Existing law provides, pursuant to a specified provision of the California Constitution, for a homeowners property tax exemption in the amount of $7,000 of the full value of a dwelling, as defined. Existing law provides that this exemption does not extend, among other things, to property that is rented, vacant, under construction on the lien date, or that is a vacation or secondary home of the owner or owners. Existing law provides that, notwithstanding this provision, if a person receiving the exemption is not occupying the dwelling on the lien date because the dwelling was damaged in a misfortune or calamity, the person shall be deemed to occupy that same dwelling as their principal place of residence on the lien date, provided the persons absence from the dwelling is temporary and the person intends to return to the dwelling when possible to do so.

This bill would provide that, if a person receiving the exemption is not occupying the dwelling because they are confined to a hospital or other care facility, the person shall be deemed to occupy that dwelling as their principal place of residence, provided that the person would occupy the dwelling if they were not confined to the hospital or other care facility, the person intends to return to the dwelling when possible to do so, and the dwelling is not rented or leased to a person that is not described in specified law.

This bill would take effect immediately as a tax levy.

Existing law provides, pursuant to a specified provision of the California Constitution, for a homeowners property tax exemption in the amount of $7,000 of the full value of a dwelling, as defined. Existing law provides that this exemption does not extend, among other things, to property that is rented, vacant, under construction on the lien date, or that is a vacation or secondary home of the owner or owners. Existing law provides that, notwithstanding this provision, if a person receiving the exemption is not occupying the dwelling on the lien date because the dwelling was damaged in a misfortune or calamity, the person shall be deemed to occupy that same dwelling as their principal place of residence on the lien date, provided the persons absence from the dwelling is temporary and the person intends to return to the dwelling when possible to do so.

This bill would provide that, if a person receiving the exemption is not occupying the dwelling because they are confined to a hospital or other care facility, the person shall be deemed to occupy that dwelling as their principal place of residence, provided that the person would occupy the dwelling if they were not confined to the hospital or other care facility, the person intends to return to the dwelling when possible to do so, and the dwelling is not rented or leased to a person that is not described in specified law.

This bill would take effect immediately as a tax levy.

Existing law provides, pursuant to a specified provision of the California Constitution, for a homeowners property tax exemption in the amount of $7,000 of the full value of a dwelling, as defined. Existing law provides that this exemption does not extend, among other things, to property that is rented, vacant, under construction on the lien date, or that is a vacation or secondary home of the owner or owners. Existing law provides that, notwithstanding this provision, if a person receiving the exemption is not occupying the dwelling on the lien date because the dwelling was damaged in a misfortune or calamity, the person shall be deemed to occupy that same dwelling as their principal place of residence on the lien date, provided the persons absence from the dwelling is temporary and the person intends to return to the dwelling when possible to do so.

This bill would provide that, if a person receiving the exemption is not occupying the dwelling because they are confined to a hospital or other care facility, the person shall be deemed to occupy that dwelling as their principal place of residence, provided that the person would occupy the dwelling if they were not confined to the hospital or other care facility, the person intends to return to the dwelling when possible to do so, and the dwelling is not rented or leased to a person that is not described in specified law.

This bill would take effect immediately as a tax levy.

Existing law provides, pursuant to a specified provision of the California Constitution, for a homeowners property tax exemption in the amount of $7,000 of the full value of a dwelling, as defined. Existing law provides that this exemption does not extend, among other things, to property that is rented, vacant, under construction on the lien date, or that is a vacation or secondary home of the owner or owners. Existing law provides that, notwithstanding this provision, if a person receiving the exemption is not occupying the dwelling on the lien date because the dwelling was damaged in a misfortune or calamity, the person shall be deemed to occupy that same dwelling as their principal place of residence on the lien date, provided the persons absence from the dwelling is temporary and the person intends to return to the dwelling when possible to do so.

This bill would provide that, if a person receiving the exemption is not occupying the dwelling because they are confined to a hospital or other care facility, the person shall be deemed to occupy that dwelling as their principal place of residence, provided that the person would occupy the dwelling if they were not confined to the hospital or other care facility, the person intends to return to the dwelling when possible to do so, and the dwelling is not rented or leased to a third party. a person that is not described in specified law.

Existing law requires the state to reimburse local agencies annually for certain property tax revenues lost as a result of any exemption or classification of property for purposes of ad valorem property taxation.

This bill would provide that, notwithstanding those provisions, no appropriation is made and the state shall not reimburse local agencies for property tax revenues lost by them pursuant to the bill.

This bill would take effect immediately as a tax levy.

Existing law provides, pursuant to a specified provision of the California Constitution, for a homeowners property tax exemption in the amount of $7,000 of the full value of a dwelling, as defined. Existing law provides that this exemption does not extend, among other things, to property that is rented, vacant, under construction on the lien date, or that is a vacation or secondary home of the owner or owners. Existing law provides that, notwithstanding this provision, if a person receiving the exemption is not occupying the dwelling on the lien date because the dwelling was damaged in a misfortune or calamity, the person shall be deemed to occupy that same dwelling as their principal place of residence on the lien date, provided the persons absence from the dwelling is temporary and the person intends to return to the dwelling when possible to do so.

This bill would provide that, if a person receiving the exemption is not occupying the dwelling because they are confined to a hospital or other care facility, the person shall be deemed to occupy that dwelling as their principal place of residence, provided that the person would occupy the dwelling if they were not confined to the hospital or other care facility, the person intends to return to the dwelling when possible to do so, and the dwelling is not rented or leased to a third party.

Existing law requires the state to reimburse local agencies annually for certain property tax revenues lost as a result of any exemption or classification of property for purposes of ad valorem property taxation.

This bill would provide that, notwithstanding those provisions, no appropriation is made and the state shall not reimburse local agencies for property tax revenues lost by them pursuant to the bill.

This bill would take effect immediately as a tax levy.

