The California Constitution declares that all property is taxable and establishes or authorizes various exemptions from tax for real property, including a homeowners exemption in the amount of $7,000 of the full value of a dwelling that may be applied unless the dwelling receives another real property exemption. The California Constitution and existing property tax law establish a veterans exemption in the amount of $4,000, as specified, for a veteran who meets certain military service requirements, and generally exempts from property taxation the same value of property of a deceased veterans unmarried spouse and parents. The California Constitution and existing property tax law establish a disabled veterans veterans exemption in the amount of $100,000 or $150,000 for the principal place of residence of a veteran or a veterans spouse, as specified.

Existing property tax law establishing the homeowners exemption specifies that the exemption may not be applied to a property on which the owner receives the veterans veterans exemption.

This bill would remove this specification and would instead prohibit the application of the homeowners exemption to a property on which the owner receives another exemption, except for the veterans exemption or the disabled veterans exemption. provide that if Senate Constitutional Amendment 6 is approved by the voters at the statewide general election scheduled for November 5, 2024, then commencing January 1, 2025, notwithstanding that prohibition, the homeowners exemption also applies to property on which an owner receives the veterans exemption or the disabled veterans exemption. By imposing additional duties on local tax officials, the bill would impose a state-mandated local program.

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.

Existing law contains provisions related to elections and voting, including a requirement that a constitutional amendment submitted to the people by the Legislature shall appear on the ballot of the first statewide election occurring at least 131 days after the adoption of the proposal by the Legislature and that the Secretary of State mail state voter information guides to voters.

This bill would require the Secretary of State, notwithstanding specified provisions of existing law relating to elections and voting, to submit Senate Constitutional Amendment ____ 6 of the 202324 Regular Session to the voters for their approval at the statewide general election scheduled for November 5, 2024.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and makes a willful violation of the act a crime. Existing law provides for the regulation of health insurers by the Department of Insurance.

Existing law requires a health care service plan or health insurer that issues, sells, renews, or offers a health care service plan contract or health insurance policy, respectively, for health care coverage in this state to comply with minimum medical loss ratios. Existing law requires a health care service plan or health insurer, excluding specialized health care service plan contracts and specialized health insurance policies, to provide, no later than August 1, an annual rebate to each enrollee or insured under that coverage, on a pro rata basis, if the medical loss ratio of the amount of premium revenue expended by the plan or health insurer on the costs for reimbursement for clinical services and for activities that improve health care quality to the total amount of premium revenue is less than a certain percentage.

This bill would make technical, nonsubstantive changes to those provisions.

 THIRD READING  

Bill No: SB 871

Author: Archuleta (D)

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, 9/1/23

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

SUBJECT: Property taxation: homeowners’, veterans’, and disabled veterans’ exemptions

SOURCE: Author

DIGEST:

This bill amends the homeowners’ exemption from property tax to allow a property that receives the homeowners’ exemption to also receive the disabled veterans’ or veterans’ exemptions; takes effect only if voters approve SCA 6 (Archuleta).

ANALYSIS:

Existing law:

1. Provides that all property is taxable unless explicitly exempted by the Constitution or federal law (California Constitution, Article XIII, Section One)
2. Sets forth several property tax exemptions (California Constitution, Article XIII, Section Three).
3. 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.
4. Allows the Legislature to increase the exemption; however, they must increase subventions to local agencies backfilling any revenue loss, and provide an increase in benefits to qualified renters.
5. Requires the state to backfill local property tax revenue losses resulting from the exemption (California Constitution, Article XIII, Section 25).
6. Contains an exemption for veterans, which the Constitution defines as someone who is serving or has served in and has been discharged under honorable conditions from service, in the United States Army, Navy, Air Force, Marine Corps, Coast Guard, or Revenue Marine (Revenue Cutter) Service; and served in any of the following:
   1. in time of war,
   2. in time of peace in a campaign or expedition for which a medal has been issued to the veteran by Congress, or
   3. in time of peace and because of a service-connected disability was released from active duty.
7. Sets the exemption amount at $1,000 (adjusted to $4,000 in statute) for a person qualifying under the above criteria, or their unmarried surviving spouse or either parent of a deceased veteran meeting the service requirements.
8. Allows the veteran’s exemption for veterans who own property, real or personal, worth less in aggregate than $5,000 if the claimant is single, or $10,000 if married.
9. 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).
10. Provides that the exemption applies instead of other real property exemptions, like the homeowners’ exemption.
11. Makes the exemption 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
12. Does not fully exclude the value of a disabled veteran or surviving spouse’s property, instead enacting a partial exemption of $100,000 for disabled veteran taxpayers with annual 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 for 2023 is $161,083 for disabled veterans with income of more than $72,335, and $241,627 for those with less than that amount.

