UNFINISHED BUSINESS  

Bill No: SB 364

Author: Mitchell (D)

Amended: 7/27/20

Vote: 27

PRIOR SENATE VOTES NOT RELEVANT

ASSEMBLY FLOOR: 56-12, 8/3/20 - See last page for vote

SUBJECT: Change in ownership: nonresidential active solar energy systems: initiative

SOURCE: Author

DIGEST:

This bill changes the classification of nonresidential active solar energy systems from real property to personal property, and creates a new property tax exemption for systems constructed prior to January 1, 2025, if voters approve Proposition 15, an initiative constitutional amendment to require fair market value based property tax assessments for certain commercial and industrial real property.

Assembly Amendments

delete the previous version of the bill, and insert its current contents.

ANALYSIS:

Existing law:

1. Provides that all property is taxable and shall be assessed at the same percentage of fair market value, unless explicitly exempted by the Constitution or federal law (California Constitution, Article XIII, Section One).
2. Authorizes the Legislature, with a 2/3 vote, to classify personal property for differential taxation or for exemption (California Constitution, Article XIII, Section Two).
3. 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 when ownership changes (California Constitution, Article XIIIA, Section One, as added by Proposition 13, 1978).
4. Excludes from new construction the addition of an active solar energy system (California Constitution, Article XIIIA, Section Two, as added by Proposition 7, 1980)
5. Implements the active solar energy system new construction exclusion to apply to both residential and nonresidential systems equally, including a wide range of systems from a utility-scale solar farm to a rooftop installation on a home, which is due to sunset after the 2023-24 fiscal year.
6. Defines real property to include improvements.
7. Provides that the active solar energy system new construction exclusion applies only until there is a change in ownership.
8. Directs assessors to value personal property each year, generally based on its adjusted cost as reported by the taxpayer on its business personal property statement.

This bill:

1. Changes the classification of a "nonresidential" active solar energy system from real property to personal property by statutorily redefining terms, including:
   1. Defining "personal property" as including a nonresidential active solar energy system; and,
   2. Defining "improvements" as excluding a nonresidential active solar energy system.
2. Exempts nonresidential active solar energy systems from personal property tax, so long as the system:
   1. Is constructed or installed before January 1, 2025; systems constructed or installed after that date are not exempt.
   2. Was excluded from new construction on the effective date of thIS bill.
3. Provides that the exemption applies until there is a change in ownership, using the definition in current law.
4. Limits the current active solar energy system new construction exclusion to include only residential systems.
5. Defines “nonresidential active solar energy system” using the same definition from the new current new construction exclusion to include a system that is not constructed on a residential property, defined as real property used as residential property, including both single-family and multiunit structures, and the land on which those structures are constructed or placed.
6. Provides that it takes effect only if voters approve an initiative at the November 2020 general election that adds a new Section 4.5 to Article XIIIA of the California Constitution, and repeals its provisions if the initiative does not receive a majority of votes.
7. States that its provisions are to be construed liberally so as to effectuate their intent, policy, and purposes.
8. Provides that its provisions are severable.
9. Makes legislative findings and declarations supporting its purposes.
10. Makes technical and conforming changes.
11. Takes effect immediately as a tax levy.

Background

If Proposition 15 passes, nonresidential active solar energy systems that are currently excluded from new construction reassessment would become subject to fair market value assessment under current law. This bill seeks to preemptively reclassify nonresidential active solar energy systems from real property to personal property, and then exempt them from personal property taxation, but only if voters approve the initiative. As such, SB 364 converts a current real property "exclusion" into a personal property tax exemption to maintain the status quo for nonresidential active solar energy systems should voters approve Proposition 15.

Residential active solar energy systems would continue to be classified as real property, and eligible for the new construction exclusion. Nonresidential active solar energy systems would become ineligible for the new construction exclusion but would be exempt from personal property taxation so long as they are currently excluded or if they are installed or constructed before January 1, 2025.

Related/Prior Legislation

Earlier this year, the Senate approved AB 105 (Ting), which is almost identical to this bill. SB 364 differs from AB 105 by limiting the personal property tax exemption for nonresidential active solar energy systems to only those systems that are excluded from new construction on the effective date of the bill.

AB 105 Support. American Wind Energy Association; California Community Choice Association; Capital Dynamics, Inc.; Coalition for Clean Air; De Shaw Renewable Investments; EDF Renewables; First Solar, Inc.; Idemitsu Renewables; National Electrical Contractors Association; Natural Resources Defense Council; RWE Renewables Americas, LLC; Recurrent Energy, LLC; Spowe; State Building & Construction Trades Council of California; Sunpower Corporation; Union of Concerned Scientists; and, Vote Solar supported AB 105.

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

According to the State Board of Equalization, the revenue impact of SB 364 is indeterminable.

SUPPORT: (Verified 8/19/20)

Advancement Project

Alliance San Diego

Almond Alliance of California

Berkshire Hathaway Energy

BHE Renewables

California Calls

California League of Conservation Voters

California Solar & Storage Association

California Tax Reform Association

California Teachers Association

City of San Jose

Clearway Energy Group

Climate Resolve

Common Sense

Communities for a Better Environment

Evolve California

Housing California

Independent Energy Producers Association

Large-scale Solar Association

League of Women Voters of California

Los Angeles Mayor Eric Garcetti

SEIU California

Sierra Club California

Silicon Valley Clean Energy

Solar Energy Industries Association

TechEquity Collaborative

Tenaska

Working Partnerships USA

OPPOSITION: (Verified 8/4/20)

California Assessors' Association

California Business Roundtable

California Farm Bureau Federation

ARGUMENTS IN SUPPORT: According to the author, “Since the 1980s, California voters and the Legislature have provided tax exemption to residential and commercial projects for solar energy projects to incentivize the state's transition to renewable energy and help reduce the upfront cost of solar energy system installation. Existing law provides exemption from taxation to nonresidential active solar energy systems constructed or installed prior to January 1, 2025 under the 'newly construction' exclusion, until there is subsequent change in ownership. Unfortunately, the Schools and Communities First (SCF) split-roll initiative, currently on the November 3rd ballot, removes this definition, inadvertently causing full value re-assessment of nonresidential solar energy systems that are exempt under current law. SB 364 seeks to preemptively correct the unintended impact of the upcoming SCF split-roll initiative on nonresidential solar energy systems in the state. SB 364 ensures that nonresidential active solar energy systems in the state constructed or installed prior to January 1, 2025, as already provided in current law, continue to be exempted from taxation by reclassifying them as personal property. In the event the split-roll initiative passes, SB 364 will ensure preservation of the existing exemption as intended. If, however, the split-roll ballot initiative is not approved at the statewide general election, SB 364 becomes inoperative preserving the existing law exemption for nonresidential solar energy generation systems.”

ARGUMENTS IN OPPOSITION: According to the California Assessors’ Association, “Active solar systems have always been considered by assessors, the Board of Equalization and the Legislature to be real property subject to the property tax imposed by the state constitution. After the passage of Proposition 13 in 1978, the Legislature passed SCA 28 (Proposition 7 of 1980) to allow a limited exclusion from the term ‘new construction’ for ‘active solar systems’ added by homeowners and businesses. The ballot materials clearly identified such systems as ‘real property’; indeed, there would have been no need to amend the constitution had such systems not been improvements to real property. It is well settled that the Constitution imposes the property tax on real property and the Legislature has no authority to exempt real property from taxation. At the same time, the Constitution allows the Legislature, with a 2/3's vote of both houses, to exempt personal property from property taxes. The courts have closely guarded against the legislative temptation to evade the prohibition against exemptions from the property tax by reclassifying "real property" as something else.”