 UNFINISHED BUSINESS  

Bill No: SB 520

Author: Seyarto (R)

Amended: 9/1/23

Vote: 21- Urgency

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 5/3/23

AYES: Caballero, Seyarto, Dahle, Durazo, Glazer, Skinner, Wiener

NO VOTE RECORDED: Blakespear

SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/18/23

AYES: Portantino, Jones, Ashby, Bradford, Seyarto, Wahab, Wiener

SENATE FLOOR: 40-0, 5/25/23

AYES: Allen, Alvarado-Gil, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Newman, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

ASSEMBLY FLOOR: 78-0, 9/13/23 - See last page for vote

SUBJECT: Property taxation: homeowners’ exemption

SOURCE: Author

DIGEST:

This bill ensures that the homeowners’ exemption from property tax continues to apply if the taxpayer is not occupying their home because they are confined to a hospital or other care facility

Assembly Amendments

remove the disclaimer that the state shall not reimburse any property tax revenue losses.

ANALYSIS:

Existing law:

1. Provides that all property is taxable unless explicitly exempted by the Constitution or federal law (Article XIII, Section One)
2. Exempts $7,000 in taxable value when the home is the principal place of residence of the owner on January 1st of the year the exemption is claimed, unless the taxpayer claims another exemption (California Constitution, Article XIII, Section 3).
3. 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 two or more limbs, is totally blind, or is totally disabled as a result of a service-connected injury, so long as the taxpayer served in the United States Army, Navy, Air Force, Marine Corps, and been discharged under conditions other than dishonorable (California Constitution, Article XIII, Section Four).
4. Precludes a taxpayer from claiming a homeowners’ exemption for a property that is rented, vacant, under construction on the lien date, or that is a vacation or secondary home.
5. Provides that even if the property is vacant or under construction, the assessor cannot revoke a taxpayer’s homeowners’ exemption when they do not occupy the dwelling (SB 1494, Committee on Revenue and Taxation, Chapter 654, Statutes of 2010), including:
   1. A dwelling that was totally destroyed in a disaster for which the Governor proclaimed a state of emergency, that previously qualified for the exemption and that has not changed ownership, provided the person intends to reconstruct a dwelling on the property and occupy the dwelling as their principal place of residence when it is possible to do so.
   2. When the dwelling is damaged in a misfortune or calamity, the person’s absence from the dwelling is temporary and the person intends to return to the dwelling when possible to do so. However, if the dwelling is destroyed, the exemption is not applicable until the structure has been replaced and occupied as a dwelling.
6. Deems property to be the disabled veteran’s principal place of residence, and therefore still eligible for the exemption, when the veteran is confined to a hospital or other care facility, if that property would be that veteran’s principal place of residence were it not for their confinement to a hospital or other care facility, provided that the residence is not rented or leased to a third party.

This bill:

1. Deems that if a person receiving the homeowners’ exemption from property tax is not occupying their home because they are confined to a hospital or other care facility, their residence is not vacant and the assessor cannot revoke their exemption, provided:
   1. The person would occupy the dwelling if they were not confined to the hospital or other care facility.
   2. The person intends to return to the dwelling when possible to do so.
   3. The dwelling is not rented or leased to an unrelated person, as defined by reference to the Internal Revenue Code.
2. Makes technical and conforming changes.

Background

The homeowner’s exemption provides a modest $7,000 reduction in taxable value ($70 at a 1% tax rate) when the home is the principal place of residence of the owner on January 1st of the year the exemption is claimed. The property must be the taxpayer's true, fixed and permanent home, and principal establishment to which they intend to return if absent. Assessors use vehicle registration, voter registration, bank accounts, and state income tax filings to determine whether a property qualifies. Once granted, the exemption continues until the taxpayer notifies the assessor or ownership changes. Assessors are unlikely to commit many enforcement resources to enforce a $70 benefit; however, under Proposition 19 (2020), intergenerational change in ownership exclusions only apply when the home qualifies for an exemption before the transfer, and the transferee claims the homeowners’ or disabled veterans’ exemption within one year after the purchase or transfer. SB 520 preserves the transferor’s status for the homeowners’ exemption if they are confined to a hospital or care facility, which ensures that the exclusion can still apply, which could save the transferee thousands in taxes.

Current Board of Equalization (BOE) Letter to Assessors 82/50 states that a homeowner can maintain their exemption if away from their residence so long as it’s not rented out. The Letter also states that an absence for more than one year would raise considerable doubt that this is the principal residence. SB 520 provides clear statutory protection for those whose confinement to a hospital or care facility lasts longer than a year, and that renting the property to a family member during the confinement period does not jeopardize the exemption

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

According to the Assembly Appropriations Committee:

• Property tax revenue loss of an indeterminable, but likely minor, amount. The BOE views this bill as clarifying whether a person is deemed to be occupying a dwelling. BOE staff does not have specific county data on the number of exemption claims denied because of a homeowner’s time in a hospital or other care facility, but notes research generally indicates most people leave such facilities within one year. Although property tax is a local government revenue source, reductions in property tax revenues increase Proposition 98 General Fund (GF) spending by up to roughly 50% (the exact amount depends on the specific amount of the annual Proposition 98 guarantee).
• One-time costs of approximately $1,000 to BOE to advise county assessors and the public of this clarification, as BOE monitors claims granted under the homeowners’ exemption (GF).

SUPPORT: (Verified 9/11/23)

Howard Jarvis Taxpayers Association

OPPOSITION: (Verified 9/11/23)

None received

ARGUMENTS IN SUPPORT: According to the author, “SB520 will simply clarify that being confined to a hospital or other care facility still qualifies an individual as occupying their principal dwelling, to remain qualified for their Constitutionally provided Homeowners’ Property Tax Exemption.”

ASSEMBLY FLOOR: 78-0, 9/13/23

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Rendon, Reyes, Luz Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas

NO VOTE RECORDED: Bauer-Kahan, Chen

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

9/14/23 9:48:20

**** END ****

SENATE THIRD READING

STR Bill Id:SB 520

Author:(Seyarto)

As Amended Ver:September 1, 2023

Majority vote. Tax Levy

SUMMARY

Clarifies that a qualified taxpayer may continue to claim the homeowners' property tax exemption if the taxpayer is not occupying their home because they are confined to a hospital or other care facility.

Major Provisions

1. Provides that if a person receiving the homeowners' exemption from property tax is not occupying their home because they are confined to a hospital or other care facility, their residence is not vacant and a County Assessor cannot revoke their exemption, provided all of the following conditions are met:
   1. The person would occupy the dwelling if they were not confined to the hospital or other care facility;
   2. The person intends to return to the dwelling when possible to do so; and,
   3. The dwelling is not rented or leased to an unrelated person, as defined by reference to the Internal Revenue Code.
2. Takes immediate effect as a tax levy.

