SB 566: Real property tax: Personal Income Tax Law: homeowners’ exemption: renter’s credit.
- Session Year: 2025-2026
- House: Senate
- Latest Version Date: 2025-05-01
Current Status:
Failed
(2026-02-02: Returned to Secretary of Senate pursuant to Joint Rule 56.)
Introduced
In Committee
Awaiting First Chamber Vote
Passed First Chamber
In Committee
Awaiting Second Chamber Vote
Passed Second Chamber
Enacted
What does this bill do?
The bill raises the homeowners property tax exemption for owners 62 and older from $7,000 to $50,000 and says the state will not reimburse local agencies for property-tax revenue lost because of that change. It also raises the renter tax credit for qualified renters 62 and older to $550 for joint/head/surviving filers and $275 for other individuals, with the same income limits adjusted for inflation. The Franchise Tax Board must report annually on how many people claim the credit and the average amount claimed.
The summary is provided by generative AI which can make mistakes. For original language, please view the details in the table below.
(1)Existing property tax law, pursuant to authority granted by the California Constitution, provides for a homeowners exemption in the amount of $7,000 of the full value of a dwelling, as defined, and authorizes the Legislature to increase this exemption.
This bill, beginning with the lien date for the 202627 fiscal year, would increase the homeowners exemption, for certain homeowners, from $7,000 to $50,000 of the full value of a dwelling. By imposing additional duties on local tax officials, the bill would impose a state-mandated local program.
(2)The California Constitution requires the Legislature, whenever it increases the homeowners property tax exemption, to provide a comparable increase in benefits to qualified renters. The Personal Income Tax Law authorizes various credits against the taxes imposed by that law, including a credit for qualified renters in the amount of $120 for spouses filing joint returns, heads of household, and surviving spouses if adjusted gross income is $50,000 or less, and in the amount of $60 for other individuals if adjusted gross income is $25,000 or less. Existing law requires the Franchise Tax Board to annually adjust for inflation these adjusted gross income amounts.
This bill, for taxable years beginning on and after January 1, 2026, would increase this credit for a qualified renter to $550 for spouses filing joint returns, heads of household, and surviving spouses, as specified, if adjusted gross income is $50,000 or less, as adjusted for inflation, and to an amount equal to $275 for other individuals, as specified, if adjusted gross income is $25,000 or less, as adjusted for inflation.
(3)Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
This bill also would state the intent of the Legislature to comply with that requirement.This bill would include additional information required for any bill authorizing a new tax expenditure.
(4)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.
(5)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.
(6)This bill would take effect immediately as a tax levy.
(1)Existing property tax law, pursuant to authority granted by the California Constitution, provides for a homeowners exemption in the amount of $7,000 of the full value of a dwelling, as defined, and authorizes the Legislature to increase this exemption.
This bill, beginning with the lien date for the 202627 fiscal year, would increase the homeowners exemption, for certain homeowners, from $7,000 to $50,000 of the full value of a dwelling. By imposing additional duties on local tax officials, the bill would impose a state-mandated local program.
(2)The California Constitution requires the Legislature, whenever it increases the homeowners property tax exemption, to provide a comparable increase in benefits to qualified renters. The Personal Income Tax Law authorizes various credits against the taxes imposed by that law, including a credit for qualified renters in the amount of $120 for spouses filing joint returns, heads of household, and surviving spouses if adjusted gross income is $50,000 or less, and in the amount of $60 for other individuals if adjusted gross income is $25,000 or less. Existing law requires the Franchise Tax Board to annually adjust for inflation these adjusted gross income amounts.
This bill, for taxable years beginning on and after January 1, 2026, would increase this credit for a qualified renter to $550 for spouses filing joint returns, heads of household, and surviving spouses, as specified, if adjusted gross income is $50,000 or less, as adjusted for inflation, and to an amount equal to $275 for other individuals, as specified, if adjusted gross income is $25,000 or less, as adjusted for inflation.
(3)Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
This bill also would state the intent of the Legislature to comply with that requirement.
(4)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.
(5)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.
(6)This bill would take effect immediately as a tax levy.
