SB 1104: Property tax: senior and disabled veterans.
- Session Year: 2015-2016
- House: Senate
- Latest Version Date: 2016-05-11
(1)The California Constitution generally limits ad valorem taxes on real property to 1% of the full cash value, as defined, of that property, and provides that the full cash value base may be adjusted each year by the inflationary rate not to exceed 2% for any given year.
Existing property tax law implementing this constitutional authority provides that the taxable value of real property is the lesser of its base year value compounded annually by an inflation factor not to exceed 2%, as provided, or its full cash value. Existing property tax law also provides that the taxable value of a manufactured home is the lesser of its base year value compounded annually by an inflation factor not to exceed 2% or its full cash value.
This bill bill, for any assessment year commencing on or after January 1, 2017, would provide that the inflation factor shall not apply to the principal place of residence residence, including a manufactured home, of a qualified veteran, as defined, who is 65 years of age or older and on the lien date, was honorably discharged from military service for any assessment year commencing on or after either January 1, 2017, or the veterans 65th birthday, whichever occurs later. service, and meets specified requirements.
By changing the manner in which local tax officials calculate the taxable value of real property owned by senior veterans, this bill would impose a state-mandated local program.
(2)Existing property tax law provides, pursuant to the authorization of the California Constitution, a disabled veterans veterans property tax exemption for the principal place of residence of a veteran or a veterans spouse, including an unmarried surviving spouse, if the veteran, because of injury incurred in military service, is blind in both eyes, has lost the use of 2 or more limbs, or is totally disabled, as those terms are defined, or if the veteran has, as a result of a service-connected injury or disease, died while on active duty in military service. Existing law exempts that part of the full value of the residence that does not exceed $100,000, or $150,000, if the veterans household income does not exceed $40,000, adjusted for inflation, as specified.
This bill, commencing with the lien date for the 201718 fiscal year and for each fiscal year thereafter, would instead exempt the full value of the principal place of residence of a veteran or veterans spouse. The bill would also make technical and conforming changes to the disabled veterans veterans property tax exemption.
By changing the manner in which local tax officials administer the disabled veterans veterans property tax exemption, this bill would impose a state-mandated local program.
(3)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.
(4)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.
(5)This bill would take effect immediately as a tax levy.
(1)The California Constitution generally limits ad valorem taxes on real property to 1% of the full cash value, as defined, of that property, and provides that the full cash value base may be adjusted each year by the inflationary rate not to exceed 2% for any given year.
Existing property tax law implementing this constitutional authority provides that the taxable value of real property is the lesser of its base year value compounded annually by an inflation factor not to exceed 2%, as provided, or its full cash value.
This bill would provide that the inflation factor shall not apply to the principal place of residence of a veteran, as defined, who is 65 years of age or older and honorably discharged from military service for any assessment year commencing on or after either January 1, 2017, or the veterans 65th birthday, whichever occurs later.
By changing the manner in which local tax officials calculate the taxable value of real property owned by senior veterans, this bill would impose a state-mandated local program.
(2)Existing property tax law provides, pursuant to the authorization of the California Constitution, a disabled veterans property tax exemption for the principal place of residence of a veteran or a veterans spouse, including an unmarried surviving spouse, if the veteran, because of injury incurred in military service, is blind in both eyes, has lost the use of 2 or more limbs, or is totally disabled, as those terms are defined, or if the veteran has, as a result of a service-connected injury or disease, died while on active duty in military service. Existing law exempts that part of the full value of the residence that does not exceed $100,000, or $150,000, if the veterans household income does not exceed $40,000, adjusted for inflation, as specified.
This bill, commencing with the lien date for the 201718 fiscal year and for each fiscal year thereafter, would instead exempt the full value of the principal place of residence of a veteran or veterans spouse. The bill would also make technical and conforming changes to the disabled veterans property tax exemption.
By changing the manner in which local tax officials administer the disabled veterans property tax exemption, this bill would impose a state-mandated local program.
(3)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.
(4)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.
(5)This bill would take effect immediately as a tax levy.
(a)For purposes of subdivision (b) of Section 2 of Article XIIIA of the California Constitution, for each lien date after the lien date in which the base year value is determined pursuant to Section 110.1, the taxable value of real property shall, except as otherwise provided in subdivision (b) or (c), be the lesser of:
(1)Its base year value, compounded annually since the base year by an inflation factor, which shall be determined as follows:
(A)For any assessment year commencing prior to January 1, 1985, the inflation factor shall be the percentage change in the cost of living, as defined in Section 2212.
(B)For any assessment year commencing after January 1, 1985, and prior to January 1, 1998, the inflation factor shall be the percentage change, rounded to the nearest one-thousandth of 1 percent, from December of the prior fiscal year to December of the current fiscal year in the California Consumer Price Index for all items, as determined by the California Department of Industrial Relations.
(C)For any assessment year commencing on or after January 1, 1998, the inflation factor shall be the percentage change, rounded to the nearest one-thousandth of 1 percent, from October of the prior fiscal year to October of the current fiscal year in the California Consumer Price Index for all items, as determined by the California Department of Industrial Relations.
(D)The percentage increase for an assessment year determined pursuant to subparagraph (A), (B), or (C) shall not exceed 2 percent of the prior years value.