COMMENTS

What is the homeowners' property tax exemption? The California Constitution provides a $7,000 reduction in the taxable value for a qualifying owner-occupied home provided that the home is the principal place of residence on January 1st of the year the exemption is claimed.^[1] Section 25 of Article XIII of the California Constitution requires the state to repay local property tax revenue losses from this exemption.

The BOE published guidance relevant to this bill in Letter to Assessors (LTA) No. 82/50 that confinement to a "convalescent home or hospital" does not disqualify a person from receiving the exemption. The BOE also specifies that the claimant should not receive rent from anyone occupying the premises. Additionally, the LTA suggests that a hospitalization lasting longer than one year could potentially jeopardize the claimant's eligibility for the exemption.

This bill, however, departs from the LTA by allowing the claimant to receive rent from a family member and by allowing the claimant to be in a hospital or other care facility for longer than one year.

What is the Disabled Veterans' Exemption? The California Constitution provides an exemption for a part or whole of a home's taxable value when the home is the principal place of residence for a disabled veteran or their unmarried surviving spouse. There are two levels of the Disabled Veteran's Exemption, the basic and the low income.^[2]

The Disabled Veterans' Exemption, unlike the current Homeowners' property tax exemption, has an exception that allows the claimant to qualify for the Disabled Veteran's Exemption if they are confined to a hospital or other care facility provided that the property is not rented or leased to another party.^[3] This bill would adopt a similar, but slightly broader exception and allow claimants of the Homeowners' property tax exemption to rent the property to family members, as defined in the United States Code.

Intergenerational transfers: Passed by California voters in 2020, Proposition 19 allows, among other things, a parent to transfer their family home or family farm to one of their children without causing a change in ownership for property tax purposes, provided that the home remains the primary residence of the new owner.^[4] The new owner is required to file for the homeowners' or disabled veterans' exemption within one year of the date of transfer or change in ownership in order to be eligible for the intergenerational transfer exclusion. Once the exclusion is granted, the family home must remain eligible for the exemption in order to retain the change in ownership exclusion. If the primary residence of a person confined to a hospital or other care facility is no longer eligible for the homeowners' exemption, then the property would potentially no longer be eligible for intergenerational transfer to an eligible transferee. This bill seeks to reduce the likelihood that a property becomes ineligible for the intergenerational transfer exclusion because the original owner is confined to a hospice or other medical care facility.

According to the Author

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

SB 520 will simply clarify that being confined to a hospital or other care facility still qualifies an individual as occupying their principal dwelling, to remain qualified for their constitutionally provided homeowners' property tax exemption.

Arguments in Support

Writing in support of this bill, the Howard Jarvis Taxpayers Association notes, in part:

Our office has received a steady stream of calls since the passage of Prop. 19 from family members concerned that having their parent in a care facility may make them ineligible for the intergenerational transfer – even if they otherwise satisfy the requirements of Prop. 19. Families shouldn't even have to consider pulling loved ones out of much-needed care to avoid a tax increase on their family home. SB 520 is just the right thing to do.

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Assembly Appropriations Committee:

1. Property tax revenue loss of an indeterminable, but likely minor, amount. The State Board of Equalization (BOE) views this bill as clarifying whether a person is deemed to be occupying a dwelling. BOE staff does not have specific county data on the number of exemption claims denied because of a homeowner’s time in a hospital or other care facility, but notes research generally indicates most people leave such facilities within one year. Although property tax is a local government revenue source, reductions in property tax revenues increase Proposition 98 General Fund (GF) spending by up to roughly 50% (the exact amount depends on the specific amount of the annual Proposition 98 guarantee).
2. One-time costs of approximately $1,000 to BOE to advise county assessors and the public of this clarification, as BOE monitors claims granted under the homeowners’ exemption (GF).

VOTES

SENATE FLOOR: 40-0-0

YES: Allen, Alvarado-Gil, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Newman, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

ASM REVENUE AND TAXATION: 10-0-1

YES: Irwin, Wallis, Bains, Grayson, Pacheco, Jim Patterson, Petrie-Norris, Ta, Valencia, Zbur

ABS, ABST OR NV: Luz Rivas

ASM APPROPRIATIONS: 15-0-1

YES: Holden, Megan Dahle, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Hart, Lowenthal, Mathis, Papan, Pellerin, Sanchez, Weber, Wilson

ABS, ABST OR NV: Soria

UPDATED

VERSION: September 1, 2023

CONSULTANT: Wesley Whitaker / REV. & TAX. / (916) 319-2098 FN: 0001666

1. Homeowners' Exemption. California State Board of Equalization. https://www.boe.ca.gov/
   proptaxes/homeowners_exemption.htm ↑

2. Disabled Veterans' Exemption Description. California State Board of Equalization. https://www.boe.ca.gov/proptaxes/dv_exemption.htm#Description ↑

3. Disabled Veterans' Exemption Qualifications. California State Board of Equalization. https://www.boe.ca.gov/proptaxes/dv_exemption.htm#Qualifications ↑

4. Proposition 19 Fact Sheet. California State Board of Equalization. https://www.boe.ca.gov/
   pdf/pub801.pdf. ↑

Date of Hearing: August 23, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

SBPCA Bill Id:SB 520

Author:(Seyarto) – As Amended Ver:March 20, 2023

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

SUMMARY:

This bill clarifies a person not occupying their home because they are confined to a hospital or other care facility continues to qualify for the homeowners’ property tax exemption.

Specifically, this bill deems such a person to occupy a dwelling as their principal place of residence, provided that the person would occupy the dwelling if not so confined, the person intends to return to the dwelling when possible to do so, and the dwelling is not rented or leased to a non-relative person.

FISCAL EFFECT:

1. Property tax revenue loss of an indeterminable, but likely minor, amount. The State Board of Equalization (BOE) views this bill as clarifying whether a person is deemed to be occupying a dwelling. BOE staff does not have specific county data on the number of exemption claims denied because of a homeowner’s time in a hospital or other care facility, but notes research generally indicates most people leave such facilities within one year. Although property tax is a local government revenue source and this bill specifies that the state shall not reimburse any local agency for lost property tax revenues, reductions in property tax revenues increase Proposition 98 General Fund (GF) spending by up to roughly 50% (the exact amount depends on the specific amount of the annual Proposition 98 guarantee).