(a)The homeowners property tax exemption is in the amount of the assessed value of the dwelling specified in this section, as authorized by subdivision (k) of Section 3 of Article XIII of the California Constitution. That exemption amount shall be as follows:
(1)Except as provided in paragraph (2), seven thousand dollars ($7,000) of the full value of the dwelling.
(2)Beginning with the lien date for the 202627 fiscal year, fifty thousand dollars ($50,000) of the full value of the dwelling for a homeowner who is 62 years of age or older.
(b)(1)The exemption does not extend 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, nor does it apply to property on which an owner receives the veterans exemption.
(2)Notwithstanding paragraph (1), 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. Except as provided in paragraph (3), when a dwelling has been totally destroyed, and thus no dwelling exists on the lien date, the exemption provided by this section shall not be applicable until the structure has been replaced and is occupied as a dwelling.
(3)A dwelling that was totally destroyed in a disaster for which the Governor proclaimed a state of emergency, that qualified for the exemption provided by this section prior to the commencement date of the disaster and that has not changed ownership since the commencement date of the disaster, shall be deemed occupied by the person receiving the exemption on the lien date 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.
(4)Notwithstanding paragraph (1), 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 all of the following conditions are met:
(A)The person would occupy the dwelling if they were not confined to the hospital or other care facility.
(B)The person intends to return to the dwelling when possible to do so.
(C)The dwelling is not rented or leased to a person that is not described in Section 267(c)(4) of Title 26 of the United States Code.
(c)For purposes of this section, all of the following apply:
(1)Owner includes a person purchasing the dwelling under a contract of sale or who holds shares or membership in a cooperative housing corporation, which holding is a requisite to the exclusive right of occupancy of a dwelling.
(2)(A)Dwelling means a building, structure, or other shelter constituting a place of abode, whether real property or personal property, and any land on which it may be situated. A two-dwelling unit shall be considered as two separate single-family dwellings.
(B)Dwelling includes the following:
(i)A single-family dwelling occupied by an owner thereof as their principal place of residence on the lien date.
(ii)A multiple-dwelling unit occupied by an owner thereof on the lien date as their principal place of residence.
(iii)A condominium occupied by an owner thereof as their principal place of residence on the lien date.
(iv)Premises occupied by the owner of shares or a membership interest in a cooperative housing corporation, as defined in subdivision (i) of Section 61, as their principal place of residence on the lien date. Each exemption allowed pursuant to this subdivision shall be deducted from the total assessed valuation of the cooperative housing corporation. The exemption shall be taken into account in apportioning property taxes among owners of shares or membership interests in the cooperative housing corporations so as to benefit those owners who qualify for the exemption.
(d)The exemption provided for in subdivision (k) of Section 3 of Article XIII of the California Constitution shall first be applied to the building, structure, or other shelter and the excess, if any, shall be applied to any land on which it may be located.
SEC. 2.Section 17053.5 of the Revenue and Taxation Code is amended to read:17053.5.(a)(1)For a qualified renter, there shall be allowed a credit against the renters net tax, as defined in Section 17039. The amount of the credit shall be as follows:
(A)(i)For spouses filing joint returns, heads of household, and surviving spouses, as defined in Section 17046, the credit shall, except as provided in clause (ii), be equal to one hundred twenty dollars ($120) if adjusted gross income is fifty thousand dollars ($50,000) or less.
(ii)For taxable years beginning on or after January 1, 2026, the credit calculated under this subparagraph shall be increased to five hundred fifty dollars ($550) if one of the spouses, including the deceased spouse, or the head of household is 62 years of age or older.
(B)(i)For other individuals, the credit shall, except as provided in clause (ii), be equal to sixty dollars ($60) if adjusted gross income is twenty-five thousand dollars ($25,000) or less.
(ii)For taxable years beginning on or after January 1, 2026, the credit calculated under this subparagraph shall be increased to two hundred seventy-five dollars ($275) if the individual is 62 years of age or older.