(E)(i)Notwithstanding any other law, for any assessment year commencing on or after January 1, 2017, the percentage increase for an assessment year determined pursuant to subparagraph (A), (B), or (C) shall not apply to the principal place of residence residence, including so much of the land surrounding it as is reasonably necessary for use of the dwelling as a home, of a qualified veteran who is 65 years of age or older on the lien date and was honorably discharged from military service for any assessment year commencing on or after either January 1, 2017, or the veterans 65th birthday, whichever occurs later. For service.
(ii)For the purpose of this subparagraph, veteran qualified veteran means a person who meets who meets the following criteria:
(I)He or she meets the criteria specified in subdivision (o) of Section 3 of Article XIII of the California Constitution, except for the limitation on the value of property owned by the veteran or the veterans spouse.
(II)If the qualified veteran is single, his or her annual income, as defined in Section 20504, is less than fifty thousand dollars ($50,000).
(III)If the qualified veteran is married, his or her household combined annual income, as defined in Section 20504, is less than one hundred thousand dollars ($100,000).
(iii)When claiming the benefit provided by this subparagraph, the claimant shall provide all information required by, and answer all questions contained in, an affidavit furnished by the assessor to determine that the claimant is a qualified veteran. The assessor may require additional proof of the information or answers provided in the affidavit before allowing the benefit provided by this subparagraph.
(2)Its full cash value, as defined in Section 110, as of the lien date, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property, or other factors causing a decline in value.
(b)If the real property was damaged or destroyed by disaster, misfortune, or calamity and the board of supervisors of the county in which the real property is located has not adopted an ordinance pursuant to Section 170, or any portion of the real property has been removed by voluntary action by the taxpayer, the taxable value of the property shall be the sum of the following:
(1)The lesser of its base year value of land determined under paragraph (1) of subdivision (a) or full cash value of land determined pursuant to paragraph (2) of subdivision (a).
(2)The lesser of its base year value of improvements determined pursuant to paragraph (1) of subdivision (a) or the full cash value of improvements determined pursuant to paragraph (2) of subdivision (a).
In applying this subdivision, the base year value of the subject real property does not include that portion of the previous base year value of that property that was attributable to any portion of the property that has been destroyed or removed. The sum determined under this subdivision shall then become the base year value of the real property until that property is restored, repaired, or reconstructed or other provisions of law require establishment of a new base year value.
(c)If the real property was damaged or destroyed by disaster, misfortune misfortune, or calamity and the board of supervisors in the county in which the real property is located has adopted an ordinance pursuant to Section 170, the taxable value of the real property shall be its assessed value as computed pursuant to Section 170.
(d)For purposes of this section, real property means that appraisal unit that persons in the marketplace commonly buy and sell as a unit, or that is normally valued separately.
(e)Nothing in this section shall be construed to require the assessor to make an annual reappraisal of all assessable property. However, for each lien date after the first lien date for which the taxable value of property is reduced pursuant to paragraph (2) of subdivision (a), the value of that property shall be annually reappraised at its full cash value as defined in Section 110 until that value exceeds the value determined pursuant to paragraph (1) of subdivision (a). In no event shall the assessor condition the implementation of the preceding sentence in any year upon the filing of an assessment appeal.
SEC. 2.Section 205.5 of the Revenue and Taxation Code is amended to read:205.5.(a)Property that constitutes the principal place of residence of a veteran, that is owned by the veteran, the veterans spouse, or the veteran and the veterans spouse jointly, is exempted from taxation if the veteran is blind in both eyes, has lost the use of two or more limbs, or if the veteran is totally disabled as a result of injury or disease incurred in military service.
(b)(1)For purposes of this section, veteran means either of the following:
(A)A veteran as specified in subdivision (o) of Section 3 of Article XIII of the California Constitution, except for the limitation on the value of property owned by the veteran or the veterans spouse.
(B)A person who would qualify as a veteran pursuant to paragraph (1) except that he or she has, as a result of a service-connected injury or disease, as determined by the United States Department of Veterans Affairs, died while on active duty in military service.
(2)For purposes of this section, property is deemed to be the principal place of residence of a veteran, disabled as described in subdivision (a), who is confined to a hospital or other care facility, if that property would be that veterans principal place of residence were it not for his or her confinement to a hospital or other care facility, provided that the residence is not rented or leased to a third party. For the purposes of this paragraph, a family member that resides at the residence is not a third party.
(c)(1)Property that is owned by, and that constitutes the principal place of residence of, the unmarried surviving spouse of a deceased veteran is exempt from taxation if the deceased veteran was blind in both eyes, had lost the use of two or more limbs, or was totally disabled, provided that either of the following conditions is met:
(A)The deceased veteran during his or her lifetime qualified for the exemption pursuant to subdivision (a), or would have qualified for the exemption under the laws effective on January 1, 1977, except that the veteran died prior to January 1, 1977.
(B)The veteran died from a disease that was service-connected, as determined by the United States Department of Veterans Affairs.
(2)Property that is owned by, and that constitutes the principal place of residence of, the unmarried surviving spouse of a veteran described in subparagraph (B) of paragraph (1) of subdivision (b) is exempt from taxation.
(3)Property is deemed to be the principal place of residence of the unmarried surviving spouse of a deceased veteran, who is confined to a hospital or other care facility, if that property would be the unmarried surviving spouses principal place of residence were it not for his or her confinement to a hospital or other care facility, provided that the residence is not rented or leased to a third party. For purposes of this paragraph, a family member who resides at the residence is not a third party.
