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The California Constitution and existing property tax law authorize taxpayers to transfer the base year value, as defined, of property to replacement property, if certain conditions are met, including, among others, that the claimant has not previously been granted, as a claimant, this property tax relief. For purposes of this property tax relief, existing law defines a claimant as any person claiming the property tax relief provided by this section, and provides that if a spouse of the claimant is a record owner of the replacement dwelling, the spouse is also considered a claimant for purposes of determining whether, in any future claim filed by the spouse this condition of eligibility has been met.

This bill would eliminate the requirement that, if a spouse of the claimant is a record owner of the replacement dwelling, the spouse also be considered a claimant for purposes of determining whether, in any future claim filed by the spouse, the condition of eligibility has been met, and would also make conforming changes to that provision. This bill would provide that this property tax relief applies only to persons who file a claim on or after January 1, 2016, and who have not been previously granted this property tax relief, as specified.

Section 2229 of the Revenue and Taxation Code requires the Legislature to reimburse local agencies annually for certain property tax revenues lost as a result of any exemption or classification of property for purposes of ad valorem property taxation.

This bill would provide that, notwithstanding Section 2229 of the Revenue and Taxation Code, no appropriation is made and the state shall not reimburse local agencies for property tax revenues lost by them pursuant to the bill.

This bill would take effect immediately as a tax levy.

Version:

The people of the State of California do enact as follows:SECTION 1.Section 69.5 of the Revenue and Taxation Code is amended to read:69.5.

(a)(1)Notwithstanding any other law, pursuant to subdivision (a) of Section 2 of Article XIIIA of the California Constitution, any person over the age of 55 years, or any severely and permanently disabled person, who resides in property that is eligible for the homeowners exemption under subdivision (k) of Section 3 of Article XIII of the California Constitution and Section 218 may transfer, subject to the conditions and limitations provided in this section, the base year value of that property to any replacement dwelling of equal or lesser value that is located within the same county and is purchased or newly constructed by that person as his or her principal residence within two years of the sale by that person of the original property, provided that the base year value of the original property shall not be transferred to the replacement dwelling until the original property is sold.

(2)Notwithstanding the limitation in paragraph (1) requiring that the original property and the replacement dwelling be located in the same county, this limitation shall not apply in any county in which the county board of supervisors, after consultation with local affected agencies within the boundaries of the county, adopts an ordinance making the provisions of paragraph (1) also applicable to situations in which replacement dwellings are located in that county and the original properties are located in another county within this state. The authorization contained in this paragraph shall be applicable in a county only if the ordinance adopted by the board of supervisors complies with all of the following requirements:

(A)It is adopted only after consultation between the board of supervisors and all other local affected agencies within the countys boundaries.

(B)It requires that all claims for transfers of base year value from original property located in another county be granted if the claims meet the applicable requirements of both subdivision (a) of Section 2 of Article XIIIA of the California Constitution and this section.

(C)It requires that all base year valuations of original property located in another county and determined by its assessor be accepted in connection with the granting of claims for transfers of base year value.

(D)It provides that its provisions are operative for a period of not less than five years.

(E)The ordinance specifies the date on and after which its provisions shall be applicable. However, the date specified shall not be earlier than November 9, 1988. The specified applicable date may be a date earlier than the date the county adopts the ordinance.

(b)In addition to meeting the requirements of subdivision (a), any person claiming the property tax relief provided by this section shall be eligible for that relief only if the following conditions are met:

(1)The claimant is an owner and a resident of the original property either at the time of its sale, or at the time when the original property was substantially damaged or destroyed by misfortune or calamity, or within two years of the purchase or new construction of the replacement dwelling.

(2)The original property is eligible for the homeowners exemption, as the result of the claimants ownership and occupation of the property as his or her principal residence, either at the time of its sale, or at the time when the original property was substantially damaged or destroyed by misfortune or calamity, or within two years of the purchase or new construction of the replacement dwelling.

(3)At the time of the sale of the original property, the claimant is at least 55 years of age, or is severely and permanently disabled.

(4)At the time of claiming the property tax relief provided by subdivision (a), the claimant is an owner of a replacement dwelling and occupies it as his or her principal place of residence and, as a result thereof, the property is currently eligible for the homeowners exemption or would be eligible for the exemption except that the property is already receiving the exemption because of an exemption claim filed by the previous owner.

(5)The original property of the claimant is sold by him or her within two years of the purchase or new construction of the replacement dwelling. For purposes of this paragraph, the purchase or new construction of the replacement dwelling includes the purchase of that portion of land on which the replacement building, structure, or other shelter constituting a place of abode of the claimant will be situated and that, pursuant to paragraph (3) of subdivision (g), constitutes a part of the replacement dwelling.

(6)Except as otherwise provided in paragraph (2) of subdivision (a), the replacement dwelling, including that portion of land on which it is situated that is specified in paragraph (5), is located entirely within the same county as the claimants original property.

(7)The claimant has not previously been granted, as a claimant, the property tax relief provided by this section, except that this paragraph shall not apply to any person who becomes severely and permanently disabled subsequent to being granted, as a claimant, the property tax relief provided by this section for any person over the age of 55 years. In order to prevent duplication of claims under this section within this state, county assessors shall report quarterly to the State Board of Equalization that information from claims filed in accordance with subdivision (f) and from county records as is specified by the board necessary to identify fully all claims under this section allowed by assessors and all claimants who have thereby received relief. The board may specify that the information include all or a part of the names and social security numbers of claimants and the identity and location of the replacement dwelling to which the claim applies. The information may be required in the form of data processing media or other media and in a format that is compatible with the recordkeeping processes of the counties and the auditing procedures of the state.

(c)The property tax relief provided by this section shall be available if the original property or the replacement dwelling, or both, of the claimant includes, but is not limited to, either of the following:

(1)A unit or lot within a cooperative housing corporation, a community apartment project, a condominium project, or a planned unit development. If the unit or lot constitutes the original property of the claimant, the assessor shall transfer to the claimants replacement dwelling only the base year value of the claimants unit or lot and his or her share in any common area reserved as an appurtenance of that unit or lot. If the unit or lot constitutes the replacement dwelling of the claimant, the assessor shall transfer the base year value of the claimants original property only to the unit or lot of the claimant and any share of the claimant in any common area reserved as an appurtenance of that unit or lot.

(2)A manufactured home or a manufactured home and any land owned by the claimant on which the manufactured home is situated. For purposes of this paragraph, land owned by the claimant includes a pro rata interest in a resident-owned mobilehome park that is assessed pursuant to subdivision (b) of Section 62.1.

(A)If the manufactured home or the manufactured home and the land on which it is situated constitutes the claimants original property, the assessor shall transfer to the claimants replacement dwelling either the base year value of the manufactured home or the base year value of the manufactured home and the land on which it is situated, as appropriate. If the manufactured home dwelling that constitutes the original property of the claimant includes an interest in a resident-owned mobilehome park, the assessor shall transfer to the claimants replacement dwelling the base year value of the claimants manufactured home and his or her pro rata portion of the real property of the park. No transfer of base year value shall be made by the assessor of that portion of land that does not constitute a part of the original property, as provided in paragraph (4) of subdivision (g).

(B)If the manufactured home or the manufactured home and the land on which it is situated constitutes the claimants replacement dwelling, the assessor shall transfer the base year value of the claimants original property either to the manufactured home or the manufactured home and the land on which it is situated, as appropriate. If the manufactured home dwelling that constitutes the replacement dwelling of the claimant includes an interest in a resident-owned mobilehome park, the assessor shall transfer the base year value of the claimants original property to the manufactured home of the claimant and his or her pro rata portion of the park. No transfer of base year value shall be made by the assessor to that portion of land that does not constitute a part of the replacement dwelling, as provided in paragraph (3) of subdivision (g).

This subdivision shall be subject to the limitations specified in subdivision (d).

(d)The property tax relief provided by this section shall be available to a claimant who is the coowner of the original property, as a joint tenant, a tenant in common, a community property owner, or a present beneficiary of a trust subject to the following limitations:

(1)If a single replacement dwelling is purchased or newly constructed by all of the coowners and each coowner retains an interest in the replacement dwelling, the claimant shall be eligible under this section whether or not any or all of the remaining coowners would otherwise be eligible claimants.

(2)If two or more replacement dwellings are separately purchased or newly constructed by two or more coowners and more than one coowner would otherwise be an eligible claimant, only one coowner shall be eligible under this section. These coowners shall determine by mutual agreement which one of them shall be deemed eligible.

(3)If two or more replacement dwellings are separately purchased or newly constructed by two coowners who held the original property as community property, only the coowner who has attained the age of 55 years, or is severely and permanently disabled, shall be eligible under this section. If both coowners are over 55 years of age, they shall determine by mutual agreement which one of them shall be deemed eligible.

In the case of coowners whose original property is a multiunit dwelling, the limitations imposed by paragraphs (2) and (3) shall only apply to coowners who occupied the same dwelling unit within the original property at the time specified in paragraph (2) of subdivision (b).

(e)Upon the sale of original property, the assessor shall determine a new base year value for that property in accordance with subdivision (a) of Section 2 of Article XIIIA of the California Constitution and Section 110.1, whether or not a replacement dwelling is subsequently purchased or newly constructed by the former owner or owners of the original property.

This section shall not apply unless the transfer of the original property is a change in ownership that either (1) subjects that property to reappraisal at its current fair market value in accordance with Section 110.1 or 5803 or (2) results in a base year value determined in accordance with this section, Section 69, or Section 69.3 because the property qualifies under this section, Section 69, or Section 69.3 as a replacement dwelling or property.

(f)(1)A claimant shall not be eligible for the property tax relief provided by this section unless the claimant provides to the assessor, on a form that shall be designed by the State Board of Equalization and that the assessor shall make available upon request, the following information:

(A)The name and social security number of each claimant who is a record owner of the replacement dwelling.

(B)Proof that the claimant was, at the time of its sale, at least 55 years of age, or severely and permanently disabled. Proof of severe and permanent disability shall be considered a certification, signed by a licensed physician and surgeon of appropriate specialty, attesting to the claimants severely and permanently disabled condition. In the absence of available proof that a person is over 55 years of age, the claimant shall certify under penalty of perjury that the age requirement is met. In the case of a severely and permanently disabled claimant either of the following shall be submitted:

(i)A certification, signed by a licensed physician or surgeon of appropriate specialty that identifies specific reasons why the disability necessitates a move to the replacement dwelling and the disability-related requirements, including any locational requirements, of a replacement dwelling. The claimant shall substantiate that the replacement dwelling meets disability-related requirements so identified and that the primary reason for the move to the replacement dwelling is to satisfy those requirements. If the claimant, or the claimants spouse or guardian, so declares under penalty of perjury, it shall be rebuttably presumed that the primary purpose of the move to the replacement dwelling is to satisfy identified disability-related requirements.