This bill:

1. Amends the homeowners’ exemption from property tax to remove the prohibition against a property that receives the homeowners’ exemption from also receiving the disabled veterans’ or veterans’ exemptions.
2. Provides that if voters approve Senate Constitutional Amendment 6 (Archuleta) at the November, 5, 2024, statewide general election, the homeowners’ exemption applies to property where the owner currently receives the veterans’ or disabled veterans’ exemption.
3. Makes conforming changes.

Related/Prior Legislation

SB 726 (Archuleta, 2023) which increases the current disabled veterans’ exemption from $161,083 for disabled veterans with income of more than $72,335, and $241,627 for those with less than that amount to $863,790 for all disabled veterans. The bill is currently pending in the Assembly Revenue and Taxation Committee. If approved by voters, SCA 6 and SB 871 would allow disabled veterans to also claim the homeowners’ exemption, equal to $7,000 in value or $70 in tax at the 1% rate. Instead of enacting SCA 6 and SB 871, the Legislature could increase the exemption amount in SB 726 an additional $7,000, which would avoid the need to place a measure before voters to amend the Constitution, and not require disabled veterans to file a claim to receive a $70 tax benefit

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

According to the Senate Appropriations Committee, “The Board of Equalization (BOE) estimates that this bill would result in annual property tax revenue losses of $3.8 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). BOE would incur General Fund administrative costs of $37,000 in 2024-25, and $6,000 annually thereafter.”

SUPPORT: (Verified 9/2/23)

American Legion, Department of California
Amvets, Department of California
California Association of County Veterans Service Officers
California State Board of Equalization
California State Commanders Veterans Council
Military Officers Association of America, California Council of Chapters
Vietnam Veterans of America, California State Council

OPPOSITION: (Verified 9/2/23)

None received

ARGUMENTS IN SUPPORT: According to the author, “Veterans have made significant sacrifices in service to our country. They have put their lives on the line, spent time away from their families, and faced numerous challenges, both physical and mental. And yet, despite all of this, many veterans continue to face difficulties as they transition back to civilian life. One of the biggest challenges that veterans face is the financial burden of owning a home. For many veterans, owning a home can be a dream that is difficult to achieve. They may struggle to make ends meet, especially if they are on a fixed income or facing other financial challenges. The veterans’ exemption provides veterans and their families with a $4,000 reduction in the taxable value of their property, which can help ease the financial burden of owning a home. This can be especially important for veterans who are facing other challenges related to their service, such as medical bills or disabilities. However, the amount of the current veteran exemption has remained the same since its creation, along with the limitations on the maximum value of the property owned by a veteran to remain eligible for the exemption. Furthermore, because the homeowners’ exemption is $7,000, nearly twice the amount of the veteran exemption, most California veteran homeowners choose the homeowners’ exemption. SCA 6 and SB 871 seeks to allow a veteran property owner who qualifies for the veterans’ exemption or the disabled veterans’ exemption to also receive the homeowners’ exemption. These measures will provide a much needed tax relief for veterans and their families. In California, we have a proud tradition of supporting our veterans. We recognize the sacrifices that they have made and

we are committed to providing them with the support they need to succeed. SB 871 and SCA 6 is another example of this commitment, and it's a way for California to show that we value our veterans and their contributions to our communities.”

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

9/2/23 16:44:11

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SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

SB 871 (Archuleta) - Property taxation: homeowners’, veterans’, and disabled veterans’ exemptions

Bill Summary:

SB 871 would allow a property that receives the homeowners’ property tax exemption also to receive the disabled veterans’ or veterans’ exemptions.

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

The following information is revised to reflect amendments

adopted by the committee on September 1, 2023

Fiscal Impact:

The Board of Equalization (BOE) estimates that this bill would result in annual property tax revenue losses of $3.8 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). BOE would incur General Fund administrative costs of $37,000 in 2024-25, and $6,000 annually thereafter.

Committee Amendments:

Specify SCA 6 as the unspecified Senate Constitutional Amendment.

-- END --

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

SB 871 (Archuleta) - Property taxation: homeowners’, veterans’, and disabled veterans’ exemptions

Bill Summary:

SB 871 would allow a property that receives the homeowners’ property tax exemption also to receive the disabled veterans’ or veterans’ exemptions.

Fiscal Impact:

The Board of Equalization (BOE) estimates that this bill would result in annual property tax revenue losses of $3.8 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). BOE would incur General Fund administrative costs of $37,000 in 2024-25, and $6,000 annually thereafter.

Background:

Under the California Constitution, all property is taxable unless explicitly exempted. Current exemptions include the Homeowners’ Exemption, the Veterans’ Exemption, and the Disabled Veterans’ Exemption.