ASSEMBLY FLOOR: 56-12, 8/3/20

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bloom, Boerner Horvath, Bonta, Burke, Calderon, Carrillo, Chau, Chen, Chiu, Cooley, Cooper, Daly, Eggman, Flora, Friedman, Gabriel, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager, Levine, Limón, Low, Mayes, McCarty, Medina, Mullin, Muratsuchi, O'Donnell, Petrie-Norris, Quirk, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Weber, Wood, Rendon

NOES: Bigelow, Brough, Choi, Megan Dahle, Fong, Kiley, Lackey, Mathis, Obernolte, Patterson, Quirk-Silva, Waldron

NO VOTE RECORDED: Cervantes, Chu, Cunningham, Diep, Frazier, Gray, Maienschein, Nazarian, Ramos, Voepel, Wicks

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

8/19/20 9:04:38

**** END ****

SENATE THIRD READING

STR Bill Id:SB 364

Author:(Mitchell)

As Amended Ver:July 27, 2020

2/3 vote. Tax Levy

SUMMARY:

Changes the classification of nonresidential active solar energy systems from real property to personal property and creates a property tax exemption for systems constructed prior to January 1, 2025 if voters approve Proposition 15, an initiative constitutional amendment to require fair market value based property tax assessments for certain commercial and industrial real property.

Major Provisions

1. Changes the classification of a "nonresidential" active solar energy system from real property to personal property by statutorily redefining terms. Specifically:
   1. Defines "personal property" as including a nonresidential active solar energy system; and,
   2. Defines "improvements" as excluding a nonresidential active solar energy system.
2. Creates a personal property tax exemption for a nonresidential active solar energy system.
3. Makes the existing real property new construction exclusion for active solar energy systems inapplicable to a nonresidential active solar energy system.
4. Exempts a nonresidential active solar energy system constructed or installed prior to January 1, 2025, from property taxation as personal property, as specified.
5. Limits, with respect to a system constructed or installed prior to this bill's operative date, the above personal property exemption to a nonresidential active solar energy system that was receiving the new construction exclusion on this bill's operative date.
6. Allows the personal property exemption to continue until there is a subsequent change in ownership of the nonresidential active solar energy system.

COMMENTS:

California's Constitution allows the Legislature to exempt personal property from property taxation: Section 2 of Article XIII of the California Constitution authorizes the Legislature, with a 2/3 vote, to classify personal property for differential taxation or for exemption. This bill seeks to use this provision of the Constitution to classify nonresidential active solar energy systems as personal property and create a property tax exemption on this basis. This bill is keyed with a 2/3 vote consistent with the Constitution's requirement.

California's Constitution allows the addition of an active solar energy system to a property to be "excluded" from property tax assessment on the basis that it is real property: When a substantial addition to real property occurs, the law requires the assessor to increase the assessment to reflect the value of the "newly constructed" property. However, the Constitution provides certain new construction exclusions. Any value added by additions where a new construction exclusion is available is not subject to property tax until there is a subsequent change in ownership of the property.

In 1980, Proposition 7 amended the Constitution to create a new construction exclusion for the construction or addition of an active solar energy system. For the last 40 years, these active solar energy systems have been classified and treated as real property. The solar exclusion applies to both residential and nonresidential systems equally and applies to a wide range of systems from a utility-scale solar project to a rooftop installation on a home.

What does this bill do? To preserve the tax benefits currently bestowed on active solar energy systems via the new construction exclusion if Proposition 15 passes, this bill seeks to preemptively reclassify nonresidential active solar energy systems from real property to personal property and create a property tax exemption for this property. The personal property tax exemption would apply to systems constructed or installed before January 1, 2025, and allows the exemption to continue to apply on and after this date, until there is a subsequent change in ownership of the system. However, systems constructed or installed before Proposition 15's operative date, would be eligible for this exemption only if that system was excluded from assessment on Proposition 15's operative date.

Residential active solar energy systems would continue to be classified as real property and remain eligible for the new construction exclusion, while nonresidential active solar energy systems would become ineligible for the new construction exclusion. This bill also provides that if voters do not approve Proposition 15, then its provisions are inoperative and will be effectively repealed on January 1, 2021.

Together, these provisions serve to transition a pre-existing property tax incentive from an "exclusion" to an "exemption" to maintain the status quo for nonresidential active solar energy systems and continue to encourage and to provide incentives for the development of solar energy.

The property tax incentive for the installation of an active solar energy system is in the form of an exclusion, it is not an exemption: If voters approve Proposition 15, then an active solar energy system currently excluded from assessment under the new construction exclusion that is located on a commercial and industrial property would effectively become subject to property tax. This is because an "exclusion" from property tax is not the same thing as an "exemption" from property tax. Generally, for commercial and industrial property that transition to a fair market value standard, the new construction and change in ownership provisions that limit when real property values are increased (for new construction) or reset to fair market value (for a change in ownership) would no longer apply. Consequently, the solar new construction exclusion no longer applies and the active solar energy system would become subject to property tax as the entire property, including the solar system, would be valued at its fair market value.

According to the Author:

Since the 1980s, California voters and the Legislature have provided tax exemption to residential and commercial projects for solar energy projects to incentivize the state's transition to renewable energy and help reduce the upfront cost of solar energy system installation. Existing law provides exemption from taxation to nonresidential active solar energy systems constructed or installed prior to January 1, 2025 under the 'newly construction' exclusion, until there is subsequent change in ownership. Unfortunately, the Schools and Communities First (SCF) split-roll initiative, currently on the November 3rd ballot, removes this definition, inadvertently causing full value re-assessment of nonresidential solar energy systems that are exempt under current law.

SB 364 seeks to preemptively correct the unintended impact of the upcoming SCF split-roll initiative on nonresidential solar energy systems in the state. SB 364 ensures that nonresidential active solar energy systems in the state constructed or installed prior to January 1, 2025, as already provided in current law, continue to be exempted from taxation by reclassifying them as personal property. In the event the split-roll initiative passes, SB 364 will ensure preservation of the existing exemption as intended. If, however, the split-roll ballot initiative is not approved at the statewide general election, SB 364 becomes inoperative preserving the existing law exemption for nonresidential solar energy generation systems.

Arguments in Support:

Supporters state "solar's current tax treatment for commercial and utility-scale projects incentivizes CA's transition to renewable energy by lowering projects' costs to ratepayers. The tax exclusion for solar is passed through to ratepayers in direct cost savings, reducing the cost of meeting state clean energy goals. Should this exclusion be impacted by passage of Proposition 15, solar projects would face uncertainty about future costs and delays in both new and existing projects, adding to the challenge of meeting our clean energy and climate goals." Supporters further state that "SB 364 is an effort to sustain an existing tax exclusion, which the voters approved by a 2-1 margin and upon which the state and its ratepayers have relied for 40 years."

Arguments in Opposition:

Opponents state "this measure is unconstitutional, noting it is well settled that the Constitution imposes the property tax on real property and the Legislature has no authority to exempt real property from taxation. At the same time, the Constitution allows the Legislature, with a 2/3's vote of both houses, to exempt personal property from property taxes. The courts have closely guarded against the legislative temptation to evade the prohibition against exemptions from the property tax by reclassifying 'real property' as something else."

FISCAL COMMENTS:

No estimate.

VOTES:

SENATE FLOOR: 38-0-0

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

UPDATED:

VERSION: July 27, 2020

CONSULTANT: Rose Marie Kinnee / REV. & TAX. / (916) 319-2098 FN: 0003162

Date of Hearing: July 27, 2020

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Autumn R. Burke, Chairwoman

SBPCA Bill Id:SB 364

Author:(Mitchell) – As Amended Ver:July 27, 2020

2/3 vote. Tax levy. Fiscal committee.