(ii)The claimants substantiation that the primary purpose of the move to the replacement dwelling is to alleviate financial burdens caused by the disability. If the claimant, or the claimants spouse or guardian, so declares under penalty of perjury, it shall be rebuttably presumed that the primary purpose of the move is to alleviate the financial burdens caused by the disability.

(C)The address and, if known, the assessors parcel number of the original property.

(D)The date of the claimants sale of the original property and the date of the claimants purchase or new construction of a replacement dwelling.

(E)A statement by the claimant that he or she occupied the replacement dwelling as his or her principal place of residence on the date of the filing of his or her claim.

(F)Any claim under this section shall be filed within three years of the date the replacement dwelling was purchased or the new construction of the replacement dwelling was completed subject to subdivision (k) or (m).

(2)A claim for transfer of base year value under this section that is filed after the expiration of the filing period set forth in subparagraph (F) of paragraph (1) shall be considered by the assessor, subject to all of the following conditions:

(A)Any base year value transfer granted pursuant to that claim shall apply commencing with the lien date of the assessment year in which the claim is filed.

(B)The full cash value of the replacement property in the assessment year described in subparagraph (A) shall be the base year value of the real property in the assessment year in which the base year value was transferred, factored to the assessment year described in subparagraph (A) for both of the following:

(i)Inflation as annually determined in accordance with paragraph (1) of subdivision (a) of Section 51.

(ii)Any subsequent new construction occurring with respect to the subject real property that does not qualify for property tax relief pursuant to the criteria set forth in subparagraphs (A) and (B) of paragraph (4) of subdivision (h).

(g)For purposes of this section:

(1)Person over the age of 55 years means any person or the spouse of any person who has attained the age of 55 years or older at the time of the sale of the original property.

(2)Base year value of the original property means its base year value, as determined in accordance with Section 110.1, with the adjustments permitted by subdivision (b) of Section 2 of Article XIIIA of the California Constitution and subdivision (f) of Section 110.1, determined as of the date immediately prior to the date that the original property is sold by the claimant, or in the case where the original property has been substantially damaged or destroyed by misfortune or calamity and the owner does not rebuild on the original property, determined as of the date immediately prior to the misfortune or calamity.

If the replacement dwelling is purchased or newly constructed after the transfer of the original property, base year value of the original property also includes any inflation factor adjustments permitted by subdivision (f) of Section 110.1 for the period subsequent to the sale of the original property. The base year or years used to compute the base year value of the original property shall be deemed to be the base year or years of any property to which that base year value is transferred pursuant to this section.

(3)Replacement dwelling means a building, structure, or other shelter constituting a place of abode, whether real property or personal property, that is owned and occupied by a claimant as his or her principal place of residence, and any land owned by the claimant on which the building, structure, or other shelter is situated. For purposes of this paragraph, land constituting a part of a replacement dwelling includes only that area of reasonable size that is used as a site for a residence, and land owned by the claimant includes land for which the claimant either holds a leasehold interest described in subdivision (c) of Section 61 or a land purchase contract. Each unit of a multiunit dwelling shall be considered a separate replacement dwelling. For purposes of this paragraph, area of reasonable size that is used as a site for a residence includes all land if any nonresidential uses of the property are only incidental to the use of the property as a residential site. For purposes of this paragraph, land owned by the claimant includes an ownership interest in a resident-owned mobilehome park that is assessed pursuant to subdivision (b) of Section 62.1.

(4)Original property means a building, structure, or other shelter constituting a place of abode, whether real property or personal property, that is owned and occupied by a claimant as his or her principal place of residence, and any land owned by the claimant on which the building, structure, or other shelter is situated. For purposes of this paragraph, land constituting a part of the original property includes only that area of reasonable size that is used as a site for a residence, and land owned by the claimant includes land for which the claimant either holds a leasehold interest described in subdivision (c) of Section 61 or a land purchase contract. Each unit of a multiunit dwelling shall be considered a separate original property. For purposes of this paragraph, area of reasonable size that is used as a site for a residence includes all land if any nonresidential uses of the property are only incidental to the use of the property as a residential site. For purposes of this paragraph, land owned by the claimant includes an ownership interest in a resident-owned mobilehome park that is assessed pursuant to subdivision (b) of Section 62.1.

(5)Equal or lesser value means that the amount of the full cash value of a replacement dwelling does not exceed one of the following:

(A)One hundred percent of the amount of the full cash value of the original property if the replacement dwelling is purchased or newly constructed prior to the date of the sale of the original property.

(B)One hundred and five percent of the amount of the full cash value of the original property if the replacement dwelling is purchased or newly constructed within the first year following the date of the sale of the original property.

(C)One hundred and ten percent of the amount of the full cash value of the original property if the replacement dwelling is purchased or newly constructed within the second year following the date of the sale of the original property.

For the purposes of this paragraph, except as otherwise provided in paragraph (4) of subdivision (h), if the replacement dwelling is, in part, purchased and, in part, newly constructed, the date the replacement dwelling is purchased or newly constructed is the date of purchase or the date of completion of construction, whichever is later.

(6)Full cash value of the replacement dwelling means its full cash value, determined in accordance with Section 110.1, as of the date on which it was purchased or new construction was completed, and after the purchase or the completion of new construction.

(7)Full cash value of the original property means, either:

(A)Its new base year value, determined in accordance with subdivision (e), without the application of subdivision (h) of Section 2 of Article XIIIA of the California Constitution, plus the adjustments permitted by subdivision (b) of Section 2 of Article XIIIA and subdivision (f) of Section 110.1 for the period from the date of its sale by the claimant to the date on which the replacement property was purchased or new construction was completed.

(B)In the case where the original property has been substantially damaged or destroyed by misfortune or calamity and the owner does not rebuild on the original property, its full cash value, as determined in accordance with Section 110, immediately prior to its substantial damage or destruction by misfortune or calamity, as determined by the county assessor of the county in which the property is located, without the application of subdivision (h) of Section 2 of Article XIIIA of the California Constitution, plus the adjustments permitted by subdivision (b) of Section 2 of Article XIIIA of the California Constitution and subdivision (f) of Section 110.1, for the period from the date of its sale by the claimant to the date on which the replacement property was purchased or new construction was completed.

(8)Sale means any change in ownership of the original property for consideration.

(9)Claimant means any person claiming the property tax relief provided by this section.

(10)Property that is eligible for the homeowners exemption includes property that is the principal place of residence of its owner and is entitled to exemption pursuant to Section 205.5.

(11)Person means any individual, but does not include any firm, partnership, association, corporation, company, or other legal entity or organization of any kind. Person includes an individual who is the present beneficiary of a trust.

(12)Severely and permanently disabled means any person described in subdivision (b) of Section 74.3.

(13)For the purposes of this section, property is substantially damaged or destroyed by misfortune or calamity if either the land or the improvements sustain physical damage amounting to more than 50 percent of either the lands or the improvements full cash value immediately prior to the misfortune or calamity. Damage includes a diminution in the value of property as a result of restricted access to the property where the restricted access was caused by the misfortune or calamity and is permanent in nature.

(h)(1)Upon the timely filing of a claim described in subparagraph (F) of paragraph (1) of subdivision (f), the assessor shall adjust the new base year value of the replacement dwelling in conformity with this section. This adjustment shall be made as of the latest of the following dates:

(A)The date the original property is sold.

(B)The date the replacement dwelling is purchased.

(C)The date the new construction of the replacement dwelling is completed.

(2)Any taxes that were levied on the replacement dwelling prior to the filing of the claim on the basis of the replacement dwellings new base year value, and any allowable annual adjustments thereto, shall be canceled or refunded to the claimant to the extent that the taxes exceed the amount that would be due when determined on the basis of the adjusted new base year value.

(3)Notwithstanding Section 75.10, Chapter 3.5 (commencing with Section 75) shall be utilized for purposes of implementing this subdivision, including adjustments of the new base year value of replacement dwellings acquired prior to the sale of the original property.

(4)In the case where a claim under this section has been timely filed and granted, and new construction is performed upon the replacement dwelling subsequent to the transfer of base year value, the property tax relief provided by this section also shall apply to the replacement dwelling, as improved, and thus there shall be no reassessment upon completion of the new construction if both of the following conditions are met:

(A)The new construction is completed within two years of the date of the sale of the original property and the owner notifies the assessor in writing of completion of the new construction within six months after completion.

(B)The fair market value of the new construction on the date of completion, plus the full cash value of the replacement dwelling on the date of acquisition, is not more than the full cash value of the original property as determined pursuant to paragraph (7) of subdivision (g) for purposes of granting the original claim.

(i)Any claimant may rescind a claim for the property tax relief provided by this section and shall not be considered to have received that relief for purposes of paragraph (7) of subdivision (b), and the assessor shall grant the rescission, if a written notice of rescission is delivered to the office of the assessor as follows:

(1)A written notice of rescission signed by the original filing claimant or claimants is delivered to the office of the assessor in which the original claim was filed.

(2)(A)Except as otherwise provided in this paragraph, the notice of rescission is delivered to the office of the assessor before the date that the county first issues, as a result of relief granted under this section, a refund check for property taxes imposed upon the replacement dwelling. If granting relief will not result in a refund of property taxes, then the notice shall be delivered before payment is first made of any property taxes, or any portion thereof, imposed upon the replacement dwelling consistent with relief granted under this section. If payment of the taxes is not made, then notice shall be delivered before the first date that those property taxes, or any portion thereof, imposed upon the replacement dwelling, consistent with relief granted under this section, are delinquent.

(B)Notwithstanding any other provision in this division, any time the notice of rescission is delivered to the office of the assessor within six years after relief was granted, provided that the replacement property has been vacated as the claimants principal place of residence within 90 days after the original claim was filed, regardless of whether the property continues to receive the homeowners exemption. If the rescission increases the base year value of a property, or the homeowners exemption has been incorrectly allowed, appropriate escape assessments or supplemental assessments, including interest as provided in Section 506, shall be imposed. The limitations periods for any escape assessments or supplemental assessments shall not commence until July 1 of the assessment year in which the notice of rescission is delivered to the office of the assessor.

