Senate Standing Committee on Revenue and Taxation

Thank you, Mister chair and Members, I accept the suggested Committee amendments, which merely add co authors to the Bill. I want to thank the Committee and the Committee staff for their work on the Bill. This Bill has received wide bipartisan support and has had no votes so far.

AB 1868 seeks to help low income homeowners in California be able to be able to access the opportunities that home ownership can afford, the stability, the building of equity, and to make sure that we have policies across the state that are that as intentional, to make sure that we have those opportunities. AB 1868.

Addresses the wide variance between jurisdictions about how they assess the value of affordable homes sold to and occupied by low income families that participate in low to no interest mortgage programs.

Basically what happens is in many communities, when they're assessing these rates, they look at the person who's going to be living in the home, that low income person. But some jurisdictions are looking at the entities that are helping to build the home, which can be cities, they can be nonprofits, which, of course, are much higher resourced.

Their rates based on that, this can create a barrier to producing these homes in some communities, thereby robbing low income residents in these communities of the opportunity to have one of these units. So this Bill would address that disparity and make sure that we are looking at the people we should be looking at, which is the ultimate owner of the home, being the low income resident. Our sponsor of the Bill is Habitat for Humanity.

Amendments taken in the Assembly remove the opposition of the California Assessors Association, who are now neutral on the Bill. There is no known opposition. And with that, testifying with me here today is someone from Habitat for Humanity, Debbie Arakal, who's the Executive Director.

Before we go to your witness, Debbie, we're gonna establish a quorum. So, secretary, please call the Members.

[Roll Call]

Okay, a quorum is present. We look forward to your lead witness. Debbie, tell me your last name again, great. Thanks for being here. We have two minutes.

Carrie Glazer and Committee Members, thank you for the opportunity to share with you today. My name is Debbie Arakel and I'm the Executive Director with Habitat for Humanity California, and I'm here representing the views of our Habitat for Humanity affiliates serving 42 counties throughout the state.

And we are proud to sponsor AB 1868 at habitats across California, we've built thousands of homes and are in the process of building hundreds more. These are entry level deed restricted homes to own habitat. Home buyers earn between 30 and 80% area median income, and we are also proud to share that 83% of our habitat homeowners are black, indigenous, and people of color. Habitat is uniquely positioned in this homeownership space.

As a builder, developer, mortgage lender and community builder, we've had situations when the property taxes were assessed with minimal consideration to the affordability and deed restrictions, which results in over assessed values with much higher property taxes than estimated rather than the proportion to the first mortgage.

This requires a mortgage reduction in order to keep the home buyers monthly payments affordable, burdens Habitat for Humanity or other nonprofit developers, negatively impacting our budgets and leaving less funding to build more homes.

This Bill codifies a best practice administered by many counties already and supports the assessor's commitment to consistent and uniform approaches to assessing deed restricted properties. As a 501 nonprofit affordable home builder and lender, we're honored to sponsor AB 1868 and join assemblymember Laura Friedman to achieve equitable property taxation on affordable owner occupied homes. I am grateful to the chair and the Committee for your consideration, and I urge an aye vote. Thank you.

Thank you, Miss Arakel, for being here. Anyone else want to give a me too in favor of this measure? Come on up to the microphone.

Good morning, chair and Members. Catherine Charles, on behalf of Housing Action Coalition in support, thank you.

Anyone else here in the hearing room? All right, we'll go to opposition. Is there anyone here in opposition to this measure? Please come forward. Seeing no one coming forward, we'll bring the matter back to the Committee for questions or comments. Any questions or comments? I recognize a motion from Senator Bradford in just a moment. Senator, Assembly Member Friedman, would you like to close?

Just, I would request an aye vote, and I thank everyone for your support.

Great. Happy to support it today. Thank you for your work in this area and thank you to Habitat for decades and decades of great service to our lower income community and helping them get home ownership. So thank you. I'm going to recognize a motion from Senator Bradford. This would be do pass as amended to appropriations. Secretary, please call the roll.

[Roll Call]

We'll put that matter on call for absent Members. Members, why don't we take up the consent calendar? Respect all the folks that are here. Senator Bradford has moved the consent calendar. [Consent Calendar] Secretary, please call the roll on the consent calendar.

[Roll Call}

We're going to put that matter on call for absent Members. We'll move next to our last item on our agenda today. This is file item 10. This is item number 10. AJR 15 by Assemblymember Irwin. Thank you for being here this morning. And the floor is yours whenever you're ready.

Good morning, Senators. Today I'm presenting AJR 15, which urges Congress to revisit the misguided decision to cap state and local income taxes at 10,000 for both individuals and married couples. The Salt deduction has been a feature of the federal tax code that dates back to the very first income tax that was imposed during the civil war.

The logic then, which still applies today, is that tax payments to state and local government is not optional. The Federal Government should not be taxing income that's already spoken for and which people have no control over. Doing so would constitute a tax upon a tax.

