SB 196: Property taxes: community land trust.

The California Constitution generally limits ad valorem taxes on real property to 1% of the full cash value of that property. For purposes of this limitation, the California Constitution defines full cash value as the assessors fair market value valuation of real property as shown on the 197576 tax bill under full cash value or, thereafter, the appraised value of that real property when purchased, newly constructed, or a change in ownership has occurred. Existing property tax law generally defines this full cash value of property as the propertys fair market value and defines these terms to mean the amount of cash or its equivalent that property would bring if exposed for sale in the open market under conditions in which neither buyer nor seller could take advantage of the exigencies of the other, and both the buyer and the seller have knowledge of all of the uses and purposes to which the property is adapted and for which it is capable of being used, and of the enforceable restrictions upon those uses and purposes. Existing property tax law requires the assessor to consider the effect of certain enforceable restrictions, including, among others, a contract that is a 99-year ground lease between a community land trust, as defined, and the qualified owner, as defined, of an owner-occupied single-family dwelling or an owner-occupied unit in a multifamily dwelling, that subjects a single-family dwelling or unit in a multifamily dwelling and the leased land on which the dwelling or unit is situated to affordability restrictions, as defined.

This bill would require, when valuing property subject to the enforceable restriction described above, that the sale or resale price of the dwelling or unit be rebuttably presumed to include both the dwelling or unit and the leased land on which the dwelling or unit is situated, and would authorize this presumption to be overcome if the assessor establishes by a preponderance of the evidence that all or a portion of the value of the leased land is not reflected in the sale or resale price of the dwelling or unit. The bill would require corrections of base year values and declines in value owing to the restrictions on properties assessed pursuant to these provisions to apply to all lien dates occurring after September 27, 2016. The bill would also make findings and declarations regarding the public purpose served by the bill.

Existing property tax law, in accordance with the California Constitution, provides for a welfare exemption for property used exclusively for religious, hospital, scientific, or charitable purposes and that is owned or operated by certain types of nonprofit entities, if certain qualifying criteria are met.

This bill would provide that property is within the welfare exemption if that property is owned by a community land trust, as defined, otherwise qualifying for the welfare exemption, and specified conditions are met, including that the property is being or will be developed or rehabilitated as housing, as specified. The bill would require this exemption to apply for 5 lien dates, as provided. The bill would prohibit this exemption from being denied on the basis that the subject property does not currently contain specified property that is in the course of construction. The bill would require the community land trust to be liable for property tax for the years for which the property was exempt under these provisions if the property was not developed or rehabilitated, or if the development or rehabilitation is not in the course of construction, by January 1, 2025, in the case of property acquired by the community land trust before January 1, 2020, or within 5 years of the lien date following the acquisition of the property in the case of property acquired by the community land trust on and after January 1, 2020, and before January 1, 2025, and would require the community land trust to notify the assessor if property owned by the community land trust is not in the course of construction by these dates. The bill, in the case where property that is owned by a community land trust becomes subject to taxation as so described, would require any assessment made, as provided, to be made within 5 years of the lien date following the date on which the property becomes subject to taxation.

By imposing new duties upon local government officials with respect to the exemption provided by this bill, this bill would impose a state-mandated local program.

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 the statutory provisions noted above.

Existing law requires the state 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 those provisions, no appropriation is made and the state shall not reimburse local agencies for property tax revenues lost by them pursuant to the bill.