(3)The notice is accompanied by the payment of a fee as the assessor may require, provided that the fee shall not exceed an amount reasonably related to the estimated cost of processing a rescission claim, including both direct costs and developmental and indirect costs, such as costs for overhead, personnel, supplies, materials, office space, and computers.

(j)(1)With respect to the transfer of base year value of original properties to replacement dwellings located in the same county, this section, except as provided in paragraph (3) or (4), shall apply to any replacement dwelling that is purchased or newly constructed on or after November 6, 1986.

(2)With respect to the transfer of base year value of original properties to replacement dwellings located in different counties, except as provided in paragraph (4), this section shall apply to any replacement dwelling that is purchased or newly constructed on or after the date specified in accordance with subparagraph (E) of paragraph (2) of subdivision (a) in the ordinance of the county in which the replacement dwelling is located, but shall not apply to any replacement dwelling which was purchased or newly constructed before November 9, 1988.

(3)With respect to the transfer of base year value by a severely and permanently disabled person, this section shall apply only to replacement dwellings that are purchased or newly constructed on or after June 6, 1990.

(4)The amendments made to subdivision (e) by the act adding this paragraph shall apply only to replacement dwellings under Section 69 that are acquired or newly constructed on or after October 20, 1991, and shall apply commencing with the 199192 fiscal year.

(k)(1)In the case in which a county adopts an ordinance pursuant to paragraph (2) of subdivision (a) that establishes an applicable date which is more than three years prior to the date of adoption of the ordinance, those potential claimants who purchased or constructed replacement dwellings more than three years prior to the date of adoption of the ordinance and who would, therefore, be precluded from filing a timely claim, shall be deemed to have timely filed a claim if the claim is filed within three years after the date that the ordinance is adopted. This paragraph may not be construed as a waiver of any other requirement of this section.

(2)In the case in which a county assessor corrects a base year value to reflect a pro rata change in ownership of a resident-owned mobilehome park that occurred between January 1, 1989, and January 1, 2002, pursuant to paragraph (4) of subdivision (b) of Section 62.1, those claimants who purchased or constructed replacement dwellings more than three years prior to the correction and who would, therefore, be precluded from filing a timely claim, shall be deemed to have timely filed a claim if the claim is filed within three years of the date of notice of the correction of the base year value to reflect the pro rata change in ownership. This paragraph may not be construed as a waiver of any other requirement of this section.

(3)This subdivision does not apply to a claimant who has transferred his or her replacement dwelling prior to filing a claim.

(4)The property tax relief provided by this section, but filed under this subdivision, shall apply prospectively only, commencing with the lien date of the assessment year in which the claim is filed. There shall be no refund or cancellation of taxes prior to the date that the claim is filed.

(l)No escape assessment may be levied if a transfer of base year value under this section has been erroneously granted by the assessor pursuant to an expired ordinance authorizing intercounty transfers of base year value.

(m)(1)The amendments made to subdivisions (b) and (g) of this section by Chapter 613 of the Statutes of 2001 shall apply:

(A)With respect to the transfer of base year value of original properties to replacement dwellings located in the same county, to any replacement dwelling that is purchased or newly constructed on or after November 6, 1986.

(B)With respect to the transfer of base year value of original properties to replacement dwellings located in different counties, to any replacement dwelling that is purchased or newly constructed on or after the date specified in accordance with subparagraph (E) of paragraph (2) of subdivision (a) in the ordinance of the county in which the replacement dwelling is located, but not to any replacement dwelling that was purchased or newly constructed before November 9, 1988.

(C)With respect to the transfer of base year value by a severely and permanently disabled person, to replacement dwellings that are purchased or newly constructed on or after June 6, 1990.

(2)The property tax relief provided by this section in accordance with this subdivision shall apply prospectively only commencing with the lien date of the assessment year in which the claim is filed. There shall be no refund or cancellation of taxes prior to the date that the claim is filed.

(n)A claim filed under this section is not a public document and is not subject to public inspection, except that a claim shall be available for inspection by the claimant or the claimants spouse, the claimants or the claimants spouses legal representative, the trustee of a trust in which the claimant or the claimants spouse is a present beneficiary, and the executor or administrator of the claimants or the claimants spouses estate.

(o)The amendments made to this section by the act adding this subdivision shall apply commencing with the lien date for the 201213 fiscal year.

(p)The amendments made to this section by the act adding this subdivision shall apply only to persons who file a claim pursuant to this section on or after January 1, 2016, and who have not been previously granted the property tax relief provided by this section. A person considered to be a claimant prior to these amendments because he or she was a record owner of a replacement dwelling on a claim filed by a spouse shall be deemed to be a person who has been previously granted the property tax relief provided by this section.

SEC. 2.

Notwithstanding Section 2229 of the Revenue and Taxation Code, no appropriation is made by this act and the state shall not reimburse any local agency for any property tax revenues lost by it pursuant to this act.

SEC. 3.

This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect.

The people of the State of California do enact as follows:SECTION 1.Section 69.5 of the Revenue and Taxation Code is amended to read:69.5.

(a)(1)Notwithstanding any other provision of law, pursuant to subdivision (a) of Section 2 of Article XIIIA of the California Constitution, any person over the age of 55 years, or any severely and permanently disabled person, who resides in property that is eligible for the homeowners exemption under subdivision (k) of Section 3 of Article XIII of the California Constitution and Section 218 may transfer, subject to the conditions and limitations provided in this section, the base year value of that property to any replacement dwelling of equal or lesser value that is located within the same county and is purchased or newly constructed by that person as his or her principal residence within two years of the sale by that person of the original property, provided that the base year value of the original property shall not be transferred to the replacement dwelling until the original property is sold.

(A)It is adopted only after consultation between the board of supervisors and all other local affected agencies within the countys boundaries.

(D)It provides that its provisions are operative for a period of not less than five years.

(3)At the time of the sale of the original property, the claimant or the claimants spouse who resides with the claimant is at least 55 years of age, or is severely and permanently disabled.

(7)The claimant has not previously been granted, as a claimant, the property tax relief provided by this section, except that this paragraph shall not apply to any person who becomes severely and permanently disabled subsequent to being granted, as a claimant, the property tax relief provided by this section for any person over the age of 55 years. In order to prevent duplication of claims under this section within this state, county assessors shall report quarterly to the State Board of Equalization that information from claims filed in accordance with subdivision (f) and from county records as is specified by the board necessary to identify fully all claims under this section allowed by assessors and all claimants who have thereby received relief. The board may specify that the information include all or a part of the names and social security numbers of claimants and their spouses and the identity and location of the replacement dwelling to which the claim applies. The information may be required in the form of data processing media or other media and in a format that is compatible with the recordkeeping processes of the counties and the auditing procedures of the state.

This subdivision shall be subject to the limitations specified in subdivision (d).

(3)If two or more replacement dwellings are separately purchased or newly constructed by two coowners who held the original property as community property, only the coowner who has attained the age of 55 years, or is severely and permanently disabled, shall be eligible under this section. If both spouses coowners are over 55 years of age, they shall determine by mutual agreement which one of them is shall be deemed eligible.

(A)The name and social security number of each claimant and of any spouse of the claimant who is a record owner of the replacement dwelling.

(B)Proof that the claimant or the claimants spouse who resided on the original property with the claimant was, at the time of its sale, at least 55 years of age, or severely and permanently disabled. Proof of severe and permanent disability shall be considered a certification, signed by a licensed physician and surgeon of appropriate specialty, attesting to the claimants severely and permanently disabled condition. In the absence of available proof that a person is over 55 years of age, the claimant shall certify under penalty of perjury that the age requirement is met. In the case of a severely and permanently disabled claimant either of the following shall be submitted:

(C)The address and, if known, the assessors parcel number of the original property.

(D)The date of the claimants sale of the original property and the date of the claimants purchase or new construction of a replacement dwelling.

(E)A statement by the claimant that he or she occupied the replacement dwelling as his or her principal place of residence on the date of the filing of his or her claim.

(A)Any base year value transfer granted pursuant to that claim shall apply commencing with the lien date of the assessment year in which the claim is filed.

(i)Inflation as annually determined in accordance with paragraph (1) of subdivision (a) of Section 51.

(g)For purposes of this section:

(1)Person over the age of 55 years means any person or the spouse of any person who has attained the age of 55 years or older at the time of the sale of the original property.

(5)Equal or lesser value means that the amount of the full cash value of a replacement dwelling does not exceed one of the following:

(7)Full cash value of the original property means, either:

(8)Sale means any change in ownership of the original property for consideration.

(9)Claimant means any person claiming the property tax relief provided by this section. If a spouse of that person is a record owner of the replacement dwelling, the spouse is also a claimant for purposes of determining whether in any future claim filed by the spouse under this section the condition of eligibility specified in paragraph (7) of subdivision (b) has been met.

(10)Property that is eligible for the homeowners exemption includes property that is the principal place of residence of its owner and is entitled to exemption pursuant to Section 205.5.

(12)Severely and permanently disabled means any person described in subdivision (b) of Section 74.3.

(A)The date the original property is sold.

(B)The date the replacement dwelling is purchased.

(C)The date the new construction of the replacement dwelling is completed.

(1)A written notice of rescission signed by the original filing claimant or claimants is delivered to the office of the assessor in which the original claim was filed.

(3)This subdivision does not apply to a claimant who has transferred his or her replacement dwelling prior to filing a claim.

(m)(1)The amendments made to subdivisions (b) and (g) of this section by Chapter 613 of the Statutes of 2001 shall apply:

(C)With respect to the transfer of base year value by a severely and permanently disabled person, to replacement dwellings that are purchased or newly constructed on or after June 6, 1990.

(o)The amendments made to this section by the act adding this subdivision shall apply commencing with the lien date for the 201213 fiscal year.

SEC. 2.

SEC. 3.

This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect.