(d)As used in this section, property that is owned by a veteran or property that is owned by the veterans unmarried surviving spouse includes all of the following:
(1)Property owned by the veteran with the veterans spouse as a joint tenancy, tenancy in common, or as community property.
(2)Property owned by the veteran or the veterans spouse as separate property.
(3)Property owned with one or more other persons to the extent of the interest owned by the veteran, the veterans spouse, or both the veteran and the veterans spouse.
(4)Property owned by the veterans unmarried surviving spouse with one or more other persons to the extent of the interest owned by the veterans unmarried surviving spouse.
(5)That portion of the property of a corporation that constitutes the principal place of residence of a veteran or a veterans unmarried surviving spouse when the veteran, the veterans spouse, or the veterans unmarried surviving spouse is a shareholder of the corporation and the rights of shareholding entitle one to the possession of property, legal title to which is owned by the corporation. The exemption provided by this paragraph shall be shown on the local roll and shall reduce the full value of the corporate property. Notwithstanding any law or articles of incorporation or bylaws of a corporation described in this paragraph, any reduction of property taxes paid by the corporation shall reflect an equal reduction in any charges by the corporation to the person who, by reason of qualifying for the exemption, made possible the reduction for the corporation.
(e)For purposes of this section, the following definitions shall apply:
(1)Being Being blind in both eyes means having a visual acuity of 5/200 or less, or concentric contraction of the visual field to 5 degrees or less.
(2)Lost the use of two or more limbs means that the limb has been amputated or its use has been lost by reason of ankylosis, progressive muscular dystrophies, or paralysis.
(3)Totally disabled means that the United States Department of Veterans Affairs or the military service from which the veteran was discharged has rated the disability at 100 percent or has rated the disability compensation at 100 percent by reason of being unable to secure or follow a substantially gainful occupation.
(f)An exemption granted to a claimant pursuant to this section shall be in lieu of the veterans exemption provided by subdivisions (o), (p), (q), and (r) of Section 3 of Article XIII of the California Constitution and any other real property tax exemption to which the claimant may be entitled. No other real property tax exemption may be granted to any other person with respect to the same residence for which an exemption has been granted pursuant to this section; provided, that if two or more veterans qualified pursuant to this section coown a property in which they reside, each is entitled to the exemption to the extent of his or her interest.
(g)The amendments made to this section by the act adding this subdivision Senate Bill 1104 of the 201516 Regular Session of the Legislature shall apply for property tax lien dates for the 201718 fiscal year and for each fiscal year thereafter.
SEC. 3.Section 5813 of the Revenue and Taxation Code is amended to read:5813.For (a)For each lien date after the lien date for which the base year value is determined, the taxable value of a manufactured home shall be the lesser of:
(a)
(1)Its base year value, compounded annually since the base year by an inflation factor, which shall be the percentage change in the cost of living, as defined in Section 51, provided, that any percentage increase shall not exceed 2 percent of the prior years value; or value.
(b)
(2)Its full cash value, as defined in Section 5803, as of the lien date, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, or other factors causing a decline in value; or value.
(c)
(3)If the manufactured home is damaged or destroyed by disaster, misfortune, or calamity, its value determined pursuant to (b) paragraph (2) shall be its base year value until the manufactured home is restored, repaired or reconstructed or other provisions of law require establishment of a new base year value.
(b)(1)Notwithstanding any other law, for any assessment year commencing on or after January 1, 2017, the percentage increase for an assessment year determined pursuant to paragraph (1) of subdivision (a) shall not apply to the principal place of residence of a qualified veteran who owns a manufactured home as his or her principal place of residence and who is 65 years of age or older on the lien date and was honorably discharged from military service.
(2)For the purpose of this subdivision, qualified veteran means a person who meets the following criteria:
(A)He or she meets the criteria specified in subdivision (o) of Section 3 of Article XIII of the California Constitution, except for the limitation on the value of property owned by the veteran or the veterans spouse.
(B)If the qualified veteran is single, his or her annual household income, as defined in Section 20504, is fifty thousand dollars ($50,000) or less.
(C)If the qualified veteran is married, his or her combined annual household income, as defined in Section 20504, is one hundred thousand dollars ($100,000) or less.
(3)When claiming the benefit provided by this subdivision, the claimant shall provide all information required by, and answer all questions contained in, an affidavit furnished by the assessor to determine that the claimant is a qualified veteran. The assessor may require additional proof of the information or answers provided in the affidavit before allowing the benefit provided by this subdivision.
SEC. 3.SEC. 4.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. 4.SEC. 5.If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.
SEC. 5.SEC. 6.This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect.
(a)For purposes of subdivision (b) of Section 2 of Article XIIIA of the California Constitution, for each lien date after the lien date in which the base year value is determined pursuant to Section 110.1, the taxable value of real property shall, except as otherwise provided in subdivision (b) or (c), be the lesser of:
(1)Its base year value, compounded annually since the base year by an inflation factor, which shall be determined as follows:
(A)For any assessment year commencing prior to January 1, 1985, the inflation factor shall be the percentage change in the cost of living, as defined in Section 2212.
(B)For any assessment year commencing after January 1, 1985, and prior to January 1, 1998, the inflation factor shall be the percentage change, rounded to the nearest one-thousandth of 1 percent, from December of the prior fiscal year to December of the current fiscal year in the California Consumer Price Index for all items, as determined by the California Department of Industrial Relations.