(2)Except as provided in subdivision (b), spouses shall receive but one credit under this section. If the spouses file separate returns, the credit may be taken by either or equally divided between them, except as follows:
(A)If one spouse was a resident for the entire taxable year and the other spouse was a nonresident for part or all of the taxable year, the resident spouse shall be allowed one-half the credit allowed to married persons and the nonresident spouse shall be permitted one-half the credit allowed to married persons, prorated as provided in subdivision (e).
(B)If both spouses were nonresidents for part of the taxable year, the credit allowed to married persons shall be divided equally between them subject to the proration provided in subdivision (e).
(b)For spouses, if each spouse maintained a separate place of residence and resided in this state during the entire taxable year, each spouse will be allowed one-half the full credit allowed to married persons provided in subdivision (a).
(c)For purposes of this section, a qualified renter means an individual who satisfies both of the following:
(1)Was a resident of this state, as defined in Section 17014.
(2)Rented and occupied premises in this state which constituted the individuals principal place of residence during at least 50 percent of the taxable year.
(d)Qualified renter does not include any of the following:
(1)An individual who for more than 50 percent of the taxable year rented and occupied premises that were exempt from property taxes, except that an individual, otherwise qualified, is deemed a qualified renter if the individual or the individuals landlord pays possessory interest taxes, or the owner of those premises makes payments in lieu of property taxes that are substantially equivalent to property taxes paid on properties of comparable market value.
(2)An individual whose principal place of residence for more than 50 percent of the taxable year is with another person who claimed that individual as a dependent for income tax purposes.
(3)An individual who has been granted or whose spouse has been granted the homeowners property tax exemption during the taxable year. This paragraph does not apply to an individual whose spouse has been granted the homeowners property tax exemption if each spouse maintained a separate residence for the entire taxable year.
(e)An otherwise qualified renter who is a nonresident for any portion of the taxable year shall claim the credits set forth in subdivision (a) at the rate of one-twelfth of those credits for each full month that individual resided within this state during the taxable year.
(f)A person claiming the credit provided in this section shall, as part of that claim, and under penalty of perjury, furnish that information as the Franchise Tax Board prescribes on a form supplied by the board.
(g)The credit provided in this section shall be claimed on returns in the form as the Franchise Tax Board may from time to time prescribe.
(h)For purposes of this section, premises means a house or a dwelling unit used to provide living accommodations in a building or structure and the land incidental thereto, but does not include land only, unless the dwelling unit is a mobilehome. The credit is not allowed for any taxable year for the rental of land upon which a mobilehome is located if the mobilehome has been granted a homeowners exemption under Section 218 in that year.
(i)This section shall become operative on January 1, 1998, and applies to any taxable year beginning on or after January 1, 1998.
(j)For each taxable year beginning on or after January 1, 1999, the Franchise Tax Board shall recompute the adjusted gross income amounts set forth in subdivision (a). The computation shall be made as follows:
(1)The Department of Industrial Relations shall transmit annually to the Franchise Tax Board the percentage change in the California Consumer Price Index for all items from June of the prior calendar year to June of the current year, no later than August 1 of the current calendar year.
(2)The Franchise Tax Board shall compute an inflation adjustment factor by adding 100 percent to the portion of the percentage change figure which is furnished pursuant to paragraph (1) and dividing the result by 100.
(3)The Franchise Tax Board shall multiply the amount in subparagraph (B) of paragraph (1) of subdivision (a) for the preceding taxable year by the inflation adjustment factor determined in paragraph (2), and round off the resulting products to the nearest one dollar ($1).
(4)In computing the amounts pursuant to this subdivision, the amounts provided in subparagraph (A) of paragraph (1) of subdivision (a) shall be twice the amount provided in subparagraph (B) of paragraph (1) of subdivision (a).
(k)(1) It is the intent of the Legislature to comply with Section 41.(k)(1)For the purpose of complying with Section 41, the Legislature finds and declares the following:
(A)The specific goal, purpose, and objective of the act adding this subdivision is to expand availability of the existing renters credit to compensate low- and middle-income renters 62 years of age or older for the increasing rates of rent throughout the State of California.
(B)The detailed performance indicators for the Legislature to use in determining whether the credit meets the goal, purpose, and objective described in subparagraph (A) is the number of taxpayers who utilized the credit and the average dollar amount of credits claimed.