Date	Status
Jun 1, 2015	Read third time. Passed. Ordered to the Senate. (Ayes 80. Noes 0. Page 1730.)
Jan 15, 2016	Consideration of Governor's veto stricken from file.
Oct 2, 2015	Vetoed by Governor.
Sep 10, 2015	Enrolled and presented to the Governor at 4 p.m.
Sep 1, 2015	Read third time. Passed. Ordered to the Assembly. (Ayes 40. Noes 0. Page 2347.).
Sep 1, 2015	Read third time. Passed. Ordered to the Assembly.
Sep 1, 2015	In Assembly. Ordered to Engrossing and Enrolling.
Aug 31, 2015	Read second time. Ordered to third reading.
Aug 27, 2015	From committee: Do pass. (Ayes 7. Noes 0.) (August 27).
Aug 17, 2015	In committee: Referred to APPR. suspense file.
Jul 8, 2015	From committee: Do pass and re-refer to Com. on APPR. (Ayes 7. Noes 0.) (July 8). Re-referred to Com. on APPR.
Jun 11, 2015	Referred to Com. on GOV. & F.
Feb 27, 2015	Introduced. To print.
Jun 1, 2015	Read third time. Passed. Ordered to the Senate.
Jun 1, 2015	In Senate. Read first time. To Com. on RLS. for assignment.
May 28, 2015	Read second time. Ordered to third reading.
May 28, 2015	Joint Rule 62(a), file notice suspended. (Page 1613.)
May 28, 2015	Joint Rule 62(a), file notice suspended.
May 28, 2015	From committee: Do pass. (Ayes 17. Noes 0.) (May 28).
May 27, 2015	In committee: Set, first hearing. Referred to APPR. suspense file.
May 19, 2015	From committee: Do pass and re-refer to Com. on APPR. (Ayes 9. Noes 0.) (May 18). Re-referred to Com. on APPR.
Mar 23, 2015	Referred to Com. on REV. & TAX.
Mar 2, 2015	Read first time.
Mar 1, 2015	From printer. May be heard in committee March 31.

Date	Description	Location	Votes
Sep 1, 2015	Assembly 3rd Reading AB1378 Holden By Galgiani	Senate Floor	40 0 0 Passed
Aug 27, 2015	Do pass	Senate Standing Committee on Appropriations	7 0 0 Passed
Aug 17, 2015	Placed on suspense file	Senate Standing Committee on Appropriations	7 0 0 Passed
Jul 8, 2015	Do pass, but first be re-referred to the Committee on [Appropriations]	Senate Standing Committee on Governance and Finance	7 0 0 Passed
Jun 1, 2015	AB 1378 HOLDEN Assembly Third Reading	Assembly Floor	80 0 0 Passed
May 28, 2015	Do pass.	Assembly Standing Committee on Appropriations	17 0 0 Passed
May 18, 2015	Do pass and be re-referred to the Committee on [Appropriations]	Assembly Standing Committee on Revenue and Taxation	9 0 0 Passed

Key

Pro

Against

Did Not Vote

This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.

Positions by individuals are not included.

* Testimony in a hearing

** Position recorded in bill analysis

*** Position recorded in written testimony

Organization	Position	Date
California Association of Assessors	** Support	Jun 1, 2015
California Association Of Realtors	** Support	Sep 1, 2015
California Taxpayers' Association	** Support	Sep 1, 2015
Howard Jarvis Taxpayers Association	** Support	Sep 1, 2015
Page K	** Support	Jun 1, 2015

* Testimony in a hearing

** Position recorded in bill analysis

*** Position recorded in written testimony

Governor's Veto analysis @page { size: 8.5in 11in; margin-left: 1in; margin-right: 1in; margin-top: 0.5in } p { direction: ltr; color: #000000; widows: 2; margin-bottom: 0.1in; orphans: 2; line-height: 115%; background: transparent } p.western { font-size: 12pt; font-family: "Times New Roman", serif } p.cjk { font-size: 12pt; font-family: "Times New Roman", serif } p.ctl { font-size: 10pt; font-family: "Times New Roman", serif; so-language: my-MM } h1 { direction: ltr; color: #000000; widows: 2; orphans: 2; background: transparent; page-break-after: avoid } h1.western { font-size: 12pt; font-family: "Times New Roman", serif } h1.cjk { font-family: "Times New Roman", serif; font-size: 12pt } h1.ctl { font-size: 10pt; font-family: "Times New Roman", serif; so-language: ar-SA } p.sdfootnote-western { line-height: 100%; color: #000000; widows: 2; font-family: "Times New Roman", serif; font-size: 10pt; margin-bottom: 0in; orphans: 2; direction: ltr; background: transparent } p.sdfootnote-cjk { line-height: 100%; color: #000000; widows: 2; font-family: "Times New Roman", serif; margin-bottom: 0in; font-size: 10pt; orphans: 2; direction: ltr; background: transparent } p.sdfootnote-ctl { line-height: 100%; color: #000000; so-language: ar-SA; widows: 2; margin-bottom: 0in; font-family: "Times New Roman", serif; font-size: 10pt; orphans: 2; direction: ltr; background: transparent } a.sdfootnoteanc { font-size: 57% }

AB 1378

Page 4

GOVERNOR'S VETO

GV Bill Id:AB 1378

Author:(Holden)

As Enrolled Ver:September 3, 2015

2/3 vote

Committee

Votes

Ayes

Noes

Revenue & Taxation

9-0

Ting, Brough, Dababneh, Gipson, Roger Hernández, Mullin, Patterson, Quirk, Wagner

Appropriations

17-0

Gomez, Bigelow, Bonta, Calderon, Chang, Daly, Eggman, Gallagher,

Eduardo Garcia, Gordon, Holden, Jones, Quirk, Rendon, Wagner, Weber, Wood

ASSEMBLY:

80-0

(June 1, 2015)

SENATE:

40-0

(September 1, 2015)

SUMMARY: Allows each spouse to qualify individually for the base year value transfer property tax relief. Specifically, this bill:

Revises the definition of "claimant" to exclude a spouse of the person claiming the base year value transfer property tax relief. Eliminates the requirement that the claimant's spouse, who is a record owner of the replacement dwelling, be considered a "claimant" for purposes of determining whether in any future claim filed by the spouse the condition of eligibility has been met.
Makes technical, conforming changes to the provisions relating to the base year value transfer eligibility requirements.
Applies only to persons who file a claim on or after January 1, 2016, and who have not been previously granted the base year value transfer property tax relief.
Takes effect immediately as a tax levy.

FISCAL EFFECT: According to the Senate Appropriations Committee, the Board of Equalization (BOE) estimates that the bill would result in a $350,000 annual property tax revenue loss, increasing annually thereafter. Approximately 50% of property tax revenues statewide accrue to schools, which generally offsets state General Fund obligations pursuant to Proposition 98. Consequently, any reduction in the school share of property tax revenues that are attributable to the bill’s impact on assessed values would result in a commensurate increase in General Fund costs. BOE indicates that the bill's administrative costs would be minor and absorbable.

COMMENTS:

The Author's Statement. The author has provided the following statement in support of this bill:

"Assembly Bill 1378 recognizes the evolving nature of marriage relations and living patterns of Californians and expands eligibility for a Proposition 60 [1986]/[Proposition] 90 [1988] transfer to include one transfer per person in a recognized long-term relationship. Assembly Bill 1378 ensures California law recognizes all types of marriages, cohabitations and housing situations."

Proposition 13 (1978). Much of the law pertaining to property taxation is prescribed by Articles XIII and XIII A (commonly known as "Proposition 13") of the California Constitution. Proposition 13 was added to the California Constitution in June 1978 and was most recently amended by Proposition 26 in 2010. Proposition 13 was designed to provide real property tax relief by imposing a set of interlocking limitations upon the assessment and taxing powers of state and local governments.^¹ California Constitution Article XIII A, Section 1 states that, as a general rule, the maximum amount of any ad valorem tax on real property may not exceed 1% of the property's full cash value, as adjusted for the lesser of inflation or 2% per year. The term "full cash value" means the "county assessor's valuation of real property as shown on the 1975-1976 tax bill" or, thereafter, "the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment" (emphasis added) [California Constitution, Article XIII A, Sections 1 and 2]. In other words, the California Constitution requires that real property be reassessed to its current fair market value whenever a "change in ownership" occurs. The definition of a "change in ownership" was not included in Proposition 13, but was left to implementing legislation.
Base-Year Value Transfers. California Constitution Article XIIIA contains provisions allowing a homeowner over the age of 55^² or a homeowner who is a disabled person^³ a once-in-a-lifetime opportunity to transfer the base year values in his/her principal residence, within two years from the sale of the original residence, to a replacement home of equal or lesser value within the same county or to a replacement home in counties that have adopted ordinances allowing the transfer^⁴, provided certain conditions are met and the county assessor is properly notified. Base year transfers allow homeowners to continue paying property taxes at the amount and rate of growth of their previous homes and prevent reassessments of their newly purchased or constructed homes to full market value.
Fifty-Five and Over. California has one of the lowest property taxes in the nation and provides the greatest benefit to property owners, especially those that have lived in their homes for many years. Subject to certain conditions, a homeowner may sell his/her home, buy or build a new one, and transfer the base-year value to a replacement dwelling. Any person claiming the base year value transfer relief is defined as a "claimant." To qualify, the claimant must provide certain information to the assessor, including his/her name and Social Security number as well as the name of Social Security number of his/her spouse who is also a record owner of the replacement dwelling. Under existing law, a person of any age may make a base year value transfer claim as long as that person resides with a spouse who is over 55 or permanently disabled, even if the spouse is not an owner of record of either the original or replacement property.

A spouse who shares title of the newly purchased home with the "claimant" is also considered to be a "claimant." Consequently, if "A" and "B" are married and record owners of property which has received the benefits of the base year transfer value relief, then neither "A" nor "B" is eligible for a similar benefit in the future.^⁵ Furthermore, if "A" and "B" divorce, and "A" marries "C", C will not be eligible for the base year value transfer relief with respect to C's replacement dwelling if both "A" and "C" are co-owners of record. The relief will be unavailable to "C" because "A" would be considered a "claimant" for purposes of "C's" claim.