(C)For any assessment year commencing on or after January 1, 1998, the inflation factor shall be the percentage change, rounded to the nearest one-thousandth of 1 percent, from October of the prior fiscal year to October of the current fiscal year in the California Consumer Price Index for all items, as determined by the California Department of Industrial Relations.
(D)In no event shall the The percentage increase for any an assessment year determined pursuant to subparagraph (A), (B), or (C) shall not exceed 2 percent of the prior years value.
(E)Notwithstanding any other law, the percentage increase for an assessment year determined pursuant to subparagraph (A), (B), or (C) shall not apply to the principal place of residence of a veteran who is 65 years of age or older and was honorably discharged from military service for any assessment year commencing on or after either January 1, 2017, or the veterans 65th birthday, whichever occurs later. For the purpose of this subparagraph, veteran means a person who meets the criteria specified in subdivision (o) of Section 3 of Article XIII of the California Constitution, except for the limitation on the value of property owned by the veteran or the veterans spouse.
(2)Its full cash value, as defined in Section 110, as of the lien date, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property, or other factors causing a decline in value.
(b)If the real property was damaged or destroyed by disaster, misfortune, or calamity and the board of supervisors of the county in which the real property is located has not adopted an ordinance pursuant to Section 170, or any portion of the real property has been removed by voluntary action by the taxpayer, the taxable value of the property shall be the sum of the following:
(1)The lesser of its base year value of land determined under paragraph (1) of subdivision (a) or full cash value of land determined pursuant to paragraph (2) of subdivision (a).
(2)The lesser of its base year value of improvements determined pursuant to paragraph (1) of subdivision (a) or the full cash value of improvements determined pursuant to paragraph (2) of subdivision (a).
In applying this subdivision, the base year value of the subject real property does not include that portion of the previous base year value of that property that was attributable to any portion of the property that has been destroyed or removed. The sum determined under this subdivision shall then become the base year value of the real property until that property is restored, repaired, or reconstructed or other provisions of law require establishment of a new base year value.
(c)If the real property was damaged or destroyed by disaster, misfortune or calamity and the board of supervisors in the county in which the real property is located has adopted an ordinance pursuant to Section 170, the taxable value of the real property shall be its assessed value as computed pursuant to Section 170.
(d)For purposes of this section, real property means that appraisal unit that persons in the marketplace commonly buy and sell as a unit, or that is normally valued separately.
(e)Nothing in this section shall be construed to require the assessor to make an annual reappraisal of all assessable property. However, for each lien date after the first lien date for which the taxable value of property is reduced pursuant to paragraph (2) of subdivision (a), the value of that property shall be annually reappraised at its full cash value as defined in Section 110 until that value exceeds the value determined pursuant to paragraph (1) of subdivision (a). In no event shall the assessor condition the implementation of the preceding sentence in any year upon the filing of an assessment appeal.
SEC. 2.Section 205.5 of the Revenue and Taxation Code is amended to read:205.5.(a)Property that constitutes the principal place of residence of a veteran, that is owned by the veteran, the veterans spouse, or the veteran and the veterans spouse jointly, is exempted from taxation on that part of the full value of the residence that does not exceed one hundred thousand dollars ($100,000), as adjusted for the relevant assessment year as provided in subdivision (h), if the veteran is blind in both eyes, has lost the use of two or more limbs, or if the veteran is totally disabled as a result of injury or disease incurred in military service. The one hundred thousand dollar ($100,000) exemption shall be one hundred fifty thousand dollars ($150,000), as adjusted for the relevant assessment year as provided in subdivision (h), in the case of an eligible veteran whose household income does not exceed the amount of forty thousand dollars ($40,000), as adjusted for the relevant assessment year as provided in subdivision (g).
(b)(1)For purposes of this section, veteran means either of the following:
(A)A veteran as specified in subdivision (o) of Section 3 of Article XIII of the California Constitution without regard to any Constitution, except for the limitation contained therein on the value of property owned by the veteran or the veterans spouse.
(B)Any A person who would qualify as a veteran pursuant to paragraph (1) except that he or she has, as a result of a service-connected injury or disease, as determined by the United States Department of Veterans Affairs, died while on active duty in military service. The United States Department of Veterans Affairs shall determine whether an injury or disease is service connected.
(2)For purposes of this section, property is deemed to be the principal place of residence of a veteran, disabled as described in subdivision (a), who is confined to a hospital or other care facility, if that property would be that veterans principal place of residence were it not for his or her confinement to a hospital or other care facility, provided that the residence is not rented or leased to a third party. A For the purposes of this paragraph, a family member that resides at the residence is not considered to be a third party.
(c)(1)Property that is owned by, and that constitutes the principal place of residence of, the unmarried surviving spouse of a deceased veteran is exempt from taxation on that part of the full value of the residence that does not exceed one hundred thousand dollars ($100,000), as adjusted for the relevant assessment year as provided in subdivision (h), in the case of a if the deceased veteran who was blind in both eyes, had lost the use of two or more limbs, or was totally disabled disabled, provided that either of the following conditions is met:
(A)The deceased veteran during his or her lifetime qualified in all respects for the exemption pursuant to subdivision (a), or would have qualified for the exemption under the laws effective on January 1, 1977, except that the veteran died prior to January 1, 1977.
(B)The veteran died from a disease that was service connected service-connected, as determined by the United States Department of Veterans Affairs.
The one hundred thousand dollar ($100,000) exemption shall be one hundred fifty thousand dollars ($150,000), as adjusted for the relevant assessment year as provided in subdivision (h), in the case of an eligible unmarried surviving spouse whose household income does not exceed the amount of forty thousand dollars ($40,000), as adjusted for the relevant assessment year as provided in subdivision (g).