However, the Department of Finance’s (DOF’s) analysis of this bill notes implementation of the reimbursement prohibition may result in other reimbursable, state-mandated costs to county assessors, as quantification of property tax revenue losses to exclude from the annual GF appropriation for property loss backfills would require each county assessor to provide DOF with annual data inputs. DOF estimates county reporting costs may reach $290,000 annually, depending on the number of impacted properties (GF).

1. One-time costs of approximately $1,000 to BOE to advise county assessors and the public of this clarification, as BOE monitors claims granted under the homeowners’ exemption (GF).

COMMENTS:

1. Purpose. According to the author, this bill will “simply clarify that being confined to a hospital or other care facility still qualifies an individual as occupying their principal dwelling, to remain qualified for their constitutionally provided homeowners’ property tax exemption.” This bill is supported by the Howard Jarvis Taxpayers Association.
2. Homeowners’ Exemption. The California Constitution provides a $7,000 reduction in the taxable value for a qualifying owner-occupied home, provided that the home is the principal place of residence for the claimant on January 1 of the year for which the exemption is claimed. This reduction results in a $70 tax benefit (1% of assessed value), but perhaps more importantly, the homeowners’ property tax exemption allows the property to remain eligible for an intergenerational transfer under Proposition 19 (2020), a tax benefit of significantly higher value. The exemption does not extend to property that is rented, vacant, under construction on the lien date, or the vacation or secondary home of the owners, but does extend to a person not occupying the dwelling temporarily because the dwelling was damaged in a misfortune or calamity.

This bill similarly provides that the homeowners’ exemption extends to a person not occupying the dwelling because the person is confined to a hospital or other care facility. BOE’s 1982 guidance in a Letter to Assessors (LTA) opined that confinement to a “convalescent home or hospital” does not disqualify a person form receiving the exemption. However, the LTA specified such a claimant should not receive rent from anyone occupying the premises and suggested a hospitalization lasting longer than one year could jeopardize the claimant’s eligibility. This bill departs from the LTA by allowing the claimant to rent the property to a family member (specifically, siblings, spouse, ancestors, and lineal descendants) and not limiting the duration of hospitalization. The author’s office contends allowing rental or lease to a family member reflects the practical reality that a homeowner requiring long-term hospitalization often has a family member reside in and physically and financially maintain the property on the owner’s behalf.

Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081

Date of Hearing: July 10, 2023

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Jacqui Irwin, Chair

SBPCA Bill Id:SB 520

Author:(Seyarto) – As Amended Ver:March 20, 2023

SUSPENSE

Majority vote. Tax levy. Fiscal committee.

SENATE VOTE: 40-0

SUBJECT: Property taxation: homeowners' exemption.

SUMMARY: Clarifies that a qualified taxpayer may continue to claim the homeowners' property tax exemption if the taxpayer is not occupying their home because they are confined to a hospital or other care facility. Specifically, this bill:

1. Provides that if a person receiving the homeowners' exemption from property tax is not occupying their home because they are confined to a hospital or other care facility, their residence is not vacant and a County Assessor cannot revoke their exemption, provided all of the following conditions are met:
   1. The person would occupy the dwelling if they were not confined to the hospital or other care facility;
   2. The person intends to return to the dwelling when possible to do so; and,
   3. The dwelling is not rented or leased to an unrelated person, as defined by reference to the Internal Revenue Code.
2. Provides that the state will not reimburse local governments for revenues lost due to this exemption.
3. Takes immediate effect as a tax levy.
4. Makes technical and conforming changes.

EXISTING FEDERAL LAW establishes that the family of an individual shall include only their brothers and sisters (whether by the whole or half-blood), spouse, ancestors, and lineal descendants. (Internal Revenue Code (IRC) Section 267 (c)(4).)

EXISTING STATE LAW:

1. Exempts $7,000 in taxable value when the home is the principal place of residence of the owner on January 1^st of the year the exemption is claimed, provided that the owner does not claim another exemption. (California Constitution, Article XIII, Section 3(k).)
2. Defines a "cooperative housing corporation" as a real estate development in which membership in the corporation, by stock ownership, is coupled with the exclusive right to possess a portion of the real property. (California Constitution, Article XIII, Section 61(i).)
3. Provides that the state reimburse counties for the loss of revenues from property tax exemptions enacted by the Legislature after January 1, 1973. (Revenue & Taxation Code (R&TC) Section 2229.)
4. Declares that tax levy bills take effect immediately. (California Constitution, Article IV, Section 8(c)(3).)
5. Exempts part of a home's taxable value when the home is the principal place of residence for a disabled veteran or their unmarried surviving spouse. (California Constitution, Article XIII, Section 4.)

FISCAL EFFECT: The State Board of Equalization (BOE) estimates that this bill would result in annual property tax revenue losses, but the magnitude is indeterminable. Reductions in local property tax revenues, in turn, increase General Fund Proposition 98 spending by up to roughly 50% (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).

COMMENTS:

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

SB 520 will simply clarify that being confined to a hospital or other care facility still qualifies an individual as occupying their principal dwelling, to remain qualified for their constitutionally provided homeowners' property tax exemption.

1. Writing in support of this bill, the Howard Jarvis Taxpayers Association notes, in part:

Our office has received a steady stream of calls since the passage of Prop. 19 from family members concerned that having their parent in a care facility may make them ineligible for the intergenerational transfer – even if they otherwise satisfy the requirements of Prop. 19. Families shouldn't even have to consider pulling loved ones out of much-needed care to avoid a tax increase on their family home. SB 520 is just the right thing to do.

1. Committee Staff Comments:
   1. What would this bill do? This bill would provide statutory protection for otherwise qualified taxpayers who are confined to a hospital or care facility and clarify that renting the property to a family member during the confinement period will not jeopardize their ability to claim the homeowners' property tax exemption ("exemption").
   2. What is the problem this bill is seeking to solve? According to the author, due to vagueness in the law, some families have had to bring elderly parents back home from hospice to ensure their family home qualifies for the homeowner's property tax exemption. The author's intent is to remove any ambiguity and ensure that homeowners are able to claim their exemption if they are in a hospital or another live-in care facility such as a nursing home. Committee staff was unable to find a documented instance where a county assessor denied the claim of an exemption due to the claimant living in a hospital or other care facility.
   3. What is the homeowners' property tax exemption? The California Constitution provides a $7,000 reduction in the taxable value for a qualifying owner-occupied home provided that the home is the principal place of residence on January 1^st of the year the exemption is claimed.^[1] Section 25 of Article XIII of the California Constitution requires the state to repay local property tax revenue losses from this exemption.