(2)To measure whether the credit achieves its intended purpose, for those taxable years for which the amount of credit under clause (ii) of subparagraph (A) and clause (ii) of subparagraph (B) of paragraph (1) of subdivision (a) applies, the Franchise Tax Board shall prepare a written report on the performance indicators described in subparagraph (B) of paragraph (1).
(3)The Franchise Tax Board shall provide the written report prepared pursuant to paragraph (2) to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, and the Senate and Assembly Committees on Revenue and Taxation. The report shall be submitted in compliance with Section 9795 of the Government Code, and no later than May 1, 2027, and each May 1 thereafter.
(4)The disclosure requirements of this subdivision shall be treated as an exception to Section 19542.
SEC. 3.If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.
SEC. 4.Notwithstanding Section 2229 of the Revenue and Taxation Code, no appropriation is made by this act and the state shall not reimburse any local agency for any property tax revenues lost by it pursuant to this act.
SEC. 5.This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
(a)The homeowners property tax exemption is in the amount of the assessed value of the dwelling specified in this section, as authorized by subdivision (k) of Section 3 of Article XIII of the California Constitution. That exemption amount shall be in the amount of seven thousand dollars ($7,000) of the full value of the dwelling. as follows:
(1)Except as provided in paragraph (2), seven thousand dollars ($7,000) of the full value of the dwelling.
(2)Beginning with the lien date for the 202627 fiscal year, fifty thousand dollars ($50,000) of the full value of the dwelling for a homeowner who is 62 years of age or older.
(b)(1)The exemption does not extend 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, nor does it apply to property on which an owner receives the veterans exemption.
(2)Notwithstanding paragraph (1), 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. Except as provided in paragraph (3), when a dwelling has been totally destroyed, and thus no dwelling exists on the lien date, the exemption provided by this section shall not be applicable until the structure has been replaced and is occupied as a dwelling.
(3)A dwelling that was totally destroyed in a disaster for which the Governor proclaimed a state of emergency, that qualified for the exemption provided by this section prior to the commencement date of the disaster and that has not changed ownership since the commencement date of the disaster, shall be deemed occupied by the person receiving the exemption on the lien date 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.
(4)Notwithstanding paragraph (1), 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 all of the following conditions are met:
(A)The person would occupy the dwelling if they were not confined to the hospital or other care facility.
(B)The person intends to return to the dwelling when possible to do so.
(C)The dwelling is not rented or leased to a person that is not described in Section 267(c)(4) of Title 26 of the United States Code.
(c)For purposes of this section, all of the following apply:
(1)Owner includes a person purchasing the dwelling under a contract of sale or who holds shares or membership in a cooperative housing corporation, which holding is a requisite to the exclusive right of occupancy of a dwelling.
(2)(A)Dwelling means a building, structure, or other shelter constituting a place of abode, whether real property or personal property, and any land on which it may be situated. A two-dwelling unit shall be considered as two separate single-family dwellings.
(B)Dwelling includes the following:
(i)A single-family dwelling occupied by an owner thereof as their principal place of residence on the lien date.
(ii)A multiple-dwelling unit occupied by an owner thereof on the lien date as their principal place of residence.
(iii)A condominium occupied by an owner thereof as their principal place of residence on the lien date.
(iv)Premises occupied by the owner of shares or a membership interest in a cooperative housing corporation, as defined in subdivision (i) of Section 61, as their principal place of residence on the lien date. Each exemption allowed pursuant to this subdivision shall be deducted from the total assessed valuation of the cooperative housing corporation. The exemption shall be taken into account in apportioning property taxes among owners of shares or membership interests in the cooperative housing corporations so as to benefit those owners who qualify for the exemption.
(d)The exemption provided for in subdivision (k) of Section 3 of Article XIII of the California Constitution shall first be applied to the building, structure, or other shelter and the excess, if any, shall be applied to any land on which it may be located.