Homeowners’ Exemption: The Constitution (1) grants a $7,000 property tax exemption on the assessed value of owner-occupied dwellings, and (2) requires the State to reimburse local governments for the resulting reduction in property tax revenues.

Standard Veterans’ Exemption: This is a $4,000 exemption on the assessed value of real or personal property owned by veterans that were honorably discharged. A surviving spouse or parents may claim the exemption. The exemption, however, is unavailable to veterans who own property valued at $5,000 or more. Because of the property value limitation, few veteran homeowners are eligible to claim the standard exemption. This exemption has also fallen into disuse because at only $4,000, any veteran who owns a home can instead claim the homeowners' exemption of $7,000, which provides greater tax savings.

Disabled Veterans’ Exemption. This is an exemption from the assessed value of a disabled veteran’s principal residence. In order to qualify for the exemption, a veteran must have severe service-related injuries. Qualified veterans include those with service-related (1) loss of vision in both eyes, (2) loss of the use of two or more limbs, or (3) 100 percent disability rating by the VA. Unmarried surviving spouses are eligible for this exemption. The exemption applies instead of other real property exemptions, like the homeowners’ exemption. State law implementing the exemption doesn’t fully exclude the value of a disabled veteran’s property, instead enacting a partial exemption of $100,000 for disabled veteran taxpayers with annual 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 for 2023 is $161,083 for disabled veterans with income of more than $72,335, and $241,627 for those with less than that amount.

Proposed Law:

This bill would amend the homeowners’ exemption from property tax to remove the prohibition against a property that receives the homeowners’ exemption from also receiving the disabled veterans’ or veterans’ exemptions. This bill would only takes effect if voters approve an unspecified Senate Constitutional Amendment,

Related Legislation:

• SCA 6 (Archuleta) would amend the California Constitution to allow additional property tax benefits for taxpayers eligible for the disabled veterans’ or veterans’ exemptions from property tax. The measure is currently pending in this Committee.
• SB 726 (Archuleta) would increase the current disabled veterans’ exemption, as specified. The bill is currently pending in the Assembly Committee on Revenue and Taxation.
• AB 1715 (Muratsuchi, Chapter 379, Statutes of 2022) updated several provisions in state law, including the disabled veterans’ exemption, to include the United States Space Force among the lists of Armed Forces entities. It should be noted that the part of the California Constitution SCA 6 seeks to amend only refers to the United States Army, Navy, Air Force, Marine Corps, Coast Guard, or Revenue Marine (Revenue Cutter) Service.

Staff Comments:

BOE data indicate that, in 2022-23, 68,114 disabled veterans' exemptions claims were granted: 63,266 at the basic level and 4,848 at the low-income level. The basic exemption amount for that year was $149,993. The low-income exemption amount was $224,991 for claimants with a household income below $67,335.

BOE staff estimates that, based on a survey of several counties, this bill would not impact 21 percent of homes receiving the basic exemption (13,286 homes), nor 24 percent of homes receiving the low-income exemption (1,164 homes), for a total of 14,449 homes. The reason for this is that these homes are already fully exempt because they have an assessed value of less than $149,993 and $224,991, respectively. Consequently, this bill would either fully exempt from property tax or greatly increase the current exemption amount for an additional 53,665 homes. At the $7,000 homeowners’ exemption amount, BOE estimates the total exemption value to be $376 million, resulting in a $3.8 million annual revenue loss at the one percent property tax rate.

Recommended Amendments:

Staff recommends amending the bill to specify SCA 6 as the unspecified Senate Constitutional Amendment.

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SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Anna M. Caballero, Chair

2023 - 2024 Regular

Property taxation: homeowners’, veterans’, and disabled veterans’ exemptions

Amends the homeowners’ exemption from property tax to to allow a property that receives the homeowners’ exemption to also receive the disabled veterans’ or veterans’ exemptions.

Background

The California Constitution provides that all property is taxable unless explicitly exempted by the Constitution or federal law. However, Section 3 of Article XIII sets forth several exemptions, including:

The Homeowners’ Exemption. The Constitution exempts a $7,000 reduction 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. The property must be the taxpayer's true, fixed and permanent home, and principal establishment to which they intend to return if absent. 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

Veterans’ Exemption. The Constitution contains an exemption for veterans, which the Constitution defines as someone who is serving or has served in and has been discharged under honorable conditions from service, in the United States Army, Navy, Air Force, Marine Corps, Coast Guard, or Revenue Marine (Revenue Cutter) Service; and served in any of the following:

• in time of war,
• in time of peace in a campaign or expedition for which a medal has been issued to the veteran by Congress, or
• in time of peace and because of a service-connected disability was released from active duty

There are 26 wars and 4 campaigns that qualify for the Veterans' Exemptions in statute. The majority of the wars and campaigns listed occurred over 100 years ago, dating back to the Revolutionary War. The exemption reduces taxable value by $1,000 (adjusted to $4,000 in statute) for a person qualifying under the above criteria, or their unmarried surviving spouse or either parent of a deceased veteran meeting the service requirements.