SENATE VOTE: Not relevant

SUBJECT: Change in ownership: nonresidential active solar energy systems: initiative

SUMMARY: Changes the classification of nonresidential active solar energy systems from real property to personal property and creates a property tax exemption for systems constructed prior to January 1, 2025 if voters approve Proposition 15, an initiative constitutional amendment to require fair market value based property tax assessments for certain commercial and industrial real property. Specifically, this bill:

1. Changes the classification of a "nonresidential" active solar energy system from real property to personal property by statutorily redefining terms. Specifically:
   1. Defines "personal property" as including a nonresidential active solar energy system; and,
   2. Defines "improvements" as excluding a nonresidential active solar energy system.
2. Creates a personal property tax exemption for a nonresidential active solar energy system.
3. Makes the existing real property new construction exclusion for active solar energy systems inapplicable to a nonresidential active solar energy system.
4. Exempts a nonresidential active solar energy system constructed or installed prior to
   January 1, 2025, from property taxation as personal property, as specified.
5. Limits, with respect to a system constructed or installed prior to this bill's operative date, the above personal property exemption to a nonresidential active solar energy system that was receiving the new construction exclusion on this bill's operative date.
6. Allows the personal property exemption to continue until there is a subsequent change in ownership of the nonresidential active solar energy system.
7. Provides that a change in ownership of a nonresidential active solar energy system occurs if it would have met the parameters for a change in ownership applicable to real property had the system been considered real property instead of personal property.
8. Defines a "nonresidential active solar energy system" as a system that uses solar devices to provide for the collection, storage, or distribution of solar energy, and that is not constructed or installed in or on residential property.
9. Defines a "residential property" as real property used as residential property, including both single-family and multiunit structures, and the land on which those structures are constructed or placed.
10. Provides that the above provisions in this bill would become operative if voters approve Proposition 15, an initiative measure adding Section 2.5 to Article XIII A of the California Constitution at the November 3, 2020, statewide general election, which would require fair market value based property tax assessments for certain commercial and industrial real property
11. Provides that in the event Proposition 15 is not approved, provisions in this bill will remain inoperative and effectively repealed on January 1, 2021.
12. Makes a legislative finding and declaration that it is the intent of the Legislature, in enacting this chapter [Chapter 4.5], to ensure active solar energy systems that would have been exempt from taxation because of the new construction exclusion continue to be exempt from taxation until there is a subsequent change in ownership of the active solar energy system.
13. States the provisions of Chapter 4.5 are to be liberally construed so as to effectuate their intent, policy, and purposes.
14. Includes severability language that states that if any provision or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.
15. Makes other conforming changes.

EXISTING LAW:

1. Provides that all property is taxable unless otherwise provided by the California Constitution or federal law. (Section 1 of Article XIII of the California Constitution.)
2. Authorizes the Legislature with a 2/3 vote to classify personal property for differential taxation or for exemption. (Section 2 of Article XIII of the California Constitution.)
3. Limits ad valorem taxes on real property to 1% of the full cash value of that property as set forth in the California Constitution based on the county assessor's determination of property value when purchased, newly constructed, or a change in ownership has occurred. This value, known as the "base year value," may reflect the yearly inflation rate, not to exceed 2% for any given year. In contrast, personal property is valued each year at its market value.
4. Requires the assessor to increase a property's assessment to reflect the full cash value of "new construction" when substantial additions or alterations occur. New construction is assigned its own distinct base year value, and the remainder of the property's base year value is unaffected.
5. Allows a new construction exclusion in the case of the construction or addition of an active solar energy system that is real property.
6. Provides the exclusion on the basis that the system is a real property.
7. Excludes the value added by the system from property taxation, until there is a subsequent change in ownership.
8. Sunsets the new construction exclusion for active solar energy systems on January 1, 2025.
9. Specifies that after the exclusion's sunset date, active solar energy systems that qualify for the new construction exclusion prior to January 1, 2025, continue to be excluded, until there is a subsequent change in ownership.

FISCAL EFFECT: The State Board of Equalization (BOE) states that the revenue impact of this bill is indeterminable.

COMMENTS:

1. The author has provided the following statement in support of this bill:

Since the 1980s, California voters and the Legislature have provided tax exemption to residential and commercial projects for solar energy projects to incentivize the state's transition to renewable energy and help reduce the upfront cost of solar energy system installation. Existing law provides exemption from taxation to nonresidential active solar energy systems constructed or installed prior to January 1, 2025 under the 'newly construction' exclusion, until there is subsequent change in ownership. Unfortunately, the Schools and Communities First (SCF) split-roll initiative, currently on the November 3rd ballot, removes this definition, inadvertently causing full value re-assessment of nonresidential solar energy systems that are exempt under current law.

SB 364 seeks to preemptively correct the unintended impact of the upcoming SCF split-roll initiative on nonresidential solar energy systems in the state. SB 364 ensures that nonresidential active solar energy systems in the state constructed or installed prior to January 1, 2025, as already provided in current law, continue to be exempted from taxation by reclassifying them as personal property. In the event the split-roll initiative passes, SB 364 will ensure preservation of the existing exemption as intended. If, however, the split-roll ballot initiative is not approved at the statewide general election, SB 364 becomes inoperative preserving the existing law exemption for nonresidential solar energy generation systems.

1. This bill is supported by Tenaska, Inc., which notes:

Since 1980, commercial and utility-scale solar projects have been partially excluded from annual property tax assessments per voter-approved Proposition 7. Proposition 15 on the November 2020 ballot would inadvertently repeal the solar tax exclusion, making utility-scale and commercial solar systems taxable at their full fair market value as of January 1, 2022.

Current tax treatment for these solar projects has aided California's transition to renewable energy by lowering projects' costs to ratepayers. The tax exclusion is passed through to ratepayers in direct cost savings. Should Proposition 15 pass without this fix, existing solar projects and contracts will face potential default, and projects with signed contracts that haven't been built will be delayed, forestalling much needed new job creation, creating additional ratepayer burdens, and delaying progress toward our clean energy and climate goals at the worst possible time.

SB 364 ensures that the existing tax treatment for larger solar projects remains intact and clarifies that projects that have already changed ownership and are paying property taxes cannot be "re-exempted" under the new law. Importantly, the language in SB 364 is tied to passage of Proposition 15 – if voters approve the measure, the SB 364 language goes into effect. If the measure is not approved SB 364's language does not go into effect, effectively leaving status quo in place, which is the goal of the legislation.

Passage of SB 364 is crucial to maintaining both progress toward our climate goals and investor confidence in California's electricity market.

1. This bill is opposed by the California Assessors' Association (CAA), in part, on the basis that this bill is unconstitutional. The CAA states:

Active solar systems have always been considered by assessors, the Board of Equalization and the Legislature to be real property subject to the property tax imposed by the state constitution. After the passage of Proposition 13 in 1978, the Legislature passed SCA 28 (Proposition 7 of 1980) to allow a limited exclusion from the term "new construction" for "active solar systems" added by homeowners and businesses. The ballot materials clearly identified such systems as "real property"; indeed, there would have been no need to amend the constitution had such systems not been improvements to real property. […]

It is well settled that the Constitution imposes the property tax on real property and the Legislature has no authority to exempt real property from taxation. At the same time, the Constitution allows the Legislature, with a 2/3's vote of both houses, to exempt personal property from property taxes. The courts have closely guarded against the legislative temptation to evade the prohibition against exemptions from the property tax by reclassifying "real property" as something else.

1. Committee Staff Comments:
   1. California's Constitution allows the addition of an active solar energy system to a property to be "excluded" from property tax assessment on the basis that it is real property: When a substantial addition to real property occurs, the law requires the assessor to increase the assessment to reflect the value of the "newly constructed" property. However, California's Constitution provides certain new construction exclusions. Any value added by additions where a new construction exclusion is available is not subject to property tax until there is a subsequent change in ownership of the property.

In 1980, Proposition 7 (SCA 28) amended the Constitution to create a new construction exclusion for the construction or addition of an active solar energy system. For the last 40 years, these active solar energy systems have been classified and treated as real property. The solar exclusion applies to both residential and nonresidential systems equally and applies to a wide range of systems from a utility-scale solar project to a rooftop installation on a home.