SEC. 2.Section 17053.5 of the Revenue and Taxation Code is amended to read:17053.5.(a)(1)For a qualified renter, there shall be allowed a credit against the renters net tax, as defined in Section 17039. The amount of the credit shall be as follows:
(A)(i)For spouses filing joint returns, heads of household, and surviving spouses, as defined in Section 17046, the credit shall shall, except as provided in clause (ii), be equal to one hundred twenty dollars ($120) if adjusted gross income is fifty thousand dollars ($50,000) or less.
(ii)For taxable years beginning on or after January 1, 2026, the credit calculated under this subparagraph shall be increased to five hundred fifty dollars ($550) if one of the spouses, including the deceased spouse, or the head of household is 62 years of age or older.
(B)(i)For other individuals, the credit shall shall, except as provided in clause (ii), be equal to sixty dollars ($60) if adjusted gross income is twenty-five thousand dollars ($25,000) or less.
(ii)For taxable years beginning on or after January 1, 2026, the credit calculated under this subparagraph shall be increased to two hundred seventy-five dollars ($275) if the individual is 62 years of age or older.
(2)Except as provided in subdivision (b), spouses shall receive but one credit under this section. If the spouses file separate returns, the credit may be taken by either or equally divided between them, except as follows:
(A)If one spouse was a resident for the entire taxable year and the other spouse was a nonresident for part or all of the taxable year, the resident spouse shall be allowed one-half the credit allowed to married persons and the nonresident spouse shall be permitted one-half the credit allowed to married persons, prorated as provided in subdivision (e).
(B)If both spouses were nonresidents for part of the taxable year, the credit allowed to married persons shall be divided equally between them subject to the proration provided in subdivision (e).
(b)For spouses, if each spouse maintained a separate place of residence and resided in this state during the entire taxable year, each spouse will be allowed one-half the full credit allowed to married persons provided in subdivision (a).
(c)For purposes of this section, a qualified renter means an individual who satisfies both of the following:
(1)Was a resident of this state, as defined in Section 17014.
(2)Rented and occupied premises in this state which constituted the individuals principal place of residence during at least 50 percent of the taxable year.
(d)Qualified renter does not include any of the following:
(1)An individual who for more than 50 percent of the taxable year rented and occupied premises that were exempt from property taxes, except that an individual, otherwise qualified, is deemed a qualified renter if the individual or the individuals landlord pays possessory interest taxes, or the owner of those premises makes payments in lieu of property taxes that are substantially equivalent to property taxes paid on properties of comparable market value.
(2)An individual whose principal place of residence for more than 50 percent of the taxable year is with another person who claimed that individual as a dependent for income tax purposes.
(3)An individual who has been granted or whose spouse has been granted the homeowners property tax exemption during the taxable year. This paragraph does not apply to an individual whose spouse has been granted the homeowners property tax exemption if each spouse maintained a separate residence for the entire taxable year.
(e)An otherwise qualified renter who is a nonresident for any portion of the taxable year shall claim the credits set forth in subdivision (a) at the rate of one-twelfth of those credits for each full month that individual resided within this state during the taxable year.
(f)A person claiming the credit provided in this section shall, as part of that claim, and under penalty of perjury, furnish that information as the Franchise Tax Board prescribes on a form supplied by the board.
(g)The credit provided in this section shall be claimed on returns in the form as the Franchise Tax Board may from time to time prescribe.
(h)For purposes of this section, premises means a house or a dwelling unit used to provide living accommodations in a building or structure and the land incidental thereto, but does not include land only, unless the dwelling unit is a mobilehome. The credit is not allowed for any taxable year for the rental of land upon which a mobilehome is located if the mobilehome has been granted a homeowners exemption under Section 218 in that year.
(i)This section shall become operative on January 1, 1998, and applies to any taxable year beginning on or after January 1, 1998.
(j)For each taxable year beginning on or after January 1, 1999, the Franchise Tax Board shall recompute the adjusted gross income amounts set forth in subdivision (a). The computation shall be made as follows:
(1)The Department of Industrial Relations shall transmit annually to the Franchise Tax Board the percentage change in the California Consumer Price Index for all items from June of the prior calendar year to June of the current year, no later than August 1 of the current calendar year.