(2)Commencing with the 199495 fiscal year, property Property that is owned by, and that constitutes the principal place of residence of, the unmarried surviving spouse of a veteran as described in subparagraph (B) of paragraph (1) of subdivision (b) is exempt from taxation on that part of the full value of the residence that does not exceed one hundred thousand dollars ($100,000), as adjusted for the relevant assessment year as provided in subdivision (h). The one hundred thousand dollar ($100,000) exemption shall be one hundred fifty thousand dollars ($150,000), as adjusted for the relevant assessment year as provided in subdivision (h), in the case of an eligible unmarried surviving spouse whose household income does not exceed the amount of forty thousand dollars ($40,000), as adjusted for the relevant assessment year as provided in subdivision (g). taxation.
(3)Beginning with the 201213 fiscal year and for each fiscal year thereafter, property Property is deemed to be the principal place of residence of the unmarried surviving spouse of a deceased veteran, who is confined to a hospital or other care facility, if that property would be the unmarried surviving spouses principal place of residence were it not for his or her confinement to a hospital or other care facility, provided that the residence is not rented or leased to a third party. For purposes of this paragraph, a family member who resides at the residence is not considered to be a third party.
(d)As used in this section, property that is owned by a veteran or property that is owned by the veterans unmarried surviving spouse includes all of the following:
(1)Property owned by the veteran with the veterans spouse as a joint tenancy, tenancy in common, or as community property.
(2)Property owned by the veteran or the veterans spouse as separate property.
(3)Property owned with one or more other persons to the extent of the interest owned by the veteran, the veterans spouse, or both the veteran and the veterans spouse.
(4)Property owned by the veterans unmarried surviving spouse with one or more other persons to the extent of the interest owned by the veterans unmarried surviving spouse.
(5)So much of the That portion of the property of a corporation as that constitutes the principal place of residence of a veteran or a veterans unmarried surviving spouse when the veteran, or the veterans spouse, or the veterans unmarried surviving spouse is a shareholder of the corporation and the rights of shareholding entitle one to the possession of property, legal title to which is owned by the corporation. The exemption provided by this paragraph shall be shown on the local roll and shall reduce the full value of the corporate property. Notwithstanding any provision of law or articles of incorporation or bylaws of a corporation described in this paragraph, any reduction of property taxes paid by the corporation shall reflect an equal reduction in any charges by the corporation to the person who, by reason of qualifying for the exemption, made possible the reduction for the corporation.
(e)For purposes of this section, being the following definitions shall apply:
(1)Being blind in both eyes eyes means having a visual acuity of 5/200 or less, or concentric contraction of the visual field to 5 degrees or less; losing less.
(2)Lost the use of a limb two or more limbs means that the limb has been amputated or its use has been lost by reason of ankylosis, progressive muscular dystrophies, or paralysis; and being totally disabled paralysis.
(3)Totally disabled means that the United States Department of Veterans Affairs or the military service from which the veteran was discharged has rated the disability at 100 percent or has rated the disability compensation at 100 percent by reason of being unable to secure or follow a substantially gainful occupation.
(f)An exemption granted to a claimant in accordance with the provisions of pursuant to this section shall be in lieu of the veterans exemption provided by subdivisions (o), (p), (q), and (r) of Section 3 of Article XIII of the California Constitution and any other real property tax exemption to which the claimant may be entitled. No other real property tax exemption may be granted to any other person with respect to the same residence for which an exemption has been granted under the provisions of pursuant to this section; provided, that if two or more veterans qualified pursuant to this section coown a property in which they reside, each is entitled to the exemption to the extent of his or her interest.
(g)Commencing on January 1, 2002, and for each assessment year thereafter, the household income limit shall be compounded annually by an inflation factor that is the annual percentage change, measured from February to February of the two previous assessment years, rounded to the nearest one-thousandth of 1 percent, in the California Consumer Price Index for all items, as determined by the California Department of Industrial Relations.
(h)Commencing on January 1, 2006, and for each assessment year thereafter, the exemption amounts set forth in subdivisions (a) and (c) shall be compounded annually by an inflation factor that is the annual percentage change, measured from February to February of the two previous assessment years, rounded to the nearest one-thousandth of 1 percent, in the California Consumer Price Index for all items, as determined by the California Department of Industrial Relations.
(g)The amendments made to this section by the act adding this subdivision apply for property tax lien dates for the 201718 fiscal year and for each fiscal year thereafter.
SEC. 3.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. 4.If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.
SEC. 5.This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect.
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Date
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Status
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|---|---|
| Feb 17, 2016 | (Corrected February 22). |
| Feb 17, 2016 | Introduced. Read first time. To Com. on RLS. for assignment. To print. |
| Feb 18, 2016 | From printer. May be acted upon on or after March 19. |
| Feb 25, 2016 | Referred to Com. on GOV. & F. |
| Apr 5, 2016 | Set for hearing April 27. |
| Apr 19, 2016 | April 27 set for first hearing canceled at the request of author. |
| Apr 27, 2016 | Set for hearing May 4. |
| May 10, 2016 | From committee: Do pass as amended and re-refer to Com. on APPR. (Ayes 6. Noes 0. Page 3765.) (May 4). |
| May 10, 2016 | From committee: Do pass as amended and re-refer to Com. on APPR. (Ayes 6. Noes 0.) (May 4). |
| May 11, 2016 | Read second time and amended. Re-referred to Com. on APPR. |
| May 13, 2016 | Set for hearing May 23. |
| May 23, 2016 | May 23 hearing: Placed on APPR. suspense file. (Ayes 7. Noes 0.) |
| May 24, 2016 | Set for hearing May 27. |
| May 27, 2016 | May 27 hearing: Held in committee and under submission. |
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Date
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Description
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Location
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Votes
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|---|---|---|---|---|
| May 23, 2016 | Placed on suspense file | Senate Standing Committee on Appropriations |
Passed |
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| May 4, 2016 | Do pass as amended, but first amend, and re-refer to the Committee on [Appropriations] | Senate Standing Committee on Governance and Finance |
Passed |
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.