What is a Problem? The proponents of this bill point out that married people are unfairly penalized when divorced. According to the author, existing law creates a "marriage penalty" by disallowing the benefits afforded by Propositions 60 and 90 to a married person whose spouse has already claimed a base year value transfer property tax relief. The author argues that base year value property transfers "remains one of the few areas of law continuing to make a distinction between domestic partnership and marriage." The purpose of this bill is to "remove tax considerations" when a couple decides on the type of relationship that "is best for them."
Proposed Solution. This bill proposes to stop treating a married couple as one "claimant" for purposes of the base year value transfer relief and, instead, grant this property tax relief to every individual regardless of his/her marital status. Practically speaking, this bill would allow a married couple to transfer their base year value twice, similarly to unmarried co-owners and registered domestic partners. However, this bill would disallow a claim made by a claimant who is under the age of 55, even if the claimant resides with a spouse who meets the age requirement. As noted by the BOE staff, residency by an over-55 spouse will no longer suffice to permit transfer of the base year value. To qualify, the over-55 spouse must file the actual claim and be a recorded owner of both homes. Under current law, a person who is under the age of 55 may be a claimant if he/she resides with a spouse who is over 55 years of age.
Statewide Tracking Database. To monitor and enforce the one-time relief, the BOE is required to collect data from counties and maintain a database of base year value transfer claimants and their spouses if names of both spouses appear on the title to the new home. If claimant's spouse subsequently claims another base year value transfer, the BOE database would match the name and the claim will be denied. This bill would allow a married couple to move their base year value twice but only if each spouse makes a claim for the first time after January 1, 2016. Because this bill applies prospectively, a spouse of the person who has already been granted a base year value transfer will not be able to claim a second base year value transfer.

GOVERNOR'S VETO MESSAGE:

This bill would allow each spouse in a marriage to submit a separate base-year property tax valuation transfer claim.

I think this bill is too broad and allows an already generous property tax benefit to be allowed a second time on a larger scale.

I do not believe that it would be prudent to authorize legislation such as this that would result in significant long-term costs to the General Fund.

Analysis Prepared by: Oksana Jaffe / REV. & TAX. / (916) 319-2098 FN: 0002456

1 Since any tax savings resulting from the real property tax limitations provided in Sections 1 and 2 of Article XIII A of the California Constitution could be effectively eliminated through the imposition of additional state and local taxes, Sections 3 and 4 place additional restrictions upon the imposition of any such taxes. See Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization, (1978) 22 Cal.3d 208.

2 In 1986, the voters passed Proposition 60 that amended the Constitution to allow a person over the age of 55 to sell a principal residence and transfer its base year value to a replacement principal residence within the same county.

3 In 1990, the voters passed Proposition 110 that amended the Constitution to extend these provisions to any severely and permanently disabled person regardless of age.

4 In 1988, Proposition 90 was passed by the voters. That proposition amended the Constitution to extend the base year value transfer provisions to a replacement residence located in another county on a county-optional basis.

5 BOE Annotation 200.0020 "Claimant (New Spouse)".

SENATE RULES COMMITTEE - SENATE FLOOR ANALYSIS @page { size: 8.5in 11in; margin-left: 1in; margin-right: 1in; margin-top: 0.5in; margin-bottom: 0.5in } p { color: #000000; widows: 2; margin-bottom: 0.1in; orphans: 2; line-height: 115%; direction: ltr; background: transparent } p.western { font-size: 14pt; font-family: "Times New Roman", serif } p.cjk { font-size: 14pt; font-family: "Times New Roman", serif } p.ctl { font-size: 10pt; font-family: "Times New Roman", serif; so-language: ar-SA } h1 { direction: ltr; color: #000000; widows: 2; page-break-inside: avoid; orphans: 2; background: transparent; page-break-after: avoid } h1.western { font-size: 12pt; font-family: "Times New Roman", serif } h1.cjk { font-size: 12pt; font-family: "Times New Roman", serif } h1.ctl { font-weight: bold; font-size: 14pt; font-family: "Times New Roman", serif; so-language: ar-SA } a:link { color: #0000ff; text-decoration: underline } a.western:link { font-weight: bold } a.cjk:link { font-weight: bold }

AB 1378

Page 4

SENATE RULES COMMITTEE

Office of Senate Floor Analyses

(916) 651-1520 Fax: (916) 327-4478

AB 1378

THIRD READING

Bill No: AB 1378

Author: Holden (D)

Introduced: 2/27/15

Vote: 21

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 7/8/15

AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach, Pavley

SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/27/15

AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen

ASSEMBLY FLOOR: 80-0, 6/1/15 - See last page for vote

SUBJECT: Property tax: base year value transfers

SOURCE: Author

DIGEST: This bill provides that a claimant’s spouse shall not be deemed as a claimant for purposes of base year value transfers.

ANALYSIS:

Existing law:

Provides that all property is taxable unless explicitly exempted by the Constitution or federal law.
Limits the maximum amount of any ad valorem tax on real property at 1% of full cash value, and directs assessors to only reappraise property when newly constructed, or ownership changes.
Allows homeowners over the age of 55 and disabled persons (regardless of age) to transfer their home’s base year values to a replacement home of equal or lesser value within the same county (Proposition 60, 1988, and Proposition 110, 1990), or to homes in counties that adopt ordinances allowing the transfer (Proposition 90, 1990).
Defines “claimant” as any eligible person claiming the base year transfer.
Limits claimants to one base-year value transfer.

This bill:

Provides that a claimant’s spouse shall not be deemed as a claimant for purposes of base year value transfers by deleting references to the spouse from the relevant section of the Revenue and Taxation Code, thereby allowing a spouse to subsequently claim another base year value transfer.
Applies the change solely to claims filed on or after January 1, 2016, by individuals who have not previously been granted a transfer.

Background

Because the Constitution doesn’t specify eligibility requirements, state law details them for base year value transfers. Instead of allowing infinite transfers, state law limits taxpayers to one transfer, as a “claimant” is eligible only when an assessor has not previously granted a base year transfer. Currently, the law only allows individuals to claim a second base year value transfer after becoming 55 years of age, then another should they subsequently become disabled, or vice versa. If the claimant has a spouse who is also an owner of record of the home, then the spouse is considered a claimant, and therefore precluded from claiming a base year transfer in the future.

Comments

Currently, whenever a taxpayer transfers a base year value to a replacement property, his or her spouse is permanently precluded for subsequently claiming a base year value transfer if their name is on the title, as they are considered a “claimant.” AB 1378 deletes spouses from that term’s definition. However, under current law, taxpayers can also avoid this “marriage penalty” by simply keeping the spouse’s name off of the title of either the original home, or failing that, keep the original claimant’s name off the replacement home when they buy it. Additionally, currently law allows the spouses of individuals who own property separately, and are not themselves over 55 or disabled, but reside on a property with a person who is but not on title, to claim the base year value transfer on their behalf. By deleting cohabitating spouses from the definition of “claimant,” AB 1378 allows for second transfers, but at the cost of always requiring the eligible person to claim the transfer, and be a recorded owner of both properties.

The Board of Equalization (BOE) collects data from counties to ensure that one taxpayer is not filing multiple claims for benefits when the taxpayer is not eligible. In this case, state law requires BOE to maintain a database of base year value transfer claimants, so the name of both the claimant and the spouse is entered into the database. If a claimant’s spouse subsequently applies, the BOE database would match the name, and the transfer could not be granted. AB 1378’s change ensures that the spouse’s name didn’t go in the database, so that he or she can maintain eligibility for a future transfer. However, because this bill is prospective, names currently in the database would remain ineligible.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee, AB 1378 results in a $350,000 annual property tax revenue loss, increasing annually thereafter.

SUPPORT: (Verified 8/28/15)

California Assessors Association

California Association of Realtors

California Taxpayers Association

Howard Jarvis Taxpayers Association

OPPOSITION: (Verified 8/28/15)

None received

ARGUMENTS IN SUPPORT: According to the author, “Assembly Bill 1378 recognizes the evolving nature of marriage relations and living patterns of Californians and expands eligibility for a Proposition 60/90 transfer to include one transfer per person in a recognized long-term relationship. Assembly Bill 1378 ensures California law recognizes all types of marriages, cohabitations and housing situations.”

ASSEMBLY FLOOR: 80-0, 6/1/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

Prepared by: Colin Grinnell / GOV. & F. / (916) 651-4119

8/31/15 9:05:48

**** END ****

Appropriations Committee Fiscal Summary @page { size: 8.5in 11in; margin-left: 1in; margin-right: 1in; margin-top: 0.5in; margin-bottom: 0.5in } p { direction: ltr; color: #000000; widows: 2; margin-bottom: 0.1in; orphans: 2; line-height: 115%; background: transparent } p.western { font-size: 12pt; font-family: "Arial", sans-serif } p.cjk { font-size: 12pt; font-family: "Times New Roman", serif } p.ctl { font-size: 10pt; font-family: "Times New Roman", serif; so-language: ar-SA } h1 { direction: ltr; widows: 2; orphans: 2; color: #000000; text-align: center; border-top: 1.50pt solid #000000; border-bottom: none; border-left: none; border-right: none; padding-top: 0.01in; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; background: transparent } h1.western { font-family: "Arial", sans-serif; font-weight: bold; font-size: 14pt } h1.cjk { font-weight: bold; font-size: 14pt; font-family: "Times New Roman", serif } h1.ctl { font-weight: bold; font-family: "Arial", sans-serif; font-size: 14pt; so-language: ar-SA } h2 { direction: ltr; widows: 2; color: #000000; orphans: 2; background: transparent } h2.western { font-weight: bold; font-size: 12pt; font-family: "Arial", sans-serif } h2.cjk { font-weight: bold; font-size: 12pt; font-family: "Times New Roman", serif } h2.ctl { font-weight: bold; font-family: "Arial", sans-serif; font-size: 10pt; so-language: ar-SA }

AB 1378 (Holden) Page 2 of 2

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

AB 1378 (Holden) - Property tax: base year value transfers.


Version: February 27, 2015	Policy Vote: GOV. & F. 7 - 0
Urgency: Yes	Mandate: No
Hearing Date: August 17, 2015	Consultant: Robert Ingenito

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

AB 1378 would allow spouses to each make separate base year value transfer claims related to the onetime only benefit provided to persons 55 years and over that move from one home to another.

Fiscal Impact:

The Board of Equalization (BOE) estimates that the bill would result in a $350,000 annual property tax revenue loss, increasing annually thereafter. Approximately 50 percent of property tax revenues statewide accrue to schools, which generally offsets state General Fund obligations pursuant to Proposition 98. Consequently, any reduction in the school share of property tax revenues that are attributable to the bill’s impact on assessed values would result in a commensurate increase in General Fund costs. BOE indicates that the bill’s administrative costs would be minor and absorbable.