(2)The Franchise Tax Board shall compute an inflation adjustment factor by adding 100 percent to the portion of the percentage change figure which is furnished pursuant to paragraph (1) and dividing the result by 100.
(3)The Franchise Tax Board shall multiply the amount in subparagraph (B) of paragraph (1) of subdivision (a) for the preceding taxable year by the inflation adjustment factor determined in paragraph (2), and round off the resulting products to the nearest one dollar ($1).
(4)In computing the amounts pursuant to this subdivision, the amounts provided in subparagraph (A) of paragraph (1) of subdivision (a) shall be twice the amount provided in subparagraph (B) of paragraph (1) of subdivision (a).
(k)(1)It is the intent of the Legislature to comply with Section 41.
SEC. 3.If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.
SEC. 4.Notwithstanding Section 2229 of the Revenue and Taxation Code, no appropriation is made by this act and the state shall not reimburse any local agency for any property tax revenues lost by it pursuant to this act.
SEC. 5.This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
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Date
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Status
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|---|---|
| Feb 2, 2026 | Returned to Secretary of Senate pursuant to Joint Rule 56. |
| May 14, 2025 | May 14 set for first hearing. Failed passage in committee. (Ayes 1. Noes 1. Page 1082.) Reconsideration granted. |
| May 1, 2025 | From committee with author's amendments. Read second time and amended. Re-referred to Com. on REV. & TAX. |
| Mar 18, 2025 | Set for hearing May 14. |
| Mar 5, 2025 | Referred to Com. on REV. & TAX. |
| Feb 21, 2025 | From printer. May be acted upon on or after March 23. |
| Feb 20, 2025 | Introduced. Read first time. To Com. on RLS. for assignment. To print. |
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Date
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Description
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Location
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Votes
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|---|---|---|---|---|
| May 14, 2025 | [First] hearing set for [05-14-2025]: Failed passage in Committee. Reconsideration granted | Senate Standing Committee on Revenue and Taxation |
Passed |
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| May 14, 2025 | Do pass, but first be re-referred to the Committee on [Appropriations] | Senate Standing Committee on Revenue and Taxation |
Failed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
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Organization
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Position
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Date
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|---|---|---|
| Board of Equalization Chair, Senator Ted Gaines | ** Support | |
| California Apartment Association | ** Support | |
| California Association Of Realtors | ** Support | |
| California Tax Reform Association | ** Against | |
| California Teachers Association | ** Against | |
| Community Action Partnership of Kern | ** Support | |
| Housing Authority of the County of Kern | ** Support | |
| Howard Jarvis Taxpayers Association | ** Support | |
| Independent Living Center of Kern County | ** Support | |
| Los Angeles County Taxpayers Association | ** Support | |
| Sacramento Taxpayers Association | ** Support | |
| Southern California Rental Housing Association | ** Support |
SENATE COMMITTEE ON REVENUE AND TAXATION
Senator Jerry McNerney, Chair
2025 - 2026 Regular
Bill No: | SB 566 | Hearing Date: | 5/14/25 |
Author: | Grove | Tax Levy: | Yes |
Version: | 5/1/25 Amended | Fiscal: | Yes |
Consultant: | Grinnell | ||
Real property tax: Personal Income Tax Law: homeowners’ exemption: renter’s credit
Enhances the value of the homeowners’ property tax exemption and renter’s income tax credit for taxpayers over the age of 62.
Background
Property taxation. Section One of Article XIII of the California Constitution provides that all property is taxable unless explicitly exempted by the Constitution or federal law. The Constitution limits the maximum amount of any ad valorem tax on real property at 1% of full cash value, plus any locally-authorized bonded indebtedness (Article XIIIA, as added by Proposition 13 of 1978). Assessors reappraise property whenever it is purchased, newly constructed, or when ownership changes. The Constitution and statute define those terms.
The Homeowners’ Exemption. The Constitution 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. State law precludes the exemption for 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 Legislature enacted the homeowners’ exemption in 1968, and increased it to its current level in 1972, effective in 1974. The Constitution s $7,000 is a minimum; despite numerous attempts, the exemption has not been increased in more than 50 years.
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.