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| California Tax Reform Association | * Against | May 4, 2016 |
SENATE COMMITTEE ON
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 1104 (Stone) - Property tax: senior and disabled veterans
Version: | Policy Vote: |
Urgency: | Mandate: |
Hearing Date: | Consultant: |
This bill meets the criteria for referral to the Suspense File.
Bill Summary:
SB 1104 would (1) eliminate the inflation adjustment for the principal place of residence of veteran taxpayers over the age of 65, and (2) expand to a full exemption the current partial Disabled Veterans’ property tax exemption.
Fiscal Impact:
The Board of Equalization (BOE) indicates that the bill would result in annual property tax revenue losses of $74 million. Reductions in local property tax revenues, in turn, increase General Fund Proposition 98 spending by up to roughly 50 percent (the exact amount depends on the specific amount of the annual Proposition 98 guarantee, which in turns depends upon a variety of economic, demographic and budgetary factors). Additionally, the bill could result in unknown, but likely minor, costs to reimburse local governments related to changes in property tax administration
Background:
The California Constitution provides that all property is taxable unless explicitly exempted by the Constitution or federal law. The Constitution (1) limits the maximum amount of any ad valorem tax on real property at 1 percent of full cash value, plus any locally-authorized bonded indebtedness, and (2) provides that assessors can only reappraise property whenever it is purchased, newly constructed, or when ownership changes (Proposition 13, 1978). Proposition 13 also limits on the inflationary growth of real property value to 2 percent per year.
Thus, when real property is purchased, the county assessor assigns it an assessed value that is equal to its purchase price, or “acquisition value.” Each year thereafter, the property’s assessed value increases by 2 percent or the rate of inflation (as measured by the California Consumer Price Index), whichever is lower. This process continues until the property is sold, at which point the county assessor again assigns it an assessed value equal to its most recent purchase price. In other words, a property’s assessed value resets to market value (what a willing buyer would pay for it) when it is sold. In most years, under this assessment practice, a property’s market value is greater than its assessed value. This occurs because assessed values increase by a maximum of 2 percent per year, whereas market values tend to increase more rapidly. Therefore, as long as a property does not change ownership, its assessed value increases predictably from one year to the next and is unaffected by higher annual increases in market value.
For example, a home purchased in 2011 for $300,000, has a maximum taxable base year value of $306,000 in 2012, $312,200 in 2013, $318,440 in 2014, $325,808 in 2015, and $332,324 in 2016. This base year value is then multiplied by the appropriate rate (usually 1 percent, but can be slightly more) to determine tax due.
Reassessment limits and capped inflation growth ensure a predictable, slowly growing tax obligation for the taxpayer, and predictable revenue for local agencies; however, these provisions may also result in a taxable base year value below the property’s fair market value, which grows in magnitude the longer the assessor hasn’t reassessed the property. In most cases, this system results in shifting the cost of public services from incumbent homeowners onto individuals who recently purchased property.
The Constitution permits the Legislature to partially or wholly exempt from property tax the value of a disabled veteran’s principal place of residence if the veteran has lost one or more limbs, is totally blind, or is totally disabled, as a result of a service-connected injury. This is known as the “disabled veterans’ exemption.” The Constitution provides that disabled veteran taxpayers, or unmarried surviving spouses of persons who die while on active duty, must apply for the exemption instead of, but not in combination with, other real property exemptions. BOE indicates that the number of taxpayers claiming the disabled veterans’ exemption has increased by 344 percent between 1990 and 2015. Unlike the homeowners’ property tax exemption, the State does not backfill local property tax revenue losses resulting from taxpayers applying the disabled veterans’ exemption.
State law implementing the exemption doesn’t fully exclude property value; instead, it enacts a partial exemption of $100,000 for disabled veteran taxpayers with household income of more than $40,000, or $150,000 for income lower than that amount, with each threshold adjusted for inflation (as measured by the California Consumer Price Index). The current inflation adjusted value is $127,510 for disabled veterans with income of more than $57,258, and $191,266 for those with less than that amount.
Proposed Law:
This bill would make two changes to property tax law:
- Growth limitation. The bill would eliminate annual inflation factor-related assessed value increases on homes owned by income-qualifying veterans 65 years and older. As such, the measure would freeze the veteran taxpayer’s base year value at its current amount until newly construction or a change in ownership occurs. The current version of the bill would (1) limit the benefit to veterans with household incomes of $50,000 if single and $100,000 if married, (2) specify the assessment freeze applies only to the home and home site, (3) specify that age on the lien date determines eligibility, and (4) extend these provisions to manufactured homes.