The BOE published guidance relevant to this bill in Letter to Assessors (LTA) No. 82/50 that confinement to a "convalescent home or hospital" does not disqualify a person from receiving the exemption. The BOE also specifies that the claimant should not receive rent from anyone occupying the premises. Additionally, the LTA suggests that a hospitalization lasting longer than one year could potentially jeopardize the claimant's eligibility for the exemption.

This bill, however, departs from the LTA by allowing the claimant to receive rent from a family member and by allowing the claimant to be in a hospital or other care facility for longer than one year.

• 1. What is the Disabled Veterans' Exemption? The California Constitution provides an exemption for a part or whole of a home's taxable value when the home is the principal place of residence for a disabled veteran or their unmarried surviving spouse. There are two levels of the Disabled Veteran's Exemption, the basic and the low income.^[2]
     
     The Disabled Veterans' Exemption, unlike the current Homeowners' property tax exemption, has an exception that allows the claimant to qualify for the Disabled Veteran's Exemption if they are confined to a hospital or other care facility provided that the property is not rented or leased to another party.^[3] This bill would adopt a similar, but slightly broader exception and allow claimants of the Homeowners' property tax exemption to rent the property to family members, as defined in the United States Code.
  2. Intergenerational transfers: Passed by California voters in 2020, Proposition 19 allows, among other things, a parent to transfer their family home or family farm to one of their children without causing a change in ownership for property tax purposes, provided that the home remains the primary residence of the new owner.^[4] The new owner is required to file for the homeowners' or disabled veterans' exemption within one year of the date of transfer or change in ownership in order to be eligible for the intergenerational transfer exclusion. Once the exclusion is granted, the family home must remain eligible for the exemption in order to retain the change in ownership exclusion. If the primary residence of a person confined to a hospital or other care facility is no longer eligible for the homeowners' exemption, then the property would potentially no longer be eligible for intergenerational transfer to an eligible transferee. This bill seeks to reduce the likelihood that a property becomes ineligible for the intergenerational transfer exclusion because the original owner is confined to a hospice or other medical care facility.
     
  3. Intent to return? This bill states that a person can qualify for the homeowners' property tax exemption if "the person intends to return to the dwelling when possible to do so," among other conditions. This language may be ambiguous for a claimant who knows that it would be impossible for them to return to their dwelling, particularly those who are receiving end-of-life care in hospice. The author's office clarified that claimants who do not expect to return home but would theoretically intend to if they could should still be able to claim the exemption. Committee staff understands that the purpose of hospice care is aimed at serving persons near end of life, meaning the number of people coming home from hospice care is very few. The Committee may wish to consider whether the intent to return home is necessary or relevant to qualifying for this exemption.

REGISTERED SUPPORT / OPPOSITION:

Support

Howard Jarvis Taxpayers Association

Opposition

None on file

Analysis Prepared by: Krystal Raynes & Wesley Whitaker / REV. & TAX. / (916) 319-2098

1. Homeowners' Exemption. California State Board of Equalization. https://www.boe.ca.gov/
   proptaxes/homeowners_exemption.htm ↑

2. Disabled Veterans' Exemption Description. California State Board of Equalization. https://www.boe.ca.gov/proptaxes/dv_exemption.htm#Description ↑

3. Disabled Veterans' Exemption Qualifications. California State Board of Equalization. https://www.boe.ca.gov/proptaxes/dv_exemption.htm#Qualifications ↑

4. Proposition 19 Fact Sheet. California State Board of Equalization. https://www.boe.ca.gov/
   pdf/pub801.pdf. ↑

Date of Hearing: June 26, 2023

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Jacqui Irwin, Chair

SBPCA Bill Id:SB 520

Author:(Seyarto) – As Amended Ver:March 20, 2023


Majority vote. Tax levy. Fiscal committee.

SENATE VOTE: 40-0

SUBJECT: Property taxation: homeowners' exemption.

SUMMARY: Clarifies that a qualified taxpayer may continue to claim the homeowners' property tax exemption if the taxpayer is not occupying their home because they are confined to a hospital or other care facility. Specifically, this bill:

1. Provides that if a person receiving the homeowners' exemption from property tax is not occupying their home because they are confined to a hospital or other care facility, their residence is not vacant and a County Assessor cannot revoke their exemption, provided all of the following conditions are met:
   1. The person would occupy the dwelling if they were not confined to the hospital or other care facility;
   2. The person intends to return to the dwelling when possible to do so; and,
   3. The dwelling is not rented or leased to an unrelated person, as defined by reference to the Internal Revenue Code.
2. Provides that the state will not reimburse local governments for revenues lost due to this exemption.
3. Takes immediate effect as a tax levy.
4. Makes technical and conforming changes.

EXISTING FEDERAL LAW establishes that the family of an individual shall include only their brothers and sisters (whether by the whole or half-blood), spouse, ancestors, and lineal descendants in Internal Revenue Code (IRC) Section 267 (c)(4).

EXISTING STATE LAW:

1. Exempts $7,000 in taxable value when the home is the principal place of residence of the owner on January 1^st of the year the exemption is claimed, provided that the owner does not claim another exemption (California Constitution, Article XIII, Section 3(k)).
2. Defines a "cooperative housing corporation" as a real estate development in which membership in the corporation, by stock ownership, is coupled with the exclusive right to possess a portion of the real property (California Constitution, Article XIII, Section 61(i)).
3. Provides that the state reimburse counties for the loss of revenues from property tax exemptions enacted by the Legislature after January 1, 1973 (Revenue & Taxation Code (R&TC) Section 2229).
4. Declares that tax levy bills take effect immediately. (California Constitution, Article IV, Section 8(c)(3)).
5. Exempts part of a home's taxable value when the home is the principal place of residence for a disabled veteran or their unmarried surviving spouse (California Constitution, Article XIII, Section 4).