Tax expenditures. California law allows various income tax credits, deductions, exemptions, and exclusions. The Legislature enacts such tax incentives either to compensate taxpayers for incurring certain expenses, such as child adoption, or to influence certain behavior, such as charitable giving. The Legislature uses tax incentives to encourage taxpayers to do something that, but for the tax credit, they would otherwise not do. The Department of Finance is required annually to publish a list of tax expenditures, currently totaling around $91.5 billion per year.
Renter’s credit. The state’s Personal Income Tax law allows eligible taxpayers who rent their principal residence to claim the Renter’s Tax Credit on their Personal Income Tax Return. The Legislature enacted the credit in 1972 as part of a comprehensive property tax reform program that increased the homeowner's exemption from property tax, which reduces the property tax on owner-occupied property. Specifically, because renters do not directly benefit from property tax reductions, the Legislature enacted the credit to provide a direct benefit to renters. To maintain parity, the Legislature significantly increased the credit in 1979, shortly after the approval of Proposition 13, which capped property tax rates and limited reassessment. The Legislature suspended the credit for the 1993 through 1997 taxable years, but reinstated it beginning with the 1998 taxable year. To qualify for the renter’s credit, the individual must be a California resident for all or part of the tax year, and rented and occupied California premises constituting their principal place of residence for at least 50% of the taxable year.
State law requires an annual inflation adjustment of the credit’s Annual Gross Income (AGI) limitations, but does not annually increase the credit amount for inflation, which has remained at its current amount since 1979. The credit is nonrefundable, which means that the credit can reduce a taxpayer’s tax liability to zero, but it cannot result in a refund. For the 2024 taxable year, the credit is equal to:
- $60 for filers that are single or married filing separately with an AGI of $52,421 or less; and
- $120 for filers that are married filing jointly, head of household, or a qualified widow(er) with an AGI of $104,842 or less.
The author wants to grant tax relief to those over the age of 62, specifically to homeowners by increasing the amount of the homeowners’ exemption, and for renters by increasing the renter’s credit.
Proposed Law
SB 566 expands two tax benefits for taxpayers over the age of 62.First, the measure increases the homeowners’ exemption from property tax from $7,000 to $50,000 for taxpayers over the age of 62, effective for the lien date for the 2026-27 property tax year.
Second, for taxable years beginning in 2026, increase the Renter’s Credit for taxpayers who are aged 62 or older using the same income thresholds:
- From $120 to $550 for married filing jointly, head of household, or surviving spouse if one of the spouses, including the deceased, meets the age requirement.
- From $60 to $275 for single or married filing separately, who meet the age requirement.
The bill also makes legislative findings and declarations to comply with Section 41 of the Revenue and Taxation Code.
State Revenue Impact
According to the Board of Equalization (BOE), SB 566’s increase the homeowners’ exemption increases the state reimbursement for the homeowners’ exemption approximately $817 million annually. BOE notes that the loss is likely to increase over time as the number of qualified claimants increases due to the aging population.
The Franchise Tax Board estimates that SB 566’s changes to the renter’s credit result in revenue losses of $47 million in 2026-27, and $50 million in 2027-28.
Comments
1. Purpose of the bill. According to the author, “Our constituents have been clear that making California more affordable should be a high priority for the legislature. California has some of the highest energy prices, utility prices, gasoline prices, and housing prices in the country. Californians across the state are struggling to afford the high cost of living. The Homeowners Exemption and Renter’s Tax Credit were originally established by the California Legislature to help offset these financial burdens. However, the credit amounts have remained unchanged for over 45 years and no longer reflect the current economic reality. SB 566 aims to support our senior citizens who are increasingly at risk of falling into poverty. The bill proposes increasing the Homeowners Exemption from $7,000 to $50,000, and raising the Renter’s Tax Credit from $60 to $275 for single filers, and from $120 to $550 for joint filers. These updates account for inflation since 1972 and are targeted specifically at individuals aged 62 and older. Every dollar saved can make a significant difference, especially for seniors on fixed incomes.”