• 1. Proposition 15, the "split roll" initiative to require fair market value based assessments of commercial and industrial real property, will be before California voters at the November 3, 2020 general election: California has an acquisition value based property taxation system for real property. Existing law generally limits a property's assessed value to its market value when first acquired with a maximum annual 2% inflation adjustment thereafter plus an addition for any new construction that subsequently occurs. If approved by voters, Proposition 15 [Initiative 1870 (19-0008A1)], would transition the assessment of certain commercial and industrial real property to a fair market value standard. Proposition 15 is commonly described as creating a "split roll" since it establishes a different value standard for commercial and industrial property than for residential property. Residential property would retain existing law's acquisition value based standard and is not impacted by Proposition 15. After the initial reassessment of commercial and industrial property to fair market value, which is phased in with a start date of January 1, 2022, Proposition 15 requires periodic reassessments at least every three years thereafter. Proposition 15 is estimated to increase annual property tax revenues by $7.5 billion to $12 billion.
  2. The property tax incentive for the installation of an active solar energy system is in the form of an exclusion, it is not an exemption: If voters approve Proposition 15, then an active solar energy system currently excluded from assessment under the new construction exclusion that is located on a commercial and industrial property would effectively become subject to property tax. This is because an "exclusion" from property tax is not the same thing as an "exemption" from property tax. Generally, for commercial and industrial property that transition to a fair market value standard, the new construction and change in ownership provisions that limit when real property values are increased (for new construction) or reset to fair market value (for a change in ownership) would no longer apply. Consequently, the solar new construction exclusion no longer applies and the active solar energy system would become subject to property tax as the entire property, including the solar system, would be valued at its fair market value.
  3. California's Constitution allows the Legislature to exempt personal property from property taxation: Section 2 of Article XIII of the California Constitution authorizes the Legislature, with a 2/3 vote, to classify personal property for differential taxation or for exemption. This bill seeks to use this provision of the Constitution to classify nonresidential active solar energy systems as personal property and create a property tax exemption on this basis. This bill is keyed with a 2/3 vote consistent with the Constitution's requirement.
  4. What is the problem? If Proposition 15 passes, then solar systems currently excluded from property tax would become taxable at fair market value. This applies to both active solar energy systems installed at a business or industrial property and major freestanding solar energy facilities selling renewable energy to utilities. Solar industry organizations state that the resulting unexpected tax increase would jeopardize the financial viability of existing solar projects and make certain planned solar projects economically unviable and un-financeable, which would, in turn, impact state clean energy and climate goals. A published Fact Sheet by the Solar Energy Industries Association states:

This [initiative] will jeopardize the equity interests in existing solar power plants. These plants sell their power under long-term power purchase agreements (PPAs), the pricing of which was contractually agreed to on the basis that property taxes would not be imposed. Existing power plants simply cannot absorb this added cost based on their fixed PPAs.

It will similarly jeopardize yet-to-be-built solar power plants, particularly those for which PPAs have already been entered into. The PPA price does not reflect the materially increased property tax cost. Such projects will not be able to get adequate financing and may have to be abandoned. Future solar projects would have to build the cost of the property tax into their PPA bids, increasing the cost of energy to California's consumers.

• 1. What does this bill do? To preserve the tax benefits currently bestowed on active solar energy systems via the new construction exclusion if Proposition 15 passes, this bill seeks to preemptively reclassify nonresidential active solar energy systems from real property to personal property and create a property tax exemption for this property. The personal property tax exemption would apply to systems constructed or installed before January 1, 2025, and allows the exemption to continue to apply on and after this date, until there is a subsequent change in ownership of the system. However, systems constructed or installed before Proposition 15's operative date, would be eligible for this exemption only if that system was excluded from assessment on Proposition 15's operative date.

Residential active solar energy systems would continue to be classified as real property and remain eligible for the new construction exclusion, while nonresidential active solar energy systems would become ineligible for the new construction exclusion. This bill also provides that if voters do not approve Proposition 15, then its provisions are inoperative and will be effectively repealed on January 1, 2021.

Together, these provisions serve to transition a pre-existing property tax incentive from an "exclusion" to an "exemption" to maintain the status quo for nonresidential active solar energy systems and continue to encourage and to provide incentives for the development of solar energy.

• 1. Setting a precedent: If Proposition 15 is approved, other commercial and industrial property owners will also incur unanticipated property tax increases. This bill could set a precedent of redefining specific items of real property improvements as personal property and creating an exemption to minimize the impact of fair market value based assessments that other commercial and industrial property owners adversely impacted by the initiative would similarly seek.
  2. Related legislation: AB 105 (Ting) includes similar provisions to classify and exempt nonresidential active solar energy systems from property tax as personal property if Proposition 15 passes. These provisions were amended into AB 105 in the Senate on June 22, 2020, and passed the Senate on June 25, 2020. Because the Senate amendments deleted the version of AB 105 passed by the Assembly, AB 105 was referred to this Committee pursuant to Rule 77.2. Subsequently, AB 105's provisions were amended into this bill with a modification to address an unintended consequence of exempting currently taxable systems consistent with this bill's intent to ensure the continued property tax benefit provided to a particular system should Proposition 15 be approved. In the case of a pre-existing active solar energy system, this bill requires the system to be receiving the benefit of the new construction exclusion on the day that Proposition 15 becomes operative. Additionally, this bill makes related findings and declarations which AB 105 lacked.

REGISTERED SUPPORT / OPPOSITION:

Support

American Wind Energy Association*

Berkshire Hathaway Energy

BHE Renewables

California Calls

California Community Choice Association*

California League of Conservation Voters

California Solar & Storage Association

Capital Dynamics, Inc.*

Clearway Energy Group

Coalition for Clean Air*

De Shaw Renewable Investments*

EDF Renewables*

Evolve California

First Solar, Inc.*

Idemitsu Renewables*

Independent Energy Producers Association

Large-scale Solar Association

League of Women Voters of California

National Electrical Contractors Association*

Natural Resources Defense Council*

RWE Renewables Americas, LLC*

Recurrent Energy, LLC*

SEIU California

Spower*

Silicon Valley Clean Energy

Solar Energy Industries Association

State Building & Construction Trades Council of California*

Sunpower Corporation*

Tenaska

Union of Concerned Scientists*

Vote Solar*

*Support letter submitted for AB 105 (Ting)

Opposition

California Assessors' Association

California Business Roundtable

Analysis Prepared by: Rose Marie Kinnee / REV. & TAX. / (916) 319-2098

Date of Hearing: June 17, 2019

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Autumn R. Burke, Chairwoman

SBPCA Bill Id:SB 364

Author:(Stone) – As Amended Ver:May 17, 2019

FOR TESTIMONY ONLY

Majority vote. Tax levy. Fiscal committee.

SENATE VOTE: 38-0

SUBJECT: Property taxation: senior veterans

SUMMARY: Eliminates the annual maximum 2% inflation adjustment applied to the assessed value of a home owned by a veteran who is age 65 or older and whose income does not exceed $50,000, if single, or $100,000, if married. Specifically, this bill:

1. Prohibits, for any assessment year commencing on or after January 1, 2020, the percentage increase by an inflation factor, as specified, from being applied to the base year value of a "qualified veteran's" principal place of residence (including a manufactured home) and so much of the land surrounding it as is reasonable necessary for the use of the dwelling if the following conditions apply:
   1. The "qualified veteran" is 65 years of age or older on the lien date (January 1); and,
   2. The "qualified veteran" was honorably discharged from military service.
2. Defines a "qualified veteran" as a person who meets the following criteria:
   1. The person meets the criteria for the "Veterans' Exemption" specified in the California Constitution^[1] excluding the limit on the value of property the veteran or the veteran's spouse may own of $5,000, if single, or $10,000, if married; and,
   2. The person's annual income, as defined in Revenue and Taxation Code (R&TC) Section 20503, if single, is $50,000 or less; or if married, the person's household combined annual income, as defined in R&TC Section 20504, is $100,000 or less.^[2]
3. Requires the veteran to file an affidavit provided by the assessor to claim this benefit and provide all necessary information and answer all questions to determine whether the claimant is a "qualified veteran."
4. Allows the assessor to require additional information from the claimant to verify the affidavit before granting the claimant the benefit.
5. Provides that, notwithstanding existing law, no appropriation is made by this act and no reimbursement is required to any local agency for any property tax revenues lost.
6. Imposes a state-mandated local program, for which reimbursement to local agencies and school districts are required if the Commission on State Mandates makes the necessary determinations, as specified.
7. Takes immediate effect as a tax levy.