FISCAL EFFECT: The State Board of Equalization (BOE) estimates that this bill would result in annual property tax revenue losses, but the magnitude is indeterminable. 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).

COMMENTS:

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

SB 520 will simply clarify that being confined to a hospital or other care facility still qualifies an individual as occupying their principal dwelling, to remain qualified for their constitutionally provided homeowners' property tax exemption.

1. Committee Staff Comments:
   1. What would this bill do? This bill would provide statutory protection for otherwise qualified taxpayers who are confined to a hospital or care facility and clarify that renting the property to a family member during the confinement period will not jeopardize their ability to claim the homeowners' property tax exemption ("exemption").
   2. What is the problem this bill is seeking to solve? According to the author, due to vagueness in the law, some families have had to bring elderly parents back home from hospice to ensure their family home qualifies for the homeowner's property tax exemption. The author's intent is to remove any ambiguity and ensure that homeowners are able to claim their exemption if they are in a hospital or another live-in care facility such as a nursing home. Committee staff were unable to find a documented instance where a county assessor denied the claim of an exemption due to the claimant living in a hospital or other care facility.
   3. What is the homeowners' property tax exemption? The California Constitution provides a $7,000 reduction in the taxable value for a qualifying owner-occupied home provided that the home is the principal place of residence on January 1^st of the year the exemption is claimed.^[1] Section 25 of Article XIII of the California Constitution requires the state to repay local property tax revenue losses from this exemption.

The BOE published guidance relevant to this bill in Letter to Assessors (LTA) No. 82/50 that confinement to a "convalescent home or hospital" does not disqualify a person from receiving the exemption. The BOE also specifies that the claimant should not receive rent from anyone occupying the premises. Additionally, the LTA suggests that a hospitalization lasting longer than one year could potentially jeopardize the claimant's eligibility for the exemption.

This bill, however, departs from the LTA by allowing the claimant to receive rent from a family member and by allowing the claimant to be in a hospital or other care facility for longer than one year.

• 1. What is the Disabled Veterans' Exemption? The California Constitution provides an exemption for a part or whole of a home's taxable value when the home is the principal place of residence for a disabled veteran or their unmarried surviving spouse. There are two levels of the Disabled Veteran's Exemption, the basic and the low income.^[2]
     
     The Disabled Veterans' Exemption, unlike the current Homeowners' property tax exemption, has an exception that would allow the claimant to qualify for the Disabled Veteran's Exemption if they are confined to a hospital or other care facility provided that the property is not rented or leased to another party.^[3] This bill would adopt a similar, but slightly broader exception and allow claimants of the Homeowners' property tax exemption to rent the property to family members, as defined in the United States Code.
  2. Intergenerational transfers: Passed by California voters in 2020, Proposition 19 allows, among other things, a parent to transfer their family home or family farm to one of their children without causing a change in ownership for property tax purposes, provided that the home remains the primary residence of the new owner.^[4] The new owner is required to file for the homeowners' or disabled veterans' exemption within one year of the date of transfer or change in ownership in order to be eligible for the intergenerational transfer exclusion. Once the exclusion is granted, the family home must remain eligible for the exemption in order to retain the change in ownership exclusion. If the primary residence of a person confined to a hospital or other care facility is no longer eligible for the homeowners' exemption, then the property would potentially no longer be eligible for intergenerational transfer to an eligible transferee. This bill seeks to reduce the likelihood that a property becomes ineligible for the intergenerational transfer exclusion because the original owner is confined to a hospice or other medical care facility.
     
  3. Intent to return? This bill states that a person can qualify for the homeowners' property tax exemption if "the person intends to return to the dwelling when possible to do so," among other conditions. This language may be ambiguous for a claimant who knows that it would be impossible for them to return to their dwelling, particularly those who are receiving end-of-life care in hospice. The author's office clarified that claimants who do not expect to return home but would theoretically intend to if they could should still be able to claim the exemption. Committee staff understands that the purpose of hospice care is aimed at serving persons near end of life, meaning the number of people coming home from hospice care is very few. The Committee may wish to consider whether the intent to return home is necessary or relevant to qualifying for this exemption.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file

Opposition

None on file

Analysis Prepared by: Krystal Raynes & Wesley Whitaker / REV. & TAX. / (916) 319-2098

1. Homeowners' Exemption. California State Board of Equalization. https://www.boe.ca.gov/
   proptaxes/homeowners_exemption.htm ↑

2. Disabled Veterans' Exemption Description. California State Board of Equalization. https://www.boe.ca.gov/proptaxes/dv_exemption.htm#Description ↑

3. Disabled Veterans' Exemption Qualifications. California State Board of Equalization. https://www.boe.ca.gov/proptaxes/dv_exemption.htm#Qualifications ↑

4. Proposition 19 Fact Sheet. California State Board of Equalization. https://www.boe.ca.gov/
   pdf/pub801.pdf. ↑

 THIRD READING  

Bill No: SB 520

Author: Seyarto (R)

Amended: 3/20/23

Vote: 21- Urgency

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 5/3/23

AYES: Caballero, Seyarto, Dahle, Durazo, Glazer, Skinner, Wiener

NO VOTE RECORDED: Blakespear

SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/18/23

AYES: Portantino, Jones, Ashby, Bradford, Seyarto, Wahab, Wiener

SUBJECT: Property taxation: homeowners’ exemption

SOURCE: Author

DIGEST:

This bill ensures that the homeowners’ exemption from property tax continues to apply if the taxpayer is not occupying their home because they are confined to a hospital or other care facility.