- Disabled veterans’ exemption. The bill would exempt from property tax the home of any person eligible for the disabled veterans' exemption, commencing with lien date for the 2017-18 fiscal year.
Related Legislation:
SB 1104’s expansion of the disabled veterans’ exemption to a full exemption is also found in SB 1183 (Bates). Additionally, the bill’s disconnection of inflation adjustment for veterans over the age of 65 is similar to provisions found in SB 1126 (Stone), which provides the same treatment for income-eligible taxpayers over the age of 65. SB 1458 (Bates) would allow disabled veterans who were discharged under other than dishonorable conditions, so long as they qualify for benefits provided by the United States Department of Veterans Affairs. All of these bills are currently on the Suspense File of this Committee.
Staff Comments:
BOE indicates that the bill would result in annual property tax revenue losses of $74 million. Of this amount, the disabled veterans’ exemption accounts for $66 million, while the other $8 million is related to the assessment freeze.
To develop the revenue estimate for the disabled veterans’ exemption, BOE used 2015-16 data (the most recent period for which all necessary information is available). Specifically, BOE staff estimated the number of disabled veteran-owned homes currently receiving the exemption to be 37,653: 33,196 at the basic level and 4,457 at the lower income level. Based on a survey of several counties, BOE estimates that this bill would not impact 21 percent of homes receiving the basic exemption (6,971 homes), or 24 percent of homes receiving the lower income exemption (1,070 homes). These homes are already fully exempt because they have an assessed value below the requisite levels in existing law. Thus, BOE estimates that the bill would exempt 29,612 homes: 26,225 currently receiving the basic exemption, and 3,387 homes receiving the lower income exemption.
Using the average 2015-16 assessed value of $356,370, and the basic one percent property tax rate, BOE calculates that the bill would result in an annual property tax reduction of $66 million.
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SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
Bill No: | SB 1104 | Hearing Date: | 5/4/16 |
Author: | Stone | Tax Levy: | Yes |
Version: | 2/17/16 | Fiscal: | Yes |
Consultant: | Grinnell | ||
Property tax: senior and disabled veterans
Eliminates the inflation adjustment for the principal place of residence of veteran taxpayer over the age of 65; Expands to a full exemption the current partial Disabled Veterans’ property tax exemption.
Background
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, plus any locally-authorized bonded indebtedness, and provides that assessors can only reappraise property whenever it is purchased, newly constructed, or when ownership changes (Proposition 13, 1978).
Growth limitation. State law implementing Proposition 13 generally sets a property’s value as its price when purchased or when ownership changed, plus an annual inflation factor, calculated by the Department of Industrial Relations using the California Consumer Price Index for all items. For example, a home purchased in 2011 for $300,000, has a maximum taxable base year value of $306,000 in 2012, $312,200 in 2013, $318,440 in 2014, $325,808 in 2015, and $332,324 in 2016. This base year value is then multiplied by the appropriate rate (usually 1%, but can be slightly more) to determine tax due. Reassessment limits and capped inflation growth ensure a predictable, slowly growing tax obligation for the taxpayer, and predictable revenue for local agencies; however, these limits may also result in a taxable base year value below the property’s fair market value, which grows in magnitude the longer the assessor hasn’t reassessed the property. In most cases, this system results in shifting the cost of public services from incumbent homeowners onto individuals who recently purchased property.
Disabled Veterans’ Exemption. The Constitution allows the Legislature to partially or wholly exempt from property tax the value of a disabled veteran’s principal place of residence if the veteran has lost one or more limbs, is totally blind, or is totally disabled, as a result of a service-connected injury. This is known as the “disabled veterans’ exemption.” The Constitution provides that disabled veteran taxpayers, or unmarried surviving spouses of persons who die while on active duty, must apply the exemption instead of, but not in combination with, other real property exemptions.
Unlike the homeowners’ exemption, the state does not backfill property tax revenue losses resulting from taxpayers applying the exemption. According to the Board of Equalization (BOE), the number of taxpayers claiming the exemption has increased from 8,483 to 37,653 between 1990 and 2015, an increase of 344%. San Diego (5,391), San Bernardino (3,732), and Sacramento (2,422) are the counties with the most taxpayers claiming the exemption.
State law implementing the exemption doesn’t fully exclude the property value from property tax, instead it allows a partial exemption of $100,000 for disabled veteran taxpayers with household income of more than $40,000, or $150,000 for income lower than that amount, with each threshold adjusted for inflation by the Department of Industrial Relations using the California Consumer Price Index for all items. The current inflation adjusted value is $127,410 for disabled veterans with income of more than $57,258, and $191,266 for those with less than that amount.
The author wants to grant additional property tax benefits by disconnecting the inflation factor for taxpayers qualifying for the veterans’ exemption in the California Constitution, and expand the current partial disabled veterans’ exemption conditioned on income into a full exemption.
Proposed Law
Senate Bill 1104 makes two changes to property tax law:
Growth limitation. SB 1104 disconnects the inflation factor for the principal place of residence of taxpayers over the age of 65 who were honorably discharged from military service for any assessment year on or after either January 1, 2017, or the taxpayer’s 65th birthday, whichever is later. As such, the measure would freeze the veteran taxpayer’s base year value at its current amount until newly construction or a change in ownership occurs.
Disabled veterans’ exemption. SB 1104 enacts a full exemption from property tax for the principal place of residence of qualifying disabled veterans to replace the current partial exemption, commencing with lien date for the 2017-18 fiscal year.
The bill also makes technical and conforming changes.