EXISTING LAW:

1. Specifies that all property is taxable unless otherwise provided by the California Constitution or federal law.^[3]
2. Limits, as a general rule, the maximum amount of any ad valorem tax on real property to 1% of the property's "full cash value".^[4]
3. Defines the term "full cash value" as the county assessor's valuation of real property as shown on the 1975-76 tax bill or, thereafter, the appraised value of real property when purchased or newly constructed, or when a change in ownership occurs.^[5] In addition, the "full cash value base" may reflect from year to year an inflationary rate not to exceed 2% for any given year.^[6]
4. Specifies that the inflation factor shall be the percentage change, rounded to the nearest one-thousandth of 1%, 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.^[7]
5. Provides that the taxable value (assessed value) of real property is the lesser of its "base year value" compounded annually by the inflation factor not to exceed 2%, as provided, or its "full cash value" (current market value).^[8]
6. Defines a "veteran" as a person:
   1. Who is serving in the U.S. Army, Navy, Air Force, Marines, Coast Guard, or Revenue Marine Service, or served in one of the listed services and was discharged under honorable conditions;
   2. Served either in time of war^[9] or in time of peace in a campaign or expedition for which a medal has been issued by Congress or in time of peace and because of a service-connected disability was released from active duty; and,
   3. Resides in the State on the current lien date.^[10]
7. Establishes the Senior Citizens and Disabled Citizens Postponement Law and the Senior Citizens Mobilehome Postponement Law. This allows the State Controller to pay property taxes to county tax collectors on behalf of individual homeowners over the age of 62 making less than $35,500 who apply for this loan program.^[11]
8. Provides a Disabled Veterans' Exemption that reduces the assesssed value of a qualifying veteran's home in the inflation-adjusted amount of $139,437 or $209,156 if their income is less than the inflation-adjusted amount of $60,563.
9. 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 purpuses of ad valorem property taxation.^[12]

FISCAL EFFECT: The State Board of Equalization (BOE) estimates annual revenue losses of $27.2 million.

COMMENTS:

1. The author has provided the following statement in support of this bill:

An issue that is currently plaguing California is the issue of veterans who are homeless. Veterans have sacrificed much for their county, 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 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 364 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. Making this change will go a long way to help veterans stay in their homes by making their living situation more affordable.

1. The Veteran organizations in support of this bill state:

SB 364 is a small attempt to help all veterans, who have sacrificed the most, receive much needed tax relief from the state in order to stay in their homes. [T]his bill would cap property taxes on any primary residence of an honorably discharged veteran over the age of 65 within certain income parameters.

1. The California Assessors' Association (CAA) and the assessors of Los Angeles and Santa Clara County are in opposition to this bill on the basis of practical administrative difficulties including the cost and resources counties would incur to implement this bill's provisions. County assessors stress that their opposition is not related to providing senior veterans with property tax relief but that this particular approach to use the inflation factor is not a cost-effective way. The following areas of concern are noted:
   1. Technology challenges and costs: Counties do not have the necessary systems in place to implement this bill's requirements in the provided timeline, as it is effective immediately. 31 counties use the same the same computer system and the remaining 27 use individualized systems. These systems will need to be changed, at significant cost, and, in the short term, complicated technological workarounds would be necessary.
   2. Ongoing administration costs: Based on their experience with the disabled veterans' exemption, administering this bill will be labor intensive. The income threshold requires regular contact and review of personal data that property owners are not always eager to share. Additionally, veteran-owned property will need to be tracked and monitored differently than all other real property and when no longer veteran-owned or no longer-income qualified returned to the regular system.
   3. Implementation uncertainties: It is unclear how to address years with negative inflation factors or how to address properties with shared ownership.
2. Committee Staff Comments:
   1. California's property tax system: Proposition 13 (1978) replaced California's market value-based system of property taxation with an acquisition value-based system. This change was designed to provide property owners with greater predictability regarding future property taxes. Specifically, Proposition 13 rolled back the assessed values of real property to 1975 market value levels and limited future assessed value increases to the inflation rate, not to exceed 2%, for as long as a property's ownership remains unchanged and the property is not substantially improved (i.e., through new construction). Thus, even if a property appreciates considerably in value over time, the 2% maximum inflation adjustment ensures only limited increases in the property's assessed value. In this manner, California's property tax system result in substantial property tax savings for long-term property owners.

This system ensures a predictable, slowly increasing tax obligation for the taxpayer, as well as predictable revenues for local agencies. At the same time, however, these provisions may also result in an assessed value for a property well below the property's actual market value. Critics, in turn, contend that this system shifts the cost of public services from longstanding property owners to those who have only recently purchased property.

• 1. Base year values: A property's "base year value" refers to the real property's protected value under Proposition 13. The base year value is compounded annually since the base year (1975 or the year of acquisition) by an inflation factor not to exceed 2%. The property's inflation-adjusted value, in turn, is called the "adjusted" or "factored" base year value. Generally, the law requires a property's assessed value to be the lower of its base year value as adjusted by the inflation factor or its current market value, whichever is lower.
  2. What does this bill do? This bill is designed to provide additional property tax relief to age-qualified (65 years of age or more) and income-qualified (less than $50,000 if single, less than $100,000 if married) homeowners who have served in the military and who were honorably discharged from military service. The relief is provided by eliminating the maximum 2% annual inflation adjustment to the base year value of a qualified veteran's principal place of residence. For any assessment year beginning on or after January 1, 2020, this serves to essentially freeze the current assessed value (absent subsequent new construction) of a qualified veteran's home who is age 65 or older on January 1, 2020, and for all other qualified veterans when they reach the age of 65 years.
  3. How much is the tax savings? For FY 2018-19, the statewide average assessed value of homes receiving the homeowners' exemption is $412,000. If the 2% inflation factor is not applied, then at the basic 1% property tax rate, the property tax savings on a home is about $82 in the first year. However, the savings would grow over time due to the nature of inflation factor compounding. Because Proposition 13 results in assessed values that are unique to each homeowner (year of purchase, improvements, location) for some senior veterans the savings will be higher and for others it will be lower. In this regard, this bill is unlike the disabled veterans' exemption, which provides the same amount property tax relief regardless of a home's assessed value. Thus, this bill provides unequal tax relief in that the higher the assessed value, the greater the tax savings. To illustrate these assessed value differences, while the statewide average assessed value is $412,000, in the case of the disabled veterans' exemption, the current assessed value exemption amount of about $140,000 is sufficient to fully exempt 30% of those veteran-owned homes from the ad valorem property tax.
  4. Policy considerations and tradeoffs: The rationale for this bill focuses on the issue of veteran homelessness, the housing affordability crisis, and ensuring those veterans who are homeowners can continue to afford their homes. However, a senior veteran homeowner may be mortgage free and paying non-market based property taxes. In contrast, a senior veteran renter's monthly rent obligation is unabated and may be at market rate levels. For a senior homeowner in need of property tax assistance, the state's Property Tax Postponement Program allows income-eligible individuals ($35,500) at least 62 years of age to postpone property tax payments on their principal residence. Given limited resources and competing priorities, senior veterans who are homeless, at risk of homelessness, or rent their homes may be in greater need of assistance than senior veteran homeowners. Additionally, since the resulting revenue loss to local governments is not reimbursed, local governments that provide services and assistance to homeless California veterans in their communities will have less funds for those purposes.
  5. Administrative cost considerations: This Committee may wish to consider whether this expansion of property tax benefits should depend on taxpayers' income, requiring assessors to verify taxpayers' private financial matters unrelated to property value, and whether the use of the inflation factor to provide a property tax benefit is appropriate given the administrative costs assessors have identified. Exemptions applied to homes are generally a one-time administrative procedure. For example, the homeowners' exemption and the regular disabled veterans' exemption require a one-time application to filed with the assessor. The disabled veterans' exemption requires annual claiming for the higher exemption based on an income threshold; however, this represents less than 10% of the nearly 49,000 disabled veterans' exemptions granted statewide.
  6. Prior year compounding of the base year value by the inflation factor ambiguity: Over the years, the calculation of the inflation factor for purposes of the annual percentage increase has been slightly modified. As a result, the law separately outlines the calculations for three distinct time periods noting the assessment years covered.^[13] Committee staff notes that, as currently drafted, this bill states that the percentage increase for all three of these periods shall not apply to a qualified veteran's home for any assessment year on or after January 1, 2020. This language raises uncertainty because it could be read in different ways. It might be argued that all past inflation adjustments to a base year value must be eliminated. For instance, if read this way, the assessed value of a qualifying veteran who has lived in the same home since 1985 would revert to its initial 1985 base year value without the subsequent 34 years of inflation factor compounding. That is, the home's market value in 1985. While this is not the author's intent, this issue is raised because the application of the inflation factor has been an area that has been previously litigated.^[14]
  7. Existing property tax relief provisions for California seniors: Beyond the protections afforded by Proposition 13, California seniors benefit from additional property tax relief measures. For example, individuals over the age of 55 may "transfer" their base year value from one home to another that is of equal or lesser value and located within the same county or in one of 10 counties that accept transfers from non-county residents. In this manner, the individual is able to avoid a reassessment of the newly purchased home to its current market value. This once-in-a-lifetime benefit allows seniors to pay the same level of taxes if they move by avoiding Proposition 13's reassessment provisions when purchasing a qualifying new home.
  8. Committee's tax expenditure policy: SB 1335 (Leno), Chapter 845, Statutes of 2014, added R&TC Section 41, which recognized that the Legislature should apply the same level of review used for government spending programs to tax credits introduced on or after January 1, 2015. This year, this Committee adopted a policy requiring that all new tax expenditure proposals, including those enacting an exemption, exclusion, or tax preference such as this bill proposes, comply with the requirements of R&TC Section 41. A tax expenditure proposal must outline specific goals, performance indicators, and data collection provisions for the Legislature to evaluate the effectiveness of the tax expenditure. A tax expenditure bill will not be eligible for a Committee vote unless it has complied with these requirements. This bill does not include currently comply with this policy.
  9. Ten-year sunset provisions: In addition to the R&TC Section 41 requirements, this Committee's policy also requires that all tax expenditure proposals contain an appropriate sunset provision to be eligible for a vote. According to the policy, this means 10 years in the case of a tax expenditure providing relief to California veterans. Without a sunset, tax expenditures are created with a majority vote, but require a 2/3rds vote to rescind. This bill does not currently comply with the Committee's policy on sunset dates.
  10. Double referral: This bill is double referred to the Assembly Committee on Veterans Affairs should this bill pass this Committee.