Background:

The California Constitution (1) provides that all property is taxable unless explicitly exempted by the Constitution or federal law, (2) limits the maximum amount of any ad valorem tax on real property at 1 percent of full cash value, and (3) directs county assessors to only reappraise property when newly constructed, or ownership changes. Voters subsequently approved change in ownership exclusions to allow homeowners over the age of 55 and disabled persons (regardless of age) to transfer their home’s base year values to a replacement home of equal or lesser value within the same county, or to homes in counties that adopt ordinances allowing the transfer. Ten counties allow these out-of-county transfers (Alameda, El Dorado, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, and Ventura). Base year transfers allow taxpayers to continue to pay property taxes at the amount and rate of growth of their previous home, and not on the cash value of their newly purchased home.

The Constitution doesn’t specify eligibility requirements; consequently, state law details base year value transfer requirements. Instead of allowing infinite number of transfers, taxpayers can generally transfer base year values once, as a “claimant” is eligible only when an assessor has not previously granted a base year transfer, with “claimant” defined as any eligible person claiming the base year transfer. Current law only allows individuals to claim a second base year value transfer after becoming 55 years of age, then another should they subsequently become disabled, or vice versa. If the claimant has a spouse who is also an owner of record of the home, then the spouse is considered a claimant, and therefore precluded from claiming a base year transfer in the future.

Proposed Law:

This bill would modify the definition of "claimant" with respect to persons claiming base year value transfer tax relief, excluding the claimant's spouse from being considered a claimant for purposes of determining whether any future claim filed by that spouse remains eligible. Consequently, for claims filed on or after January 1, 2016, each disabled spouse aged 55 or older would may qualify individually and file separately for one-time base year value transfer property tax relief.

Staff Comments:

BOE property tax data indicate that counties grant an average of 5,000 base year value transfer claims each year. BOE assumes the bill would lead to a five percent increase, resulting in 250 additional qualified transfers annually.

California Association of Realtors data indicate that the median home price in December 2014 was $454,000. The 2013-14 average assessed value of a property receiving the homeowners’ exemption was $314,000. Therefore, BOE estimates the amount assessed value difference per home after a base year transfer is about $140,000, and the aggregate revenue loss (at the one percent rate) is about $350,000 annually, and would likely increase to the extent that home values exceed the annual two percent cap in assessed valuation allowed under Proposition 13.

-- END --

SENATE HEALTH @page { size: 8.5in 11in; margin-left: 1in; margin-right: 1in; margin-top: 0.5in; margin-bottom: 0.5in } p { color: #000000; widows: 2; margin-bottom: 0.1in; orphans: 2; line-height: 115%; direction: ltr; background: transparent } p.western { font-size: 12pt; font-family: "Arial", sans-serif } p.cjk { font-size: 12pt; font-family: "Times New Roman", serif } p.ctl { font-size: 12pt; font-family: "Arial", sans-serif; so-language: ar-SA } h1 { direction: ltr; widows: 2; color: #000000; orphans: 2; text-align: center; border-top: 1.50pt solid #000000; border-bottom: none; border-left: none; border-right: none; padding-top: 0.01in; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; background: transparent } h1.western { font-family: "Arial", sans-serif; font-weight: bold; font-size: 14pt } h1.cjk { font-weight: bold; font-size: 14pt; font-family: "Times New Roman", serif } h1.ctl { font-weight: bold; font-family: "Arial", sans-serif; font-size: 14pt; so-language: ar-SA } h2 { direction: ltr; widows: 2; color: #000000; orphans: 2; text-align: center; background: transparent; text-decoration: underline } h2.western { font-family: "Arial", sans-serif; font-weight: bold; font-size: 12pt } h2.cjk { font-weight: bold; font-size: 12pt; font-family: "Times New Roman", serif } h2.ctl { font-size: 12pt; font-family: "Arial", sans-serif; so-language: ar-SA }

AB 1378 (Holden) 2/27/15 Page 3 of 3

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Robert M. Hertzberg, Chair

2015 - 2016 Regular

Bill No:	AB 1378	Hearing Date:	7/8/15
Author:	Holden	Tax Levy:	Yes
Version:	2/27/15	Fiscal:	Yes
Consultant:	Grinnell

Property tax: base year value transfers

Provides that a claimant’s spouse shall not be deemed as a claimant for purposes of base year value transfers.

Background and Existing Law

Article XIII of the California Constitution provides that all property is taxable unless explicitly exempted by the Constitution or federal law. The Constitution limits the maximum amount of any ad valorem tax on real property at 1% of full cash value, and directs assessors to only reappraise property when newly constructed, or ownership changes (Proposition 13, 1978). Voters subsequently approved change in ownership exclusions to allow homeowners over the age of 55 and disabled persons (regardless of age) to transfer their home’s base year values to a replacement home of equal or lesser value within the same county (Proposition 60, 1988, and Proposition 110, 1990), or to homes in counties that adopt ordinances allowing the transfer (Proposition 90, 1990). Ten counties allow these out-of-county transfers (Alameda, El Dorado, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, and Ventura). Base year transfers allow taxpayers to continue to pay property taxes at the amount and rate of growth of their previous home, and not on the cash value of their newly purchased home.

Because the Constitution doesn’t specify eligibility requirements, state law details base year value transfer requirements. Instead of allowing infinite transfers, taxpayers can generally transfer base year values once, as a “claimant” is eligible only when an assessor has not previously granted a base year transfer, with “claimant” defined as any eligible person claiming the base year transfer. Currently, the law only allows individuals to claim a second base year value transfer after becoming 55 years of age, then another should they subsequently become disabled, or vice versa. If the claimant has a spouse who is also an owner of record of the home, then the spouse is considered a claimant, and therefore precluded from claiming a base year transfer in the future. The author wants to remove this “marriage penalty” by allowing spouses that co-own property with eligible base year value transfer claimants to subsequently request a transfer.

Proposed Law

Assembly Bill 1378 provides that a claimant’s spouse shall not be deemed as a claimant for purposes of base year value transfers, thereby allowing a spouse to subsequently claim another base year value transfer. However, the provision only allows a claimant’s spouse to apply for the subsequent base year value transfer prospectively.

State Revenue Impact

The State Board of Equalization (BOE) estimates a $350,000 annual property tax revenue loss.

Comments

1. Purpose of the bill. According to the author, “Assembly Bill 1378 recognizes the evolving nature of marriage relations and living patterns of Californians and expands eligibility for a Proposition 60/90 transfer to include one transfer per person in a recognized long-term relationship. Assembly Bill 1378 ensures California law recognizes all types of marriages, cohabitations and housing situations.”

2. Push and pull. Currently, whenever a taxpayer transfers a base year value to a replacement property, his or her spouse is permanently precluded for subsequently claiming a base year value transfer if their name is on the title, as they are considered a “claimant.” AB 1378 deletes spouses from that term’s definition. However, under current law, taxpayers can also avoid this “marriage penalty” by simply keeping the spouse’s name off of the title of either the original home, or failing that, keep the original claimant’s name off the replacement home when they buy it. Additionally, currently law allows the spouses of individuals who own property separately, and are not themselves over 55 or disabled, but reside on a property with a person who is but not on title, to claim the base year value transfer on their behalf. By deleting cohabitating spouses from the definition of “claimant,” AB 1378 would allow for second transfers, but at the cost of always requiring the eligible person to claim the transfer, and be a recorded owner of both properties.

3. BOE and assessors. In 1850, the Legislature first directed county assessors to tax property; however, assessors in different counties often applied different tax rates and methods of assessment. The California Constitution of 1879 created BOE to equalize rates and assessment practices among counties. As part of this effort, BOE collects data from counties to ensure that one taxpayer is not filing multiple claims for benefits when the taxpayer is not eligible. In this case, state law requires BOE to maintain a database of base year value transfer claimants, so the name of both the claimant and the spouse is entered into the database. If a claimant’s spouse subsequently applies, the BOE database would match then name, and the transfer could not be granted. AB 1378’s change would ensure that the spouse’s name didn’t go in the database, so that he or she can maintain eligibility for a future transfer. However, because the measure is prospective, names currently in the database would remain ineligible.

Assembly Actions

Assembly Floor 80-0
Assembly Appropriations 17-0
Assembly Revenue and Taxation 9-0

Support and Opposition

(7/2/15)

Support: California Assessors Association, California Association of Realtors, California Taxpayers Association, Howard Jarvis Taxpayers Association.

Opposition: Unknown-- END --

Assembly Third Reading analysis @page { size: 8.5in 11in; margin-left: 1in; margin-right: 0.75in; margin-top: 0.5in; margin-bottom: 0.5in } p { color: #000000; widows: 2; margin-bottom: 0.1in; orphans: 2; line-height: 115%; direction: ltr; background: transparent } p.western { font-size: 12pt; font-family: "Times New Roman", serif } p.cjk { font-size: 12pt; font-family: "Times New Roman", serif } p.ctl { font-size: 10pt; font-family: "Times New Roman", serif; so-language: ar-SA } h1 { direction: ltr; color: #000000; widows: 2; orphans: 2; background: transparent; page-break-after: avoid } h1.western { font-size: 12pt; font-family: "Times New Roman", serif } h1.cjk { font-family: "Times New Roman", serif; font-size: 12pt } h1.ctl { font-size: 10pt; font-family: "Times New Roman", serif; so-language: ar-SA } p.sdfootnote-western { line-height: 100%; color: #000000; widows: 2; font-family: "Times New Roman", serif; font-size: 10pt; margin-bottom: 0in; orphans: 2; direction: ltr; background: transparent } p.sdfootnote-cjk { line-height: 100%; color: #000000; widows: 2; font-family: "Times New Roman", serif; margin-bottom: 0in; font-size: 10pt; orphans: 2; direction: ltr; background: transparent } p.sdfootnote-ctl { line-height: 100%; color: #000000; so-language: ar-SA; widows: 2; margin-bottom: 0in; font-family: "Times New Roman", serif; orphans: 2; direction: ltr; font-size: 10pt; background: transparent } a.sdfootnoteanc { font-size: 57% }

AB 1378

Page 3

ASSEMBLY THIRD READING

ATR Bill Id:AB 1378

Author:(Holden)

As Introduced Ver:February 27, 2015

Majority vote. Tax levy

Committee

Votes

Ayes

Noes

Revenue & Taxation

9-0

Ting, Brough, Dababneh, Gipson, Roger Hernández, Mullin, Patterson, Quirk, Wagner

Appropriations

17-0

Gomez, Bigelow, Bonta, Calderon, Chang, Daly, Eggman, Gallagher,

Eduardo Garcia, Gordon, Holden, Jones, Quirk, Rendon, Wagner, Weber, Wood

SUMMARY: Allows each spouse to qualify individually for the base year value transfer property tax relief. Specifically, this bill:

Revises the definition of "claimant" to exclude a spouse of the person claiming the base year value transfer property tax relief. Specifically, this bill eliminates the requirement that the claimant's spouse, who is a record owner of the replacement dwelling, be considered a "claimant" for purposes of determining whether in any future claim filed by the spouse the condition of eligibility has been met.
Makes technical, conforming changes to the provisions relating to the base year value transfer eligibility requirements.
Applies only to persons who file a claim on or after January 1, 2016, and who have not been previously granted the base year value transfer property tax relief.
Takes effect immediately as a tax levy.