By recognizing this simple fact, the SALT deduction reflects a key principle of federalism and non interference by the Federal Government in state and local affairs. Only recently, in 2017, did this consensus give way.

When TCJA was passed by Congress, some in DC were not shy about using the SALT deduction as a tool to put their finger on the scale and punish high tax states. This was not about thoughtful tax policy, as evidenced by the fact that married couples and individual filers are allowed the same deduction amount.

After TCJA went into effect, we heard loud and clear from our constituents people that had previously received refunds on their federal taxes were now surprised that they owed money to the IR's, even though their incomes stayed the same.

Overwhelmingly, I heard from married couples that they were rightfully offended, that they would have been better off to file separately. AJR 15 urges Congress to fix this penalty on married couples and lift the salt deduction consistent with how it has operated decades prior to the TCJA. With me today is Vanessa Chavez from the California Association of Realtors.

Thank you, Assemblymember. We'll go to your lead witness. Welcome.

Chair and Member is Vanessa Chavez with the California Association of Realtors in support of AJR 15. This measure calls on Congress and stresses the urgency of repealing the SALT cap, which was enacted under the Trump Administration. The change penalized high cost states such as California, New York and New Jersey by limiting the state and local taxes that a taxpayer is able to deduct.

For example, in San Francisco, the median household income as reported by the US Census Bureau states that it is roughly $136,000 as compared to the national figure, which is half of that amount coming in at roughly $74,000. The SALT deduction includes property income and sales tax.

To be more specific, a taxpayer who itemizes can deduct property taxes, but the taxpayer needs to choose between deducting income and sales taxes. Taxpayers of states with high income taxes typically opt to deduct their state and local income taxes, while taxpayers of states with high sales tax typically deduct their sales taxes.

Generally, taxpayers deduct property and income taxes using the SALT deduction. One of the more notable, if not most damaging, provisions in the Tax Cuts and Jobs Act was the limitation of the state and local taxes for taxpayers who file jointly, as the limitation is capped at $10,000, meaning that a taxpayer who files single has the same limit as two taxpayers who file together.

This change has led to disproportionately penalizing families in California. As a result, we have many families who are already dealing with the many hardships of these changes, and homeowners in California who are incurring the high cost of housing, which includes increased insurance costs and high interest rates, just to name a few.

The SALT cap creates a burden for our state's families, and reform is necessary to ensure the residents of the state are able to meet the basic needs of their families. For these reasons, we ask for your aye vote.

Thank you, Miss Chavez. Anyone else here in the hearing room would like to add on as a me too. In favor of this measure, please come forward. Alright. Seeing none, we'll move to opposition. Is there anyone here in opposition to this measure? See now we'll bring the matter back to the Committee for questions or comments.

Assembly Member, thank you for your leadership in this area. I think that there's many that wish you well and us well in making these changes. And with that, I think I heard a motion from Senator Padilla.

Senator Dahle.

Excuse me, it was Senator Dahle.

Senator Dahle, we have bipartisan support. Yeah.

All right.

Bipartisan.

This would be that the matter be adopted and we refer to the Committee on Appropriations. Secretary, please call. oh, would you like to close?

I would like to say this Bill has received bipartisan support and has 68 co authors, so we all like it.

And Senator Dahle, which is cherry on top. All right, I'll debate having ceased secretary, please call the roll.

[Roll Call]

All right, we're going to move that Bill on call for the absent Members. Thank you to the Members who are here on time for completing our agenda today. Thank you. And we'll thank you. Thank you, Assembly Member. And we will open the roll on items that we've dealt with so that the newly arrived Members can vote.

And we ask those that are not here to please come on down so we can have your vote be recorded. So let us begin with the consent calendar. The secretary would open the roll on the consent calendar.

[Roll Call]

Put that on call for absent Members next to Assemblymember Friedman's Bill. This is Assembly Bill 1868. Please open the roll.

[Roll Call]

All right, so we're going to take a short recess as we wait for absent Members to arrive. Recess. The Revenue and Taxation Committee. We're going to go through the role for absent Members. We'll first begin with the consent calendar. Secretary, please open the roll on the consent calendar.

[Roll Call]

Leave that open for absent Members. We'll move next to file item number two. This is Assembly Bill 1868 by Assembly Member Friedman. Please open the roll.

[Roll Call]

Call for absent Members. And finally file item 10, AJR 15 by Assembly Member Irwin. Please open the roll.

[Roll Call]

We'll put that on call for absent Members and we'll go back to recess waiting for our final Member to join us. Committee on Revenue and Taxation. Back to order. So we can close the roll on the pending votes on the consent calendar. We're going to close the roll with a six to zero vote. On assemblymember Friedman's, 1868.

We're going to close the roll on a six to zero vote and AJR 15 by assemblymember Irwin. We're going to close the roll with a six to zero vote. Thank you all for participating. Thank you to the staff for all your great work and for the Members of the audience who've come to join us this morning. With that, the Committee is adjourned.