1. Previous legislation:
   • 1. SB 404 (J. Stone) of the 2017-18 Legislative Session was substantially similar to this bill except that SB 404 would have also provided a full property tax exemption for disabled veterans. SB 404 was held on the Senate Appropriations Committee's Suspense File.
     2. SB 587 (J. Stone) of the 2015-16 Legislative Session would have eliminated the annual inflation adjustment for the principal place of residence of an income-eligible ($25,000 or less if single; $50,000 or less if married) taxpayer 65 years of age or older. SB 587 was held on the Assembly Appropriations Committee's Suspense File.
     3. SB 690 (J. Stone) of the 2015-16 Legislative Session was substantially similar to this bill. SB 690 was held on the Assembly Appropriations Committee's Suspense File.
     4. SB 1104 (J. Stone) of the 2015-16 Legislative Session was substantially similar to this bill, except that SB 1104 would have also provided a full property tax exemption for disabled veterans. SB 1104 was held on the Senate Appropriations Committee's Suspense File.
     5. SB 1126 (J. Stone) of the 2015-16 Legislative Session would have eliminated the annual inflation adjustment for the principal place of residence of an income-eligible ($25,000 or less if single; $50,000 or less if married) taxpayer 65 years of age or older. SB 1126 was held on the Senate Appropriations Committee's Suspense File.

REGISTERED SUPPORT / OPPOSITION:

Support

American G.I. Forum of California
American Legion – Department of California

AMVETS, Department of California
California Association of County Veterans Service Officers
California State Commanders Veterans Council
Military Officers Association of America

National Guard Association of California
Vietnam Veterans of America, California State Council

Opposition

California Assessors' Association

Los Angeles County Assessor

Santa Clara County Assessor

Analysis Prepared by: Rose Marie Kinnee / REV. & TAX. / (916) 319-2098

1. Article XIII, Section 3(o). The Veterans' Exemption, in the amount of $4,000 in assessed value, is different from the "Disabled Veterans' Exemption". The Veterans' Exemption is effectively obsolete because of this low asset threshold and the availability of the greater $7,000 in assessed value Homeowners' Exemption. In FY 2018-19, only one veteran qualified in the State. ↑

2. These income definitions are used for purposes of the State Controller administered Property Tax Postponement Program and the suspended Franchise Tax Board administered Homeowner' and Renters Assistance Program. ↑

3. California Constitution Article XIII, Section 1. ↑

4. California Constitution Article XIII A, Section 1(a). ↑

5. California Constitution Article XIII A, Section 2(a) and R&TC Section 110.1 ↑

6. California Constitution Article XIII A, Section 2(b). ↑

7. R&TC Section 51(a)(1)(C). This is the current calculation. Section 51(a)(1)(A) and (B) for prior assessment years are slightly different. ↑

8. R&TC Section 51(a). ↑

9. This includes all persons who have served since August 2, 1990 to present because a Presidential Proclamation related to the Gulf War has yet to be issued. ↑

10. California Constitution Article XIII, Section 3(o); R&TC Section 205.5. ↑

11. R&TC Sections 20581 – 20646. ↑

12. R&TC Section 2229. ↑

13. R&TC Section 51(a)(1)(A), (B), and (C). ↑

14. For example, see County of Orange v. Renee M. Bezaire (2004) 117 Cal.App.4th 121. ↑

 THIRD READING  

Bill No: SB 364

Author: Stone (R)

Amended: 5/17/19

Vote: 21

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 3/27/19

AYES: McGuire, Moorlach, Beall, Hertzberg, Hurtado, Nielsen, Wiener

SENATE VETERANS AFFAIRS COMMITTEE: 7-0, 4/23/19

AYES: Archuleta, Grove, Hurtado, Nielsen, Roth, Umberg, Wilk

SENATE APPROPRIATIONS COMMITTEE: 6-0, 5/16/19

AYES: Portantino, Bates, Bradford, Hill, Jones, Wieckowski

SUBJECT: Property taxation: senior and disabled veterans

SOURCE: Author

DIGEST:

This bill eliminates the inflation adjustment for the principal place of residence of an income-eligible veteran taxpayer over the age of 65.

ANALYSIS:

Existing law:

1. Provides that all property is taxable unless explicitly exempted by the Constitution or federal law (California Constitution, Article XIII).
2. 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 when ownership changes (California Constitution, Article XIIIA, as added by Proposition 13, 1978).
3. Restricts assessed value inflationary growth of real property to 2% per year.
4. Sets a property’s value for tax purposes 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 2012 for $300,000, has a maximum taxable base year value of $306,000 in 2013, $312,200 in 2014, $318,440 in 2015, $325,808 in 2016, and $332,324 in 2017. This base year value is then multiplied by the appropriate rate (generally 1%, but can be more if voters approved local general obligation bonds) to determine tax due.