FISCAL EFFECT: According to the Assembly Appropriations Committee:

1) Minor and absorbable administrative costs to the Board of Equalization (BOE).

2) Significant annual reductions in property tax revenue, possibly around $350,000 in the first year and likely increasing annually thereafter, resulting in General Fund costs for approximately half the decrease in revenues to reimburse counties under the Proposition 98 (1988) funding guarantee.

COMMENTS:

The Author's Statement. The author has provided the following statement in support of this bill:

Proposition 13 (1978). Much of the law pertaining to property taxation is prescribed by Articles XIII and XIII A (commonly known as "Proposition 13") of the California Constitution. Proposition 13 was added to the California Constitution in June 1978 and was most recently amended by Proposition 26 in 2010. Proposition 13 was designed to provide real property tax relief by imposing a set of interlocking limitations upon the assessment and taxing powers of state and local governments.^¹ California Constitution Article XIII A, Section 1 states that, as a general rule, the maximum amount of any ad valorem tax on real property may not exceed 1% of the property's full cash value, as adjusted for the lesser of inflation or 2% per year. The term "full cash value" means the "county assessor's valuation of real property as shown on the 1975-1976 tax bill" or, thereafter, "the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment" (emphasis added) [California Constitution, Article XIII A, Sections 1 and 2]. In other words, the California Constitution requires that real property be reassessed to its current fair market value whenever a "change in ownership" occurs. The definition of a "change in ownership" was not included in Proposition 13, but was left to implementing legislation.
Base-Year Value Transfers. California Constitution Article XIIIA contains provisions allowing a homeowner over the age of 55^² or a homeowner who is a disabled person^³ a once-in-a-lifetime opportunity to transfer the base year values in his/her principal residence, within two years from the sale of the original residence, to a replacement home of equal or lesser value within the same county or to a replacement home in counties that have adopted ordinances allowing the transfer^⁴, provided certain conditions are met and the county assessor is properly notified. Base year transfers allow homeowners to continue paying property taxes at the amount and rate of growth of their previous homes and prevent reassessments of their newly purchased or constructed homes to full market value.
Fifty-Five and Over. California has one of the lowest property taxes in the nation and provides the greatest benefit to property owners, especially those that have lived in their homes for many years. Subject to certain conditions, a homeowner may sell his/her home, buy or build a new one, and transfer the base-year value to a replacement dwelling. Any person claiming the base year value transfer relief is defined as a "claimant." To qualify, the claimant must provide certain information to the assessor, including his/her name and Social Security number as well as the name of Social Security number of his/her spouse who is also a record owner of the replacement dwelling. Under existing law, a person of any age may make a base year value transfer claim as long as that person resides with a spouse who is over 55 or permanently disabled, even if the spouse is not an owner of record of either the original or replacement property.

What is a Problem? The proponents of this bill point out that married people are unfairly penalized when divorced. According to the author, existing law creates a "marriage penalty" by disallowing the benefits afforded by Propositions 60 and 90 to a married person whose spouse has already claimed a base year value transfer property tax relief. The author argues that base year value property transfers "remains one of the few areas of law continuing to make a distinction between domestic partnership and marriage." The purpose of this bill is to "remove tax considerations" when a couple decides on the type of relationship that "is best for them."
Proposed Solution. This bill proposes to stop treating a married couple as one "claimant" for purposes of the base year value transfer relief and, instead, grant this property tax relief to every individual regardless of his/her marital status. Practically speaking, this bill would allow a married couple to transfer their base year value twice, similarly to unmarried co-owners and registered domestic partners. However, this bill would disallow a claim made by a claimant who is under the age of 55, even if the claimant resides with a spouse who meets the age requirement. As noted by the BOE staff, residency by an over-55 spouse will no longer suffice to permit transfer of the base year value. To qualify, the over-55 spouse must file the actual claim and be a recorded owner of both homes. Under current law, a person who is under the age of 55 may be a claimant if he/she resides with a spouse who is over 55 years of age.
Statewide Tracking Database. To monitor and enforce the one-time relief, the BOE is required to collect data from counties and maintain a database of base year value transfer claimants and their spouses if names of both spouses appear on the title to the new home. If claimant's spouse subsequently claims another base year value transfer, the BOE database would match the name and the claim will be denied. This bill would allow a married couple to move their base year value twice but only if each spouse makes a claim for the first time after January 1, 2016. Because this bill applies prospectively, a spouse of the person who has already been granted a base year value transfer will not be able to claim a second base year value transfer.

Analysis Prepared by: Oksana Jaffe / REV. & TAX. / (916) 319-2098 FN: 0000661

3 In 1990, the voters passed Proposition 110 that amended the Constitution to extend these provisions to any severely and permanently disabled person regardless of age.

5 BOE Annotation 200.0020 "Claimant (New Spouse)".

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AB 1378

Page 2

Date of Hearing: May 27, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

ABPCA Bill Id:AB 1378

Author:(Holden) – As Introduced Ver:February 27, 2015

Policy Committee:

Revenue and Taxation

Vote:

9 - 0

Urgency: Yes State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill modifies the definition of "claimant" with respect to persons claiming base year value transfer tax relief, excluding the claimant's spouse from being considered a claimant for purposes of determining whether any future claim filed by that spouse remains eligible. As a result of the change, for claims filed on or after January 1, 2016, each disabled spouse aged 55 or older may qualify individually and file separately for one-time base year value transfer property tax relief.

FISCAL EFFECT:

1) Minor and absorbable administrative costs to the Board of Equalization.

2) Significant annual reductions in property tax revenue, possibly around $350,000 in the first year and likely increasing annually thereafter, resulting in GF costs for approximately half the decrease in revenues to reimburse counties under the Proposition 98 funding guarantee.

COMMENTS:

1) Purpose. According to the author, this bill recognizes the evolving nature of marriages and living patterns of Californians, expanding eligibility for base year value transfers to allow one transfer per person in a recognized long-term relationship. As a result, the base value year transfer law will recognize all types of marriages and cohabitations. Proponents argue this bill is about fairness, allowing both spouses or cohabitants to make separate claims for transfer, assuming the other statutory requirements are satisfied.

2) Base Year Value Transfers. Adopted in June 1978, Proposition 13 was designed to provide real property tax relief by limiting the assessment and taxing powers of state and local governments. As a general rule, Proposition 13 limits any tax on real property to 1% of the property's assessed value, measured as either the assessed value as of the 1975-76 tax year or the appraisal value when purchased, constructed, or a change in ownership has occurred, subject to adjustment for the lesser of inflation or 2% per year. As a result, real property is only reassessed to fair market value upon a change in ownership.

One exception to the change in ownership fair market value reassessment is the base year value transfer provision. Under that rule, a disabled homeowner aged 55 or older may elect a once-in-a-lifetime transfer of the base year value of the homeowner's principal residence to a replacement residence of equal or lesser value within the same county, or in certain other counties, within two years of the sale of the original residence. The base year value transfer allows the homeowner to continue paying property taxes at the amount and rate of growth of the previous residence and not the fair market value of the new residence.

Under the current base value transfer rules, if a married couple are both record owners of a property that has received base year transfer value relief, neither will be eligible to claim such relief again in the future, even if the couple has divorced. Furthermore, if one of the spouses were to remarry an otherwise eligible person, that new couple would also be ineligible for the base year value transfer because the remarrying individual is not eligible.

3) Love and Marriage. Although very limited in scope, this bill takes a rather progressive view of marital and cohabitant relationships. In general, federal and state income tax laws treat married couples as a single economic unit. This is not based in tax logic or economic experience, but rather reflects society's views on the institution of marriage and the family. Most married couples file joint tax returns, and even married couples filing singly are taxed as married persons. California property tax law similarly treats married taxpayers as a single economic unit, and this bill represents a small, but perhaps symbolic, deviation from that general policy. The committee may wish to consider whether this policy ought to be considered with respect to property tax more generally, and whether this bill should be considered in that broader context.

Analysis Prepared by: Joel Tashjian / APPR. / (916) 319-2081

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AB 1378

Page 5

Date of Hearing: May 18, 2015

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Philip Ting, Chair

ABPCA Bill Id:AB 1378 (

Author:Holden) – As Introduced Ver:February 27, 2015

Majority Vote. Tax Levy. Fiscal Committee

SUBJECT: Property tax: base year value transfers

SUMMARY: Allows each spouse to qualify individually for the base year value transfer property tax relief. Specifically, this bill:

Revises the definition of "claimant" to exclude a spouse of the person claiming the base year value transfer property tax relief. Specifically, this bill eliminates the requirement that the claimant's spouse, who is a record owner of the replacement dwelling, be considered a "claimant" for purposes of determining whether in any future claim filed by the spouse the condition of eligibility has been met.
Makes technical, conforming changes to the provisions relating to the base year value transfer eligibility requirements.
Applies only to persons who file a claim on or after January 1, 2016, and who have not been previously granted the base year value transfer property tax relief.
Takes effect immediately as a tax levy.