State Revenue Impact
According to BOE, the measure’s growth limitation provisions result in annual property tax revenue losses of $9.7 million, while its disabled veteran exemption expansion results in potential annual property tax revenue losses of $65.9 million.
Comments
1. Purpose of the bill. According to the author, “An issue that is currently plaguing California is the issue of veterans who are homeless. Veterans have sacrificed much for their country, and in return, local, state and federal governments need to do everything in their power to help them succeed. According to the National Coalition for Homeless Veterans, homeless veterans are younger on average than the total veteran population. Approximately 9% are between the ages of 18 and 30, and 41% are between the ages of 31 and 50. On top of that, about 1.4 million other veterans are considered at risk of homelessness. There is no single solution that will solve this crisis. Reasons for the large number of homeless veterans are complex and numerous. Two of the biggest factors are the extreme shortage of affordable housing and livable income. SB 1104 attempts to address the affordable housing issue for veterans by capping the property taxes on any primary residence of an honorably discharged veteran over the age of 65, and exempting the property tax of all disabled veterans living in their primary residence. By making these two changes, it will go a long way to helping veterans stay in their homes by making their living situation more affordable.”
2. Too many benefits? Proposition 13 provided property owners in California with substantial protections from higher property tax rates and annual reassessments. However, California already has the lowest property tax rates and most taxpayer-friendly reassessment triggers of almost any state in the nation, thereby providing significant benefits to property owners, especially those that have been in their homes for many years. SB 1104 expands those benefits to freeze their base year values at their current amounts for qualifying veterans currently over the age of 65, and in the future for veterans when they turn 65. The Committee may wish to consider whether this tax benefit is necessary given those already afforded under current law
3. No income test. Generally, property tax exemptions don’t depend on the taxpayer’s income; however, the different disabled veterans exemption amounts were first enacted by the Legislature when it allowed a greater exemption ($15,000 at the time), for disabled veterans with income that qualified him or her for the Property Tax Postponement program (AB 955, Mangers, 1978). The Legislature maintained the distinction when it fixed the current exemption amounts (SB 320, Royce, 1989), and applied the inflation adjustment (SB 1362, Poochigian, 2000). SB 1104 would end this distinction by granting a full exemption for all taxpayers regardless of income. Increasing the disabled veterans’ exemption reduces taxes for those who have sacrificed greatly for their country, and would be easier for assessors to administer, as they would no longer have to verify the taxpayer’s income. However, SB 1104 would grant both a full exemption from property tax to all disabled veterans, thereby potentially providing a benefit for individuals who have income sufficient to meet current tax obligations. Additionally, the measure also freezes base year values for all veterans when they turn 65, regardless of income. The Committee may wish to consider whether the bill’s tax benefits should depend on the taxpayer’s income.
4. Different treatment. Proposition 13’s cap on assessed value growth currently benefits all taxpayers regardless of age, income, or other variable. SB 1104 sets a precedent by freezing a veteran over the age of 65’s property tax base at its amount today, as well as for other qualifying veterans when they turn 65, while all other taxpayers would be subject to annual inflation adjustments.
5. Related legislation, part one. SB 1104’s expansion of the disabled veterans’ exemption to a full exemption is also found in SB 1138 (Bates), which the Committee approved unanimously on April 27, 2016. Additionally, SB 1104’s disconnection of inflation adjustment for veterans over the age of 65 is similar to provisions found in SB 1126 (Stone), which provides the same treatment for income-eligible taxpayers over the age of 65. The Committee also approved that bill unanimously on April 27, 2016.
6. Related legislation, part two. SB 1104 freezes base year values for veteran taxpayers over the age of 65 who were honorably discharged, consistent with the California Constitution’s definition for the veterans’ exemption, and state law that determines eligibility for the disabled veterans’ property tax exemption. However, the Committee unanimously approved SB 1458 (Bates) at its April 27, 2016, hearing, which allows disabled veterans who were discharged under other than dishonorable conditions, so long as they qualify for benefits provided by the United States Department of Veterans Affairs.
7. Mandate. The California Constitution requires the state to reimburse local governments for the costs of new or expanded state mandated local programs. Because SB 1104 changes the manner in which assessors value real property, Legislative Counsel says that it imposes a new state mandate. The measure provides that the state shall not reimburse local agencies for property tax revenue losses, instead stating that should the Commission on State Mandates determine that the bill imposes a reimbursable mandate, reimbursement must be made pursuant to existing statutory provisions.
8. Technicals. BOE and Committee Staff recommend the following amendment:
- On page 3, line 24, after “law,” insert “for any assessment year commencing on or after January 1, 2017;” on line 27, after “older,” insert “on the lien date;” on line 28, strike out “for any assessment year,” strike out line 29, and on line 30, strike out “65th birthday, whichever occurs later.”
- Specify filing requirements and deadlines for taxpayers to claim the benefit, as assessors do not currently possess age information for potentially eligible taxpayers.
- Apply the bill’s enhanced benefits for owners of mobile homes by amending Revenue and Taxation Code §5813.
- Clarify whether the measure’s benefits apply to as much land surrounding the principal place of residence as is reasonably necessary to use the dwelling as a home, similar to other exemptions.
Support and Opposition
(4/28/16)
Support: California Commission on Aging.
Opposition: California Tax Reform Association.
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Discussed in Hearing
5MIN
Senate Standing Committee on Governance and Finance
Bill Author
Bill Co-Author(s):