This bill:

1. Disconnects the inflation factor for the principal place of residence of income-eligible taxpayers over the age of 65 who were honorably discharged from military service for any assessment year on or after either January 1, 2020, or the taxpayer’s 65th birthday, whichever is later.
2. Allows the benefit solely for veterans with household combined annual income of less than $100,000, or if single, annual income of less than $50,000 using the definitions for income in the Senior Citizens and Disabled Citizens Property Tax Postponement Law.
3. Requires the veteran taxpayer to complete an affidavit furnished by the assessor providing all information required and answering any questions to determine qualification to claim the benefit.
4. Allows the assessor to require additional proof of the information or answers in the affidavit before allowing the benefit.
5. Limits the benefit to the residence any land necessary for the use of the property as a home – any additional land would continue to grow in taxable value pursuant to current law.
6. Applies its provisions to taxpayers owning manufactured homes.
7. Makes technical and conforming changes.

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

According to the Senate Appropriations Committee, the Board of Equalization (BOE) estimates that this bill’s two proposed changes to property tax law would result in annual revenue losses of $22 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, this bill could result in unknown, but likely minor, costs to reimburse local governments related to changes in property tax administration. Costs to BOE would be minor and absorbable.

SUPPORT: (Verified 5/17/19)

American GI Forum of California
AMVETS-Department of California
California Association of County Veterans Service Officers
California State Commanders Veterans Council
Retired Public Employees Association
National Guard Association of California
13 individuals

OPPOSITION: (Verified 5/17/19)

California Assessors Association

ARGUMENTS IN SUPPORT: 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 364 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.”

ARGUMENTS IN OPPOSITION: According to the California Assessors Association, “SB 364 creates a new program that attempts to fashion itself as an exemption but is, in fact, different treatment of real property for property tax purposes as required by the Constitution. In short, SB 364 takes the current Veterans’ Exemption and twists it into a different way to assess property owned by certain qualified veterans. With most exemptions, the assessed value is enrolled then an exemption is applies. In this proposal, the inflation factor required in Article XIIIA is waived for qualified veterans who are not disabled. This will require Assessors to monitor all properties owned by veterans and track their age and annual income. Then, we will be required to treat those properties differently than all other real property not subject to statutory restrictions. The added administrative burden is significant. There is no doubt that new reporting forms and recordkeeping standards will be required to begin the tracking effort. Additionally, computer programming will be required so that assessed values of property owned by a qualified veteran is not inflated consistent with state law. In California, there are 31 counties using the same property tax system. The remaining 27 counties use individualized system. If this bill passes, with an effective date of the 2020 lien date, it will need an immediate change to those property tax systems. Disabled and aging veterans have the support and respect of California’s County Assessors. However, the practical application of this legislation is problematic.”

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

5/20/19 10:19:57

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

SB 364 (Stone) - Property taxation: senior and disabled veterans

Bill Summary:

SB 364 would (1) eliminate the inflation adjustment for the principal place of residence of income-eligible veteran taxpayers over the age of 65, and (2) expand to a full exemption the current partial disabled veterans’ property tax exemption.

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on May 16, 2019

Fiscal Impact:

The Board of Equalization (BOE) estimates that the bill’s two proposed changes to property tax law would result in annual revenue losses of $22 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. Costs to BOE would be minor and absorbable.

Committee Amendments:

Remove the expansion of the current partial disabled veterans’ property tax exemption.

-- END --

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

SB 364 (Stone) - Property taxation: senior and disabled veterans

Bill Summary:

SB 364 would (1) eliminate the inflation adjustment for the principal place of residence of income-eligible 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) estimates that the bill’s two proposed changes to property tax law would result in annual revenue losses of $126 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. Costs to BOE would be minor and absorbable.

Background:

The California Constitution provides that all property is taxable unless explicitly exempted by either the Constitution or federal law. The Constitution (1) limits the maximum amount of any ad valorem tax on real property at one 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 limit the inflationary growth of real property value to two percent per year.

Thus, when real property is purchased, the county assessor assigns it an assessed value that is equal to its purchase price (known as its “acquisition value”). Each year thereafter, the property’s assessed value increases by either two 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 two 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 2014 for $300,000, has a maximum taxable base year value of $306,000 in 2015, $312,200 in 2016, $318,440 in 2017, $325,808 in 2018, and $337,324 in 2019. This base year value is then multiplied by the appropriate rate (usually one 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 has not 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 (known as the disabled veterans exemption) if the veteran has lost one or more limbs, is totally blind, or is totally disabled as a result of a service-connected injury. 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 475 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 permits 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 $139,437 for disabled veterans with income of more than $62,614, and $209,156 for those with less than that amount.

Proposed Law:

This bill would make two changes to property tax law:

• The bill would eliminate annual inflation factor-related assessed value increases on homes owned by income-qualifying veterans 65 years and older, as specified. To be eligible, a veteran homeowner must meet specified criteria.
• The bill would fully exempt from property tax the principal place of residence of any person eligible for the disabled veterans' exemption, commencing with lien date for the 2019-20 fiscal year.

Related Legislation:

SB 404 (Stone, 2017) and SB 1104 (Stone, 2016) were both substantially similar to this bill. Both were held under submission on the Suspense File of this Committee.

Staff Comments:

BOE indicates that the bill would result in annual property tax revenue losses of $131 million. Of this amount, the disabled veterans’ exemption accounts for $104 million, while the other $27 million is related to the assessment freeze.

To develop the revenue estimate for the disabled veterans’ exemption, BOE used 2018-19 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 48,829: 44,292 at the basic level and 4,537 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 (9,301 homes), or 24 percent of homes receiving the lower income exemption (1,089 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 38,439 additional homes: 34,991 currently receiving the basic exemption, and 2,448 homes receiving the lower income exemption.

Using the average 2018-19 assessed value of $412,000, and the basic one percent property tax rate, BOE calculates that the bill would result in an annual property tax reduction of $104 million.

BOE’s revenue loss estimate for the proposed assessment freeze is based on an assessment that qualifying veterans own 15 percent of owner-occupied homes for those aged 65 and older, a total of 330,000 homes. BOE assumes that 80 percent, or 264,000, of veteran-owned homes would qualify for the expansion under the bill. Again using the average 2018-19 assessed value of $412,000. BOE calculates that avoiding the two percent increase would reduce the property tax liability of each qualifying homeowner by $82.40. The total revenue loss for the assumed number of qualifying homes would be $22 million.

-- END --

SENATE COMMITTEE ON VETERANS AFFAIRS

Senator Bob Archuleta, Chair

2019 - 2020 Regular

Bill No: SB 364 Hearing Date: 4/23/19

Subject: Property taxation: senior and disabled veterans

DESCRIPTION

Summary:

This bill would eliminate the inflation adjustment for the principal place of residence of an income-eligible veteran taxpayer over the age of 65; expands to a full exemption the current partial disabled veterans’ property tax exemption.

Existing law:

1) Authorizes the Legislature to exempt partially or fully from property tax, the home of a disabled veteran if the veteran’s disabling injury incurred in military service; and the veteran is blind in both eyes; lost the use of two or more limbs; or is totally disabled. (California Constitution)

a) Applies also to the veteran’s spouse, including an unmarried surviving spouse, if the veteran has, as a result of a service-connected injury or disease, died while on active duty in military service.

b) Does not apply if the home is receiving another real property exemption.

2) Provides a partial exemption for eligible disabled veterans.

3) Sets, generally, a property’s assessed value as its price when purchased or when ownership is changed, plus an annual inflation factor, calculated as specified.

This bill:

1) Regarding the disabled veterans property tax exemption, provides a full exemption for the principal residence of any qualified disabled veteran home owner–taking effect with the lien date for the 2020–21 fiscal year.

2) Regarding the standard property tax program, eliminates inflation-based increases in a home’s assessed valuation for qualified veteran homeowners.

a) Takes effect on January 1, 2020.

b) To be eligible, a veteran home owner must meet the following criteria:

1. Received an honorable discharge.
2. Be at least age 65 on the lien date (January 1).
3. Have a household income less than $50,000 (if single) or $100,000 (if married).

c) Applies only to the qualified veteran’s principal place of residence.

3) Makes technical and conforming changes to the disabled veteran’s 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 newly constructed, or when ownership changes (Proposition 13, 1978).