EXISTING LAW:

Provides that all property is taxable, unless otherwise provided by the California Constitution or federal laws [Section 1(a), Article XIII, California Constitution]. Limits ad valorem taxes on real property to 1% of the full cash value of that property [Section 1(a), Article XIII A, California Constitution (Proposition 13)]. Requires real property to be reassessed to its current fair market value whenever a "change in ownership" occurs, but creates exceptions to numerous transfers. (California Constitution, Article XIII A, Section 2; R&TC Sections 60 – 69.5.) The assessed value of the property established initially for property tax purposes is generally referred to as "base year value", which is subject to annual increases for inflation, not to exceed 2%.
Allows property owners over 55 years of age and disabled persons once-in-a-lifetime opportunity to transfer the base-year value of their principle residence, within two years from the sale of the original residence, to a replacement home of equal or lesser value within the same county (Proposition 60, 1988), or to a replacement home in counties that have adopted ordinances allowing the transfer (Proposition 90, 1990), provided certain conditions are met and the county assessor is properly notified. Currently, Alameda, El Dorado, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, and Ventura Counties allow these out-of-county transfers. Base-year transfers allow taxpayers to continue to pay property taxes at the amount and rate of growth of their previous home and prevent reassessments of their newly purchased homes to full market value.
Provides that, if the replacement dwelling is purchased before the original property is sold, the taxpayer may transfer the base-year value only if the replacement property is 100% or less of the original property’s value. If the replacement dwelling is purchased within the first year after the sale, then the taxpayer may transfer the base year if the replacement property is within 105% of the original property’s value. And, if the replacement dwelling is purchased within the second year after the sale, then the taxpayer may transfer the base year if the replacement property is within 110% of the original property’s value.
Allows a homeowner, who has been granted a base year value transfer from his/her original residence to a replacement dwelling, to perform new construction on the replacement property subsequent to the transfer and exempts the new construction from assessment. The new construction must be completed within two years of the sale of the original property and its value may not exceed the sales price of the original property.
Defines any person claiming the base year transfer property tax relief as a "claimant" and specifies that spouses are deemed to be a single claimant. Provides that a person is eligible to claim a base year value transfer as a claimant only if neither that person nor his/her spouse, who is a record owner of the new home, has previously received that property tax relief.
Provides that each co-owner of real property, including domestic partners or unmarried couples, is considered to be a separate claimant for purposes of the base year value property tax relief.

FISCAL EFFECT: The State Board of Equalization (BOE) staff estimates that this bill would result in an annual loss of $350,000.

COMMENTS:

The Author's Statement. The author has provided the following statement in support of this bill:

"Assembly Bill 1378 recognizes the evolving nature of marriage relations and living patterns of Californians and expands eligibility for a Proposition 60/90 transfer to include one transfer per person in a recognized long-term relationship. Assembly Bill 1378 ensures California law recognizes all types of marriages, cohabitations and housing situations."
Arguments in Support. The proponents of this bill state that this bill "clarifies and expands the rules for Proposition 60 'base year value transfers' to allow both spouses to make separate claims for transfer of a principal residence to a replacement residence, assuming all other statutory requirements are met." The proponents claim that this bill is "simply about creating fairness in the years following Proposition 60's passage in 1986." They argue that it "dispenses with [the] unequal treatment and entitles each individual owner, regardless of marital status, to a once per lifetime base year value transfer" and "will streamline administration of the section 69.5 base year value transfers as Assessors will no longer be required to track couples for purposes of ensuring that future transfers are valid."
Proposition 13. Much of the law pertaining to property taxation is prescribed by Articles XIII and XIII A (commonly known as "Proposition 13") of the California Constitution. Proposition 13 was added to the California Constitution in June 1978 and was most recently amended by Proposition 26 in 2010. Proposition 13 was designed to provide real property tax relief by imposing a set of interlocking limitations upon the assessment and taxing powers of state and local governments.^¹ Section 1 of Article XIII A states that, as a general rule, the maximum amount of any ad valorem tax on real property may not exceed 1% of the property's full cash value, as adjusted for the lesser of inflation or 2% per year. The term "full cash value" means the "county assessor's valuation of real property as shown on the 1975-1976 tax bill" or, thereafter, "the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment" (emphasis added) [California Constitution, Article XIII A, Sections 1 and 2]. In other words, the California Constitution requires that real property be reassessed to its current fair market value whenever a "change in ownership" occurs. The definition of a "change in ownership" was not included in Proposition 13, but was left to implementing legislation.
Base-Year Value Transfers. Article XIIIA of the California Constitution contains provisions allowing a homeowner over the age of 55^² or a homeowner who is a disabled person^³ a once-in-a-lifetime opportunity to transfer the base year values in his/her principal residence, within two years from the sale of the original residence, to a replacement home of equal or lesser value within the same county or to a replacement home in counties that have adopted ordinances allowing the transfer^⁴, provided certain conditions are met and the county assessor is properly notified. Base year transfers allow homeowners to continue paying property taxes at the amount and rate of growth of their previous homes and prevent reassessments of their newly purchased or constructed homes to full market value.
Fifty-Five and Over. California has one of the lowest property taxes in the nation and provides the greatest benefit to property owners, especially those that have lived in their homes for many years. Subject to certain conditions, a homeowner may sell his/her home, buy or build a new one, and transfer the base-year value to a replacement dwelling. Any person claiming the base year value transfer relief is defined as a "claimant." To qualify, the claimant must provide certain information to the assessor, including his/her name and Social Security number as well as the name of Social Security number of his/her spouse who is also a record owner of the replacement dwelling. Under existing law, a person of any age may make a base year value transfer claim as long as that person resides with a spouse who is over 55 or permanently disabled, even if the spouse is not an owner of record of either the original or replacement property.

A spouse who shares title of the newly purchased home with the "claimant" is also considered to be a "claimant." Consequently, if "A" and "B" are married and record owners of property which has received the benefits of the base year transfer value relief, then neither A nor B is eligible for a similar benefit in the future.^⁵ Furthermore, if "A" and "B" divorce, and "A" marries "C", C will not be eligible for the base year value transfer relief with respect to C's replacement dwelling if both "A" and "C" are co-owners of record. The relief will be unavailable to "C" because "A" would be considered a "claimant" for purposes of "C's" claim.
What is a Problem? The proponents of this bill point out that married people are unfairly penalized when divorced. According to the author, existing law creates a "marriage penalty" by disallowing the benefits afforded by Propositions 60 and 90 to a married person whose spouse has already claimed a base year value transfer property tax relief. The author argues that base year value property transfers "remains one of the few areas of law continuing to make a distinction between domestic partnership and marriage." The purpose of this bill is to "remove tax considerations" when a couple decides on the type of relationship that "is best for them."
Proposed Solution. This bill proposes to stop treating a married couple as one "claimant" for purposes of the base year value transfer relief and, instead, grant this property tax relief to every individual regardless of his/her marital status. Practically speaking, this bill would allow a married couple to transfer their base year value twice, similarly to unmarried co-owners and registered domestic partners. However, this bill would disallow a claim made by a claimant who is under the age of 55, even if the claimant resides with a spouse who meets the age requirement. As noted by the BOE staff, residency by an over-55 spouse will no longer suffice to permit transfer of the base year value. To qualify, the over-55 spouse must file the actual claim and be a recorded owner of both homes. Under current law, a person who is under the age of 55 may be a claimant if he/she resides with a spouse who is over 55 years of age.

Married Couple as a "Single Economic Unit." As observed by one of the prominent tax law professors, the choice between marriage neutrality and couples neutrality cannot be made purely on the basis of tax logic, but must consider "society's assumptions about the role of marriage and the family" and "in the end can rest on nothing more precise or permanent than collective social preferences."^⁶ Thus, under both federal and state income tax laws, a married couple is treated as a single economic unit. Generally, spouses file a joint tax return, reporting their combined income and calculate their tax liability based on that combined income. A married taxpayer filing separately is still subject to tax liability different from that if filed as single. Many tax preferences are disallowed to married taxpayers filing separately. These differences are called marriage penalties and marriage bonuses.^⁷ It appears that existing California property tax law similarly treats married taxpayers as a single economic unit in contrast to couples that cohabitate or are registered as domestic partners. The Committee may wish to consider whether the rationale for this tax treatment of a married couple as a single economic unit is warranted in the context of the property tax law. The Committee may also wish to consider limiting the application of this bill to a married couple where one of the spouses was previously married and received a base year value transfer on a home he/she, or his/her ex-spouse, owned in the prior marriage.
Statewide Tracking Database. To monitor and enforce the one-time relief, the Board of Equalization is required to collect data from counties and maintain a database of base year value transfer claimants and their spouses if names of both spouses appear on the title to the new home. If claimant's spouse subsequently claims another base year value transfer, the BOE database would match the name and the claim will be denied. This bill would allow a married couple to move their base year value twice but only if each spouse makes a claim for the first time after January 1, 2016. Because this bill applies prospectively, a spouse of the person who has already been granted a base year value transfer will not be able to claim a second base year value transfer.
Prior Legislation:
1. AB 321 (Niello), of the 2009-10 Legislative Session, was similar to this bill. AB 321 was held on the Assembly Committee on Appropriations' Suspense File.
2. AB 2579 (Niello), of the 2007-08 Legislative Session, was similar to this bill. AB 2579 was held on the Senate Appropriations Committee's Suspense File.

REGISTERED SUPPORT / OPPOSITION:

Support

Howard Jarvis Taxpayers' Association

California Association of Assessors

California Association of Realtors

California Taxpayers Association

Opposition

None on file

Analysis Prepared by: Oksana Jaffe / REV. & TAX. / (916) 319-2098

1 Since any tax savings resulting from the real property tax limitations provided in Sections 1 and 2 of Article XIII A could be effectively eliminated through the imposition of additional state and local taxes, Sections 3 and 4 place additional restrictions upon the imposition of any such taxes. See Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization, (1978) 22 Cal.3d 208.

3 In 1990, the voters passed Proposition 110 that amended the Constitution to extend these provisions to any severely and permanently disabled person regardless of age.

5 BOE Annotation 200.0020 "Claimant (New Spouse)".

6 Marriage and the Income Tax, L. Zelenak, 67 S. Cal. Rev. 339, p. 342 (1994), citing Boris I. Bittker, Federal Income Taxation and the Family, 27 Stan. L. Rev. 1389, 1395-96 (1975).

7 Id., at p.339.

Discussed in Hearing

3MIN

Authors shown for version:
Enrolled (9/3/2015)

AB 1378: Property tax: base year value transfers.

GOVERNOR'S VETO

GV Bill Id:AB 1378

THIRD READING

Bill No: AB 1378

SENATE COMMITTEE ON APPROPRIATIONS

Bill Summary:

Fiscal Impact:

Background:

Proposed Law:

Staff Comments:

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Background and Existing Law

Proposed Law

State Revenue Impact

Comments

Assembly Actions

Support and Opposition

ASSEMBLY THIRD READING

ATR Bill Id:AB 1378

ASSEMBLY COMMITTEE ON APPROPRIATIONS

ABPCA Bill Id:AB 1378

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

ABPCA Bill Id:AB 1378 (

Senate Floor

Senate Standing Committee on Appropriations

Senate Standing Committee on Governance and Finance

Assembly Floor