrecorded changes in ownership.
Federal courts have stated that fixed deadlines - statute of
limitations - may appear harsh because they can be missed, but
the resulting occasional harshness is redeemed by the clarity
imparted. (Prussner v. United States (7th Cir. 1990) 896 F.2d
218, 222-223 [quoting United States v. Locke (1985) 471 U.S.
84; United States v. Boyle (1985) 469 U.S. 241, 249].)
According to the sponsor, this bill seeks to balance the
veteran's need to receive added property tax relief with the
state and local government's need to certainty and closure on
property tax revenue receipts.
REGISTERED SUPPORT / OPPOSITION :
Support
State Board of Equalization (Sponsor)
American Legion, Department of California
AMVETS, Department of California
California Association of County Veterans Service Officer
California State Commanders Veterans Council
California Taxpayers Association
George Runner, Member, Second District, State Board of
Equalization
Jerome E. Horton, Chairman, Board of Equalization
Howard Jarvis Taxpayers Association
Santa Clarita Valley Chamber of Commerce
Veterans Caucus of the California Democratic Party
Veterans of Foreign Wars, Department of California
Vietnam Veterans of America, California State Council
Opposition
None of file
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098
SB 1113
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