ANALYSIS:

Existing law:

1. Provides that all property is taxable unless explicitly exempted by the Constitution or federal law (Article XIII, Section One)
2. Exempts $7,000 in taxable value when the home is the principal place of residence of the owner on January 1st of the year the exemption is claimed, unless the taxpayer claims another exemption (California Constitution, Article XIII, Section 3).
3. 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 two or more limbs, is totally blind, or is totally disabled as a result of a service-connected injury, so long as the taxpayer served in the United States Army, Navy, Air Force, Marine Corps, and been discharged under conditions other than dishonorable (California Constitution, Article XIII, Section Four).
4. Precludes a taxpayer from claiming a homeowners’ exemption for a property that is rented, vacant, under construction on the lien date, or that is a vacation or secondary home.
5. Provides that even if the property is vacant or under construction, the assessor cannot revoke a taxpayer’s homeowners’ exemption when they do not occupy the dwelling (SB 1494, Committee on Revenue and Taxation, Chapter 654, Statutes of 2010), including:
   1. A dwelling that was totally destroyed in a disaster for which the Governor proclaimed a state of emergency, that previously qualified for the exemption and that has not changed ownership, provided the person intends to reconstruct a dwelling on the property and occupy the dwelling as their principal place of residence when it is possible to do so.
   2. When the dwelling is damaged in a misfortune or calamity, the person’s absence from the dwelling is temporary and the person intends to return to the dwelling when possible to do so. However, if the dwelling is destroyed, the exemption is not applicable until the structure has been replaced and occupied as a dwelling.
6. Deems property to be the disabled veteran’s principal place of residence, and therefore still eligible for the exemption, when the veteran is confined to a hospital or other care facility, if that property would be that veteran’s principal place of residence were it not for their confinement to a hospital or other care facility, provided that the residence is not rented or leased to a third party.

This bill:

1. Deems that if a person receiving the homeowners’ exemption from property tax is not occupying their home because they are confined to a hospital or other care facility, their residence is not vacant and the assessor cannot revoke their exemption, provided:
   1. The person would occupy the dwelling if they were not confined to the hospital or other care facility.
   2. The person intends to return to the dwelling when possible to do so.
   3. The dwelling is not rented or leased to an unrelated person, as defined by reference to the Internal Revenue Code.
2. Makes technical and conforming changes.

Background

The homeowner’s exemption provides a modest $7,000 reduction in taxable value ($70 at a 1% tax rate) when the home is the principal place of residence of the owner on January 1st of the year the exemption is claimed. The property must be the taxpayer's true, fixed and permanent home, and principal establishment to which they intend to return if absent. Assessors use vehicle registration, voter registration, bank accounts, and state income tax filings to determine whether a property qualifies. Once granted, the exemption continues until the taxpayer notifies the assessor or ownership changes. Assessors are unlikely to commit many enforcement resources to enforce a $70 benefit; however, under Proposition 19 (2020), intergenerational change in ownership exclusions only apply when the home qualifies for an exemption before the transfer, and the transferee claims the homeowners’ or disabled veterans’ exemption within one year after the purchase or transfer. SB 520 preserves the transferor’s status for the homeowners’ exemption if they are confined to a hospital or care facility, which ensures that the exclusion can still apply, which could save the transferee thousands in taxes.

Current Board of Equalization Letter to Assessors 82/50 states that a homeowner can maintain their exemption if away from their residence so long as it’s not rented out. The Letter also states that an absence for more than one year would raise considerable doubt that this is the principal residence. SB 520 provides clear statutory protection for those whose confinement to a hospital or care facility lasts longer than a year, and that renting the property to a family member during the confinement period does not jeopardize the exemption.

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

According to the Senate Appropriations Committee:

• The Board of Equalization (BOE) estimates that this bill would result in annual property tax revenue losses, but the magnitude is indeterminable. 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).
• BOE would incur minor and absorbable costs to implement the provisions of the bill.
• By adding to the duties of local tax officials, this bill creates a state-mandated local program. To the extent the Commission on State Mandates determines that the provisions of this bill create a new program or impose a higher level of service on local agencies, local agencies could claim reimbursement of those costs (General Fund). The magnitude is unknown.

SUPPORT: (Verified 5/18/23)

None received

OPPOSITION: (Verified 5/18/23)

None received

ARGUMENTS IN SUPPORT: According to the author, “SB520 will simply clarify that being confined to a hospital or other care facility still qualifies an individual as occupying their principal dwelling, to remain qualified for their Constitutionally provided Homeowners’ Property Tax Exemption.”

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

5/20/23 13:00:18

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

SB 520 (Seyarto) - Property taxation: homeowners’ exemption

Bill Summary:

SB 520 would provide that the property tax homeowners’ exemption would continue to apply if taxpayers are not occupying their home because they are confined to a hospital or other care facility.

Fiscal Impact:

• The Board of Equalization (BOE) estimates that this bill would result in annual property tax revenue losses, but the magnitude is indeterminable. 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).
• BOE would incur minor and absorbable costs to implement the provisions of the bill.
• By adding to the duties of local tax officials, this bill creates a state-mandated local program. To the extent the Commission on State Mandates determines that the provisions of this bill create a new program or impose a higher level of service on local agencies, local agencies could claim reimbursement of those costs (General Fund). The magnitude is unknown.

Background:

The California Constitution generally exempts $7,000 in taxable value when a home is the owner’s principal place of residence. Once granted, the homeowners’ exemption continues until the taxpayer notifies the assessor or ownership changes. Under the Constitution, the Legislature can increase the exemption; however, the State must backfill local property tax revenue losses (including any such increase from the current amount) resulting from the exemption. Current law provides that the homeowners’ exemption does not apply to property that is rented, vacant, under construction on the lien date, or that is a vacation or secondary home.

Under the Constitution, the Legislature can partially or wholly exempt from property tax the value of a disabled veteran’s principal place of residence if the veteran (1) has lost two or more limbs, (2) is totally blind, or (3) is totally disabled as a result of a service-connected injury, as specified. The exemption applies instead of other real property exemptions, like the homeowners’ exemption. State law implementing the disabled veterans’ exemption deems property to be the disabled veteran’s principal place of residence, and therefore still eligible for the exemption, when the veteran is confined to a hospital or other care facility, if that property would be that veteran’s principal place of residence were it not for their confinement to a hospital or other care facility, provided that the residence is not rented or leased to a third party. Current law does not contain similar language for non-veterans when it comes to the homeowners’ exemption. In other words, under existing law, county assessors could revoke the homeowners’ exemption when a nonveteran taxpayer is confined in a hospital or other care facility.

Proposed Law:

This bill would provide that if a person receiving the homeowners’ exemption from property tax is not occupying their home because they are confined to a hospital or other care facility, their residence is not vacant and the assessor cannot revoke their exemption, provided: (1) the person would occupy the dwelling if they were not confined to the hospital or other care facility, (2) the person intends to return to the dwelling when possible to do so, and (3) the dwelling is not rented or leased to an unrelated person, as defined by reference to the Internal Revenue Code.

