BILL ANALYSIS �
SB 1113
Page 1
SENATE THIRD READING
SB 1113 (Knight)
As Amended April 1, 2014
Majority vote
SENATE VOTE :36-0
REVENUE & TAXATION 9-0 APPROPRIATIONS 17-0
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|Ayes:|Bocanegra, Harkey, Beth |Ayes:|Gatto, Bigelow, |
| |Gaines, Gordon, Bloom, | |Bocanegra, Bradford, Ian |
| |Dahle, Pan, | |Calderon, Campos, |
| |V. Manuel P�rez, Ting | |Donnelly, Eggman, Gomez, |
| | | |Holden, Jones, Linder, |
| | | |Pan, Quirk, |
| | | |Ridley-Thomas, Wagner, |
| | | |Weber |
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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 :
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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 or her surviving
unmarried spouse. [California Constitution Article XIII,
Section 4; 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 or 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%
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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
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 : According to the Assembly Appropriations
Committee:
1)Minor and absorbable costs to the Board of Equalization to
advise county assessors and others on the law changes;
potentially minor reimbursable administration costs to
counties.
2)Estimated reduction in local property tax revenues of
approximately $240,000 annually. Under Proposition 98 of
1988, that reduction would trigger an increase in General Fund
support for k-14 education of approximately 40% to 50%, or up
to $120,000 annually. The exact amount would depend on the
actual number of disabled veteran claimants and the specific
factors which determine the Proposition 98 minimum funding
guarantee.
COMMENTS : 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. [United States]
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
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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 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 Section 5097 and Military and
Veterans Code Section 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
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determined they are entitled to."
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.
Assembly Revenue and Taxation Committee comments:
This 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.
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
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 decides to appeal 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.
The four-year statute of limitation for filing a refund claim.
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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 Board of
Equalization (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 has successfully appealed or
litigated 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 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
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revenue receipts.
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098
FN: 0004842