2. Credits. SB 566 takes a two-pronged approach to granting tax relief to Californians over the age of 62: First by increasing the homeowners’ exemption (which only benefits property owners) and second through a renter’s credit, which only qualified renters can claim. However, as a nonrefundable credit, the current Renter’s Tax Credit would likely have little benefit for the state’s poorest families. Since California has a progressive income tax and a significant dependent exemption credit, many low-income families may not be required to file a return, and if so, have little to no income tax liability. If the tax credit was refundable, it could provide benefit to low- and middle-income taxpayers, but both FTB and the Legislative Analyst’s Office agree that refundable credits can increase refund fraud and identity theft. Historically, both the Internal Revenue Service and FTB have experienced identity fraud and improper claims with refundable credits. Additionally, if a refund is determined to be fraudulent, FTB cannot likely recover the refund because an unknown person filed the tax return using a stolen or fraudulent identity.
3. Make it worth it. Much like proposals to enhance the renter’s credit, the Legislature has considered several proposals in recent years to increase the homeowner’s exemption from property tax. Because the dollar value of the current exemption is only around $70 ($7,000 at the 1% property tax rate), any increase would need to be significant enough to induce taxpayers to file a claim for the enhanced exemption, as the current claim form does not require a taxpayer to state their age. SB 566’s exemption would have a value of around $500, a seven-fold increase. While the additional benefit would help those over the age of 62 who struggle with increased costs of living, the exemption applies solely to property owners, and applies uniformly regardless of the property owner’s income. As a result, some of the bill’s benefits could accrue to taxpayers who while over the age of 62, have sufficient wealth to pay property taxes, even in a time of higher costs.
4. Revenue loss. Existing tax law provides various credits, deductions, exclusions, and exemptions for certain taxpayers. Since the Legislature enacts these items to accomplish some governmental purpose, which has a cost — in the form of foregone revenues — state law refers to them as "tax expenditures." This bill would increase an existing tax expenditure resulting in foregone General Fund revenue in the first year it’s enacted. As a result, the state will have to reduce spending or increase taxes to match the foregone revenue. The Committee may wish to consider whether SB 566 is a cost-effective way to help Californians over the age of 62 manage higher costs.
5. No sunset. Generally, when the Legislature enacts a new or enhanced tax benefit, it does so for a finite period of time by inserting a sunset provision. A future Legislature can then evaluate the tax expenditure’s performance during its effective period while considering whether to extend, modify, or let it expire. However, SB 566 does not contain a sunset provision on either its property tax exemption increase or its enhanced renters’ credit amounts.
6. Section 41. Section 41 of the Revenue and Taxation Code requires any bill enacting a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, along with data collection and reporting requirements (SB 1335, Leno, 2014). While property tax expenditures are not subject to Section 41, SB 566’s changes to the renters’ credit are. SB 566 states as its goal, purpose, and objective to expand the availability of the existing renter’s credit to compensate low- and middle-income renters 62 years of age or older for the increasing rates of rent throughout the State of California. The measure identifies the number of taxpayers who utilized the credit and the average dollar amount of credits claimed as performance indicators, and directs FTB to issue a report on or before May 1, 2027, and each May 1 thereafter, detailing the amount of credits claimed and number of taxpayers allowed a credit.
7. Related legislation. Although not considered by the Revenue & Taxation Committee, SB 681 (Wahab) increases the renter’s credit to either $250 for a taxpayer without dependents, or $500 for a taxpayer with dependents, regardless of filing status, among other changes. The measure also makes the credit refundable if the Legislature appropriates refunds. The bill was approved by the Committees on Housing and Judiciary, and is currently pending in the Committee on Appropriations.
Support and Opposition
(5/9/25)
Support: Board of Equalization Chair, Senator Ted Gaines
California Apartment Association
California Association of Realtors
Community Action Partnership of Kern
Housing Authority of the County of Kern
Howard Jarvis Taxpayers Association
Independent Living Center of Kern County
Los Angeles County Taxpayers Association
Sacramento Taxpayers Association
Southern California Rental Housing Association
Opposition: California Tax Reform Association
California Teachers Association
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Discussed in Hearing
18MIN
Senate Standing Committee on Revenue and Taxation
Bill Author
Bill Co-Author(s):