Staff Comments:

BOE lacks the requisite data to estimate the revenue loss from this bill. BOE staff does not have any specific county data on the number of absence cases tied to homeowners in a hospital or other care facility, and where counties may have denied exemptions. In general, according to BOE, research does indicate that most people leave health care facilities within one year. For example, a 2020 study concluded that 88 percent of nursing home residents were discharged after a stay of three months or less, while six percent of residents stayed for one year or more.

This bill could potentially interact with current-law intergenerational change-in-ownership exclusions that could result in significant property tax revenue reductions. Specifically, under Proposition 19 (2020), intergenerational change in ownership exclusions only apply when (1) the home qualifies for an exemption before the transfer, and (2) the transferee claims the homeowners’ or disabled veterans’ exemption within one year after the purchase or transfer. Because this bill would preserve the transferor’s status for the homeowners’ exemption if they are confined to a hospital or care facility, intergenerational transfers could occur under the bill which would not be allowed under current law. Such a scenario could lead to a significant property tax loss relative to existing law.

-- END --

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Anna M. Caballero, Chair

2023 - 2024 Regular

Property taxation: homeowners’ exemption

Ensures that the homeowners’ exemption from property tax continues to apply if the taxpayer is not occupying their home because they are confined to a hospital or other care facility.

Background

The Homeowners’ Exemption. The Constitution exempts a $7,000 in taxable value when the home is the principal place of residence of the owner on January 1st of the year the exemption is claimed, unless the taxpayer claims another exemption. State law precludes a property that is rented, vacant, under construction on the lien date, or that is a vacation or secondary home. Once granted, the exemption continues until the taxpayer notifies the assessor or ownership changes. The Constitution allows the Legislature to increase the exemption; however, they must increase subventions to local agencies backfilling any revenue loss, and provide increases in benefits to qualified renters. Unlike other exemptions, Section 25 of Article XIII requires the state to backfill local property tax revenue losses resulting from the exemption.

State law provides that the homeowners’ exemption does not apply to a second or vacation home, or when the dwelling is vacant. However, the Legislature has provided in two instances that the assessor cannot revoke a taxpayer’s homeowners’ exemption when they do not occupy the dwelling (SB 1494, Committee on Revenue and Taxation, 2010), including:

• A dwelling that was totally destroyed in a disaster for which the Governor proclaimed a state of emergency, that previously qualified for the exemption and that has not changed ownership, provided the person intends to reconstruct a dwelling on the property and occupy the dwelling as their principal place of residence when it is possible to do so.
• When the dwelling is damaged in a misfortune or calamity, the person’s absence from the dwelling is temporary and the person intends to return to the dwelling when possible to do so. However, if the dwelling is destroyed, the exemption is not applicable until the structure has been replaced and occupied as a dwelling.

Disabled Veterans’ Exemption. Additionally, Section 4 of Article XIII 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 two or more limbs, is totally blind, or is totally disabled as a result of a service-connected injury. The taxpayer must have served in the United States Army, Navy, Air Force, Space Force, Coast Guard, or Marine Corps and been discharged under conditions other than dishonorable. This disabled veterans’ exemption is available to disabled veteran taxpayers or their unmarried surviving spouses, so long as the surviving spouse receives a U.S. Department of Veterans Affairs (USDVA) determination that the spouse’s death was service-connected. The exemption applies instead of other real property exemptions, like the homeowners’ exemption.

State law implementing the disabled veterans’ exemption deems property to be the disabled veteran’s principal place of residence, and therefore still eligible for the exemption, when the veteran is confined to a hospital or other care facility, if that property would be that veteran’s principal place of residence were it not for their confinement to a hospital or other care facility, provided that the residence is not rented or leased to a third party.

State law implementing the homeowner’s exemption does not contain similar language as the disabled veterans’ exemption ensuring that the assessor does not revoke the exemption when the taxpayer is confined in a hospital or other care facility. The author wants to add these provisions to the homeowners’ exemption.

Proposed Law

Senate Bill 520 deems that if a person receiving the homeowners’ exemption from property tax is not occupying their home because they are confined to a hospital or other care facility, their residence is not vacant and the assessor cannot revoke their exemption, provided:

• The person would occupy the dwelling if they were not confined to the hospital or other care facility.
• The person intends to return to the dwelling when possible to do so.
• The dwelling is not rented or leased to an unrelated person, as defined by reference to the Internal Revenue Code.

The measure makes technical changes.

State Revenue Impact

Pending.

Comments

1. Purpose of the bill. According to the author, “SB520 will simply clarify that being confined to a hospital or other care facility still qualifies an individual as occupying their principal dwelling, to remain qualified for their Constitutionally provided Homeowners’ Property Tax Exemption.”

2. Higher stakes. The homeowner’s exemption provides a modest $7,000 reduction in taxable value ($70 at a 1% tax rate) when the home is the principal place of residence of the owner on January 1st of the year the exemption is claimed. The property must be the taxpayer's true, fixed and permanent home, and principal establishment to which they intend to return if absent. Assessors use vehicle registration, voter registration, bank accounts, and state income tax filings to determine whether a property qualifies. Once granted, the exemption continues until the taxpayer notifies the assessor or ownership changes. Assessors are unlikely to commit many enforcement resources to enforce a $70 benefit; however, under Proposition 19 (2020), intergenerational change in ownership exclusions only apply when the home qualifies for an exemption before the transfer, and the transferee claims the homeowners’ or disabled veterans’ exemption within one year after the purchase or transfer. SB 520 preserves the transferor’s status for the homeowners’ exemption if they are confined to a hospital or care facility, which ensures that the exclusion can still apply, which could save the transferee thousands in taxes.

3. Existing guidance. Current Board of Equalization Letter to Assessors 82/50 states that a homeowner can maintain their exemption if away from their residence so long as it’s not rented out. The Letter also states that an absence for more than one year would raise considerable doubt that this is the principal residence. SB 520 provides clear statutory protection for those whose confinement to a hospital or care facility lasts longer than a year, and that renting the property to a family member during the confinement period does not jeopardize the exemption.

Support and Opposition

(4/28/23)

Support: None received.

Opposition: None received.

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