BILL ANALYSIS                                                                                                                                                                                                    �




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


          SB 1152 (Anderson) - Property Taxation: Exemptions: Veterans'  
          Organizations
          
          Amended: May 15, 2014           Policy Vote: G&F 6-0
          Urgency: No                     Mandate: No
          Hearing Date: May 19, 2014      Consultant: Robert Ingenito
          
          This bill meets the criteria for referral to the Suspense File.


          Bill Summary: SB 1152 would provide that a veterans'  
          organization would not lose its property tax exemption  
          eligibility when the property is used for fraternal, lodge or  
          social club purposes. 

          Fiscal Impact: 

                 This measure would lower local property tax revenue by  
               roughly $500,000 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 $250,000  
               annually. The exact amount would depend on the specific  
               factors which determine the annual Proposition 98 minimum  
               funding guarantee.

              BOE would incur minor costs, likely less than $10,000 per  
               year, to inform and advise county assessors, the public and  
               staff of the change to current law, and update documents.

          
          Background: Current law provides a property tax exemption on  
          real property owned by veterans' organizations. However, in  
          practice, only small portions of most property owned by  
          veterans' organizations actually receive the property tax  
          exemption. The majority of veterans organizations' property is  
          ineligible for exemption because another provision of law  
          disqualifies property if used for fraternal, lodge, or social  
          purposes. The application of veterans' organization exemptions  
          is inconsistent from county to county. Some counties assess the  
          entire property, others do not assess the property at all, and  
          still others exempt just the office and facilities that directly  








          SB 1152 (Anderson)
          Page 1


          serve veterans, such as counseling rooms used for readjustment  
          services. 
          
          Proposed Law: This bill would provide that a veterans'  
          organization would not lose its property tax exemption  
          eligibility when the property is used for fraternal, lodge or  
          social club purposes. Additionally, the bill would provide that  
          the exemption would not apply to a veterans organization's  
          portion of property that consists of a bar where alcoholic  
          beverages are served. The portion of the property ineligible for  
          exemption shall be that area primarily used to prepare and serve  
          alcoholic beverages.
          

          Related Legislation: A prior version of SB 1152 was identical to  
          SB 1469 (Johannessen) from 2002. SB 1469 was never heard in a  
          committee. 

          Staff Comments: Available data indicate that the total assessed  
          value of veterans organizations' affected property amounts to  
          $64 million. Assuming all of these parcels are currently not  
          receiving the property tax exemption, this bill would lead to an  
          annual reduction in property tax revenues of $640,000. However,  
          the bill's tax treatment of the portion of the properties  
          related to bars would reduce the magnitude of the annual local  
          property tax loss to roughly $500,000. The precise impact on the  
          General Fund would depend on the specific factors which  
          determine the annual Proposition 98 minimum funding guarantee.