BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 1323 HEARING: 4/24/14
AUTHOR: Lieu FISCAL: Yes
VERSION: 4/2/13 TAX LEVY: No
CONSULTANT: Grinnell
PROPERTY TAXATION
Implements several recommendations from the California
Assessors' Association regarding exemptions.
Background, Existing Law, and Proposed Law
Section 1 of Article XIII of the California Constitution
provides that all property is taxable unless explicitly
exempted by the Constitution or federal law, but allows the
Legislature to exempt property used for charitable purposes
owned by nonprofit entities organized and operated for
charitable purposes, none of whose income inure to the
benefit of any private shareholder or individual. The
Legislature enacted this exemption, commonly known as the
"welfare exemption." Exemptions apply to the annual
property tax roll, as well as to one-time supplemental
assessments, which assessors send to taxpayers whenever a
change of ownership or new construction results in a
reassessment after the lien date of January 1st to reflect
the difference between the initial and revised assessment.
The California Assessors' Association working group wants
to change several technical requirements in property tax
law to ease administration.
I. Cancelling and refunding taxes on exempt property.
Currently, when a taxpayer files an application for an
exemption for property used as a college, cemetery, church,
religious exhibition, veterans' organization, free public
library, free museums, or other welfare exempt property
before the supplemental assessment is due; the assessor can
cancel all taxes, penalties, and interest for that
assessment. However, if the taxpayer doesn't file an
application until after that date, but before the first
installment becomes delinquent, the assessor reduces any
taxes, penalties, and interest by 90%, but not below $250.
If the taxpayer applies after that date, the assessor can
SB 1323 (Lieu) - 4/2/14 -- Page 2
only reduce taxes, penalties, and interest by 85%, but not
below $200. However, some exemptions depart from the
general rule, such as:
For not timely filed claims for the veterans' or
homeowners' exemption, the assessor can refund up to
80% of the tax provided the taxpayer files an
application on or before the date the first
installment becomes due.
For not timely filed claims for the disabled
veterans' exemption, the assessor can refund up to 90%
of the tax provided the taxpayer files an application
on or before the date the first installment becomes
due, but only 85% if the taxpayer doesn't file the
claim before that time.
For any other exemption not listed above, if the
taxpayer doesn't file an application until after that
date, but before the first installment becomes
delinquent, the assessor reduces any taxes, penalties,
and interest by 90%, but when the taxpayer applies
after that date, the assessor can only reduce taxes,
penalties, and interest by 85%.
Additionally, past practice for taxpayers and organization
was to file one exemption application, regardless of the
number of properties owned. However, assessors process one
claims per property, and can't easily identify which
property should be assessed the penalty when a taxpayer
owning multiple properties doesn't file for the exemption
on time.
Senate Bill 1323 instead provides that for all the
exemptions except the veterans', homeowners' exemption, and
disabled veterans' exemption, the assessor can cancel 90%
of the taxes, penalties, or interest, but not below
$200,000 in valuation ($200 in property tax at the one
percent rate). The bill changes both the individual
statutes for each property tax exemption, as well as the
general law that guides supplemental assessments.
The bill provides that the $200,000 assessed valuation
penalty cap for exempt properties applies to each
application, which can include a property location with six
contiguous parcels. If a taxpayer owns multiple
properties, and fails to file applications on time for any
of them, the penalty equals $250 per application, instead
of per taxpayer.
SB 1323 (Lieu) - 4/2/14 -- Page 3
II. Church Parking Lots. Current law allows the welfare
exemption for all real property necessary and desirable for
persons attending services to park their cars. However,
the church, religious denomination, or sect must not have a
congregation of more than 500 people for it to be eligible
for the exemption. Additionally, the law conditions the
exemption on the parking of "automobiles."
SB 1323 deletes the 500 person limit, and changes
"automobiles" to "vehicles."
III. Affidavits. Taxpayers seeking an exemption must
annually submit an affidavit to the assessor each year
providing any required information, and can currently
combine all of his or her property into one affidavit.
Additionally, state law generally requires taxpayers to
submit affidavits for exemptions between the lien date and
5pm on February 15th.
SB 1323 requires the taxpayer to submit the affidavit for
each property for which he or she seeks an exemption, but
also allows the taxpayer to file a single claim for a
property consisting of contiguous parcels. The bill also
clarifies that the claim period for the full disabled
veterans' exemption begins when the taxpayer becomes
eligible for the exemption and ends on February 15th.
IV. Forms. State law often contains the exact form that
assessors and taxpayers use, including the card that
applicants for the welfare exemption send to the assessor
each year to show no change in eligibility for the
exemption, and the notice that the assessor sends each year
to taxpayers who received the religious exemption the year
before.
SB 1323 deletes both the card and the notice from the law,
and instead directs the BOE to prescribe cards and notices
for applicants and assessors to use, which BOE does for all
of its forms annually.
State Revenue Impact
BOE estimates minimal revenue impact.
SB 1323 (Lieu) - 4/2/14 -- Page 4
Comments
1. Purpose of the bill . According to the author,
"California's property taxation laws and regulations can be
fairly complex and all appropriate attempts should be made
to simplify them for the betterment of taxpayers and
administrators alike. This measure is about simplifying the
code sections related to late-filings. It will streamline
the process for granting property tax welfare exemptions
related to certain types of property such as religious
institutions and hospitals. Ultimately, by bringing
efficiencies to claiming welfare exemption status, this
measure will save taxpayers and local government, including
county assessors, precious time and resources. In
addition, the bill also removes the current limitation
restricting the parking area exemption benefit to
congregations with fewer than 500 members. A process by
which is unnecessary and often arcane."
2. Cut to the chase . SB 1323 make several technical
changes to reasonably dense sections of property tax law to
ease property tax administration for assessors, but
contains three substantive changes of note:
First, instead of the current dollar cap on the
amount of tax, penalty, or interest ($250) the
taxpayer must pay after to failing to timely file
exemption applications, the bill instead uses a
slightly lower equivalent amount of assessed value
($200,000). It's easier for county auditors to work
with assessed value amounts due to supplemental
property tax rates for local general obligation bonds
that apply in some parts of a county, but not others.
Second, taxpayers that own more than one property
eligible for the exemption currently pay the maximum
left-over amount of $250 once after applying
exemptions. Under the bill, they must pay up to $250
for each application.
Lastly, the bill eliminates different treatment for
applications filed late, but still before specified
deadlines (90% of tax reduced), and those filed after
the specified deadline (85% of tax reduced), to
further ease administration.
3. Second thoughts . The bill's provision that applies
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penalty relief per six-parcel contiguous property, instead
of per taxpayer, may lead to taxpayers paying more in tax,
a result of the interaction between the bill and a ruling
in a 1973 BOE Letter to Assessors. To remove this effect,
the phrase "in total amount" should be added after "20,000"
on Page 4, Line 24; Page 5, Line 11; Page 12, Line 24.
Support and Opposition (4/24/14)
Support : California Assessors' Association; California
Association of Nonprofits.
Opposition : None received.