The Constitution only allows the exemption for veterans who own property, real or personal, worth less in aggregate than $5,000 if the claimant is single, or $10,000 if married. According to the State Board of Equalization, at its peak, from 1956 through 1962, over one million persons received the veterans' exemption. However, the constitutional restrictions for the exemption have rendered it obsolete, so much so that, only one person received the exemption in 2018-19. This exemption has also fallen into disuse because at only $4,000, any veteran who owns a home can instead claim the homeowners' exemption of $7,000, which provides greater tax savings.

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 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 exemption doesn’t fully exclude the value of a disabled veteran’s property, instead enacting a partial exemption of $100,000 for disabled veteran taxpayers with annual 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 for 2023 is $161,083 for disabled veterans with income of more than $72,335, and $241,627 for those with less than that amount.

Seeking to provide additional property tax relief for veterans, including disabled veterans, the author wants to make conforming statutory changes to implement a constitutional amendment that would allow a taxpayer claiming the homeowners’ exemption to also claim the disabled veterans’ or veterans’ exemptions.

Proposed Law

Senate Bill 871 amends the homeowners’ exemption from property tax to remove the prohibition against a property that receives the homeowners’ exemption from also receiving the disabled veterans’ or veterans’ exemptions. The measure only takes effect if voters approve an unspecified Senate Constitutional Amendment, and makes conforming changes.

State Revenue Impact

Pending.

Comments

1. Purpose of the bill. According to the author, “Veterans have made significant sacrifices in service to our country. They have put their lives on the line, spent time away from their families, and faced numerous challenges, both physical and mental. And yet, despite all of this, many veterans continue to face difficulties as they transition back to civilian life. One of the biggest challenges that veterans face is the financial burden of owning a home. For many veterans, owning a home can be a dream that is difficult to achieve. They may struggle to make ends meet, especially if they are on a fixed income or facing other financial challenges. The veterans’ exemption provides veterans and their families with a $4,000 reduction in the taxable value of their property, which can help ease the financial burden of owning a home. This can be especially important for veterans who are facing other challenges related to their service, such as medical bills or disabilities. However, the amount of the current veteran exemption has remained the same since its creation, along with the limitations on the maximum value of the property owned by a veteran to remain eligible for the exemption. Furthermore, because the homeowners’ exemption is $7,000, nearly twice the amount of the veteran exemption, most California veteran homeowners choose the homeowners’ exemption. SCA 6 and SB 871 seeks to allow a veteran property owner who qualifies for the veterans’ exemption or the disabled veterans’ exemption to also receive the homeowners’ exemption. These measures will provide a much needed tax relief for veterans and their families. In California, we have a proud tradition of supporting our veterans. We recognize the sacrifices that they have made and we are committed to providing them with the support they need to succeed. SB 871 and SCA 6 is another example of this commitment, and it's a way for California to show that we value our veterans and their contributions to our communities.”

2. One way or another. Earlier this year, the Committee approved SB 726 (Archuleta), which increases the current disabled veterans’ exemption from $161,083 for disabled veterans with income of more than $72,335, and $241,627 for those with less than that amount to $863,790 for all disabled veterans. SB 726 also continues the inflation indexing that applies to the current exemption. If approved by voters, SCA 6 would allow disabled veterans to also claim the homeowners’ exemption, equal to $7,000 in value or $70 in tax at the 1% rate. To accomplish the same goal, why not increase the exemption amount in SB 726 an additional $7,000? Doing so would avoid the need to place a measure before voters to amend the Constitution, and not require disabled veterans to file a claim to receive a $70 tax benefit.

3. Togetherness. SB 871 amends the homeowners’ exemption in state law to implement SCA 6’s (Archuleta) constitutional change. The Committee will also consider SCA 6 at its May 3, 2023, hearing.

4. Technical. SB 871 currently states that is provisions only take effect if voters approve an unspecified constitutional amendment. The Committee may wish to consider amending SB 871 to specify SCA 6.

5. Mandate. The California Constitution requires the state to reimburse local governments for the costs of new or expanded state mandated local programs. Because SB 871 expands eligibility for the homeowners’ exemption, Legislative Counsel states that it imposes a new state mandate. The measure states that should the Commission on State Mandates determine that the bill imposes a reimbursable mandate, reimbursement must be made pursuant to existing statutory provisions. Additionally, the bill provides that the state shall not reimburse local agencies for any property tax revenue losses resulting from its expanded welfare exemption.

Support and Opposition

(4/28/23)

Support: California Association of Realtors

Opposition: None received.

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