General Veterans’ Exemption. Existing 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 2012 for $300,000, has a maximum taxable base year value of $306,000 in 2013, $312,200 in 2014, $318,440 in 2015, $325,808 in 2016, and $332,324 in 2017. The most recent purchase price establishes a base year value, which then is multiplied by the appropriate rate (generally 1%, but can be more if voters approved local general obligation bonds) to determine tax due.

Disabled Veterans Property Tax Exemption. California provides qualified disabled veterans and their unmarried surviving spouses with a property tax exemption that applies to their home’s assessed value. Eligibility provisions require that the claimant demonstrate award of a disability rating from the United States Department of Veterans Affairs (USDVA) that:

1) Rates the veteran’s disability at 100%; or

2) Rates the veteran’s disability compensation at 100% because the veteran is unable to secure and maintain gainful employment.

The law allows surviving spouses to receive the exemption if the spouse's death was service-connected. To be eligible for the exemption, surviving spouses must receive a USDVA determination that the spouse’s death was service-connected. A USDVA determination is necessary for (1) active duty personnel deaths (i.e., the service person was not a “veteran”) and (2) veterans without a 100% rating when alive, but whose cause of death is deemed service-connected. Surviving spouses of veterans with a 100% disability rating during their lifetime continue to receive the exemption after the veteran’s death so long as they do not remarry.

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 $139,437 for disabled veterans with income of more than $62,614, and $209,156 for those with less than that amount. In 1990, 8,483 disabled veterans' exemptions were provided to eligible homeowners. For 2015, there were 37,653 eligible homeowners. Over the last 25 years, there has been a 344% increase.

COMMENT

Author’s statement. 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 364 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.”

Double-referred. This bill passed the Senate Governance & Finance Committee (7-0) on 4/10/19.

Related/Previous Legislation. SB 364 is largely identical to SB 404 (Stone, 2017), which was almost identical to SB 1104 (Stone, 2016). SB 1104 would have frozen the base year value for all veteran taxpayers; however, the author accepted amendments in this Committee limiting this benefit solely to veterans with incomes below a specified limit, and applying its changes to mobile and manufactured homes. (Held in Senate Appropriations Committee)

AB 1458 (Bates, Chapter 871, Statutes of 2016) expands eligibility for the disabled veterans property tax exemption to include a person who has been discharged under "other than dishonorable conditions" – but who is otherwise eligible for federal veterans' health and medical benefits, as determined by USDVA.

SB 1183 (Bates, 2016) (1) exempts from property tax the home of any person eligible for the disabled veterans’ exemption, with a $1 million cap in assessed value that would be adjusted annually for inflation, and (2) expands eligibility for the exemption. (Held in Senate Appropriations Committee)

AB 1556 (Mathis/Weber, 2016) exempts fully from property tax the home of a totally disabled veteran, as defined, or his/her unmarried surviving spouse, by repealing the limitations imposed on the assessed value of the disabled veteran's principal residence eligible for the exemption and the amount of his/her household income. (Held in Assembly Revenue and Taxation Committee)

AB 2568 (Houston, 2008) exempts fully from property tax the personal residence of a disabled veteran and his/her spouse. (Held in Senate Revenue and Taxation Committee)

POSITIONS

Sponsor: Author.

Support:

American G.I. Forum of California

AMVETS, Department of California

California Association of County Veterans Service Officers

California State Commanders Veterans Council

National Guard Association of California

3 - Individuals

Oppose: None on file.

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SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Mike McGuire, Chair

2019 - 2020 Regular

Property taxation: senior and disabled veterans

Eliminates the inflation adjustment for the principal place of residence of an income-eligible 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 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 2012 for $300,000, has a maximum taxable base year value of $306,000 in 2013, $312,200 in 2014, $318,440 in 2015, $325,808 in 2016, and $332,324 in 2017. This base year value is then multiplied by the appropriate rate (generally 1%, but can be more if voters approved local general obligation bonds) to determine tax due.

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. Statute allows the exemption for any claimant who obtains a United States Department of Veterans Affairs disability rating that either rates his or her disability at 100%, or rates compensation at 100% because the veteran is unable to obtain gainful employment.

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 48,829 between 1990 and 2015, an increase of 475%. San Diego (7,159), Riverside (4,961), Los Angeles (3,477), and San Bernardino (2,908), 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 $139,437 for disabled veterans with income of more than $62,614, and $209,156 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 with annual income below specified amounts, and expand the current partial disabled veterans’ exemption conditioned on income into a full exemption.

Proposed Law

Senate Bill 364 makes two changes to property tax law:

Growth limitation. SB 364 disconnects the inflation factor for the principal place of residence of income-eligible taxpayers over the age of 65 who were honorably discharged from military service for any assessment year on or after either January 1, 2020, or the taxpayer’s 65^th birthday, whichever is later. The bill would allow the benefit solely for veterans with household combined annual income of less than $100,000, or if single, annual income of less than $50,000 using the definitions for income in the Senior Citizens and Disabled Citizens Property Tax Postponement Law. To claim the benefit, the veteran taxpayer must complete an affidavit furnished by the assessor providing all information required and answering any questions to determine qualification. The assessor may require additional proof of the information or answers in the affidavit before allowing the benefit, which only applies to land necessary for the use of the property as a home – any additional land would continue to grow in taxable value pursuant to current law. If the assessor grants the claim, the measure would freeze the veteran taxpayer’s base year value at its current amount until new construction or a change in ownership occurs.

Disabled veterans’ exemption. SB 364 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 2019-20 fiscal year, regardless of income.

The bill also makes technical and conforming changes.

State Revenue Impact

According to BOE, SB 364 results in annual property tax revenue losses of $131.4 million, with $27.2 million attributable to disconnecting the inflation factor for an income-eligible veteran’s principal place of residence, and $104.2 from converting the disabled veterans’ exemption into a full exemption.

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 364 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? California already uses acquisition-cost valuation, applies one of the lowest property tax rates in the nation, and limits reassessment only when property is newly constructed or changes ownership, thereby providing significant benefits to property owners, especially those that have been in their homes for many years. 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 revalued the property. In most cases, this system shifts the cost of public services from incumbent homeowners onto individuals who recently purchased property. SB 364 expands those benefits to freeze base year values for income-eligible veteran taxpayers over the age of 65 at current amounts, and in the future for veterans when they turn 65. The children and grandchildren of veterans would also benefit from SB 364’s lower base year value if the veteran transferred the property to them, as these transfers are not changes in ownership under the Constitution. The Committee may wish to consider whether this tax benefit is necessary given those already afforded under current law.

3. Different treatment. Proposition 13’s cap on assessed value growth currently benefits all taxpayers regardless of age, income, or other variable. SB 364 sets a precedent by freezing an income-eligible 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.

4. No income test. Generally, property tax exemptions don’t depend on the taxpayer’s income; however, the different disabled veterans’ exemption amounts based on income were first enacted by the Legislature when it allowed a greater exemption ($15,000 at the time) for disabled veterans with income sufficiently low to qualify 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 364 ends 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, the bill would grant 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 despite their disability. The Committee may wish to consider whether the bill’s tax benefits should depend on the taxpayer’s income.

5. Related legislation. SB 364 is largely identical to SB 404 (Stone, 2017), which was almost identical to SB 1104 (Stone, 2016). The Committee approved both measures unanimously, but neither advanced from the Senate Appropriations Committee’s suspense file. As introduced, SB 1104 would have frozen the base year value for all veteran taxpayers; however, the author accepted amendments in this Committee limiting this benefit solely to veterans with incomes below a specified limit, and applying its changes to mobile and manufactured homes.

6. Mandate. The California Constitution requires the state to reimburse local governments for the costs of new or expanded state mandated local programs. Because SB 364 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.

7. Double-referred. The Senate Rules Committee referred SB 364 to both the Committees on Governance and Finance, which considers bills affecting property taxation, and Veterans Affairs.

Support and Opposition

(3/22/19)

Support: Unknown.

Opposition: Unknown.

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