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AB-3141 Property taxation: possessory interests: seaport environmental improvements.(2023-2024)

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Date Published: 03/22/2024 04:00 AM
AB3141:v98#DOCUMENT

Amended  IN  Assembly  March 21, 2024

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Assembly Bill
No. 3141

Introduced by Assembly Member Gipson

February 16, 2024

An act to amend Section 107.10 of the Revenue and Taxation Code, relating to taxation. An act to add Section 107.15 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 3141, as amended, Gipson. Property taxation: possessory interests: publicly owned housing project. seaport environmental improvements.
Existing property tax law requires that all property subject to tax be assessed at its full cash value, and includes certain possessory interests among those property interests that are subject to tax. Existing property tax law defines a taxable possessory interest to be a use that is independent, durable, and exclusive. Existing property tax law specifies that, specifies, for purposes of the definition of a taxable possessory interest, there is no independent possession or use of land or improvements if various types of possession or use that are not considered independent possession or use of land, including when that possession or use is a tenancy in a residential unit of a publicly owned housing project by a low-income household, as specified.

This bill would make a nonsubstantive change to the provision relating to publicly owned housing projects.

This bill would provide, for the 2025–26 fiscal year to the 2029–30 fiscal year, inclusive, that there is no independent or exclusive possession or use of land or improvements if that possession or use is of any infrastructure at a public seaport, as defined, that is newly constructed on or after January 1, 2025, as described, as part of a nonrevenue-generating environmental improvement, as defined. The bill would, among other things, deem the construction or installation made or used for the operation of any fully automated cargo handling equipment, as defined, to be independent, durable, and exclusive, as specified. The bill would continue to exclude a possessory interest from exclusion under the bill’s provisions after the 2029–30 fiscal year, if the interest is excluded prior to the inoperative date of the bill’s provisions, until there is a subsequent change in ownership of the interest or until the date the nonrevenue-generating environmental improvement is used for the operation of any fully automated cargo handling equipment, whichever is earlier. By requiring local tax officials to administer the bill’s provisions, the bill would impose a state-mandated local program. The bill would make related legislative findings and declarations.
Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
This bill would specify that it does not authorize a tax expenditure.
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.
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.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NOYES  

The people of the State of California do enact as follows:


SECTION 1.

 It is the intent of the Legislature that Section 107.15 of the Revenue and Taxation Code, as added by this act, be enacted to encourage and to provide incentives for the development, construction, and installation of publicly owned infrastructure in support of the improvement of air quality or water quality at intermodal freight transportation systems at public seaports, independent of existing lease terms and revenue bonding capacity, by clarifying when newly constructed infrastructure that is improved, constructed, or installed is not independent and exclusive possession.

SEC. 2.

 The Legislature finds and declares all of the following:
(a) California’s public seaports exist on granted state tidelands held in trust for the people of the state and managed for the benefit of all of the people of California as a statewide interest and exist on property managed by a local government or a local port or harbor district as a dedicated use of publicly owned and operated property.
(b) California’s public seaports are enterprise agencies that rely on revenues from cargo volumes and long-term lease revenues to underwrite revenue bonds that finance the infrastructure necessary to facilitate the state’s and nation’s commerce and trade. These infrastructure investments also include improvements to real property, which are necessary to better the environment but do not further the independent and exclusive use of seaport property by tenants. Many of these improvements are necessary in order to execute and administer the policies, statutes, ordinances, rules, and regulations of the state, which is also the grantor and trustor public owner of the property.
(c) These improvements to real property for investments to improve the environment also typically do not generate additional revenues for the seaports, and often increase the operational expenses of tenants. This means that these are infrastructure expenses that are not directly financed through revenue bonding backed by revenues by leaseholders or a business-driven management or operation of the property separate or apart from the public purposes of the property and its improvements.
(d) In addition, many of these investments are necessary to be made in the middle of an existing lease term or operating agreement with a port tenant. This means that these costs to both the port and the port’s tenant were not accounted for in the initial lease terms or associated revenue bonding underwriting and planning separate and apart from the initiation of new policies, statutes, ordinances, rules, or regulations at the time of the lease execution.
(e) Many improvements to real property for investments to improve the environment are not made for the benefit and enjoyment of the tenant and the tenant does not maintain exclusive occupancy of the use of the environmental improvements.
(f) The possessory interests held by port tenants on public seaport property generate substantial property taxes.
(g) Improvements made to the publicly-owned infrastructure at public seaports in support of bettering air quality and water quality, when the improvements are for uses that are not independent and exclusive, are made in order to facilitate improvements to the environment and not to impose higher tax burdens upon the tenants at public seaports as a result of a reassessment event during the term of possession of the public property. Higher tax burdens upon the tenants at public seaports as a result of these improvements thereby create substantial indirect increases in the costs of improvement of the state’s environment.
(h) The imposition of higher taxes on tenants may increase costs on discretionary intermodal cargo, which may lead to its diversion to another maritime gateway. This diversion of intermodal cargo may, in turn, both increase greenhouse gases and reduce seaport revenues. These revenues are necessary to fund and finance public seaports’ infrastructure improvements, which better environmental quality.
(i) The full value of the improvements made by the public seaports in the construction or installation of infrastructure as part of a nonrevenue-generating environmental improvement will be captured on the tax rolls at a change in ownership reassessment event where the resulting economic impact of new construction that results in nonindependent and nonexclusive uses will naturally be reflected in either increases or decreases to assessed value.

SEC. 3.

 Section 107.15 is added to the Revenue and Taxation Code, to read:

107.15.
 (a) (1) Except as provided in subdivision (b), for purposes of paragraph (1) of subdivision (a) of Section 107, there is no independent possession or use of land or improvements if that possession or use is of any infrastructure at a public seaport that is newly constructed on or after January 1, 2025, as part of a nonrevenue-generating environmental improvement.
(2) Except as provided in subdivision (b), for purposes of paragraph (3) of subdivision (a) of Section 107, there is no exclusive possession or use of land or improvements if that possession or use is of any infrastructure at a public seaport that is newly constructed on and after January 1, 2025, as part of a nonrevenue-generating environmental improvement.
(b) (1) This section shall not apply to personal property, including cargo handling equipment, and no tax benefit is intended to be conferred under this section on the basis of ownership or operation of any personal property, including cargo handling equipment.
(2) Notwithstanding any other provision of this section, the construction or installation of the real property improvements shall be deemed to be independent, durable, and exclusive if the construction or installation is made or used for the operation of any fully automated cargo handling equipment. This paragraph shall not be construed to limit the use of devices that support human-operated cargo handling equipment, including, but not limited to, equipment to evaluate the utilization and environmental benefits of that human-operated equipment.
(c) (1) This section shall not be construed to restrict, and shall not result in any restriction of, any assessment procedures or requirements pursuant to this part for property that is not subject to the payment of a possessory interest tax at the time of the completion of the construction or installation of the improvements.
(2) An improvement subject to this section shall be deemed to be constructed or installed on or after January 1, 2025, if the construction or installation is completed on or after that date, regardless of when the construction or installation of the improvement commenced or when the associated building permit was issued for that construction or installation.
(d) For purposes of this section, the following definitions apply:
(1) “Fully automated cargo handling equipment” means cargo handling equipment that is remotely operated or remotely monitored with or without the exercise of human intervention or control.
(2) “Infrastructure” means an improvement to real property.
(3) “New construction” has the same meaning as in Section 70.
(4) “Nonrevenue-generating environmental improvement” means any improvement to real property that is all of the following:
(A) The improvement is necessary to facilitate an improvement in air quality or water quality at the seaport or in the environment impacted by seaport operations.
(B) The principal purpose of the improvement does not include producing or otherwise generating revenue for the public seaport.
(C) The improvement is on property that is subject to a possessory interest tax payable by a tenant or lessee of the seaport at the time the construction or installation of the improvement is completed.
(5) “Public seaport” means any local public agency that owns, operates, or manages seaport, intermodal, rail, industrial transportation, or marine terminal assets on granted state tidelands or within the boundaries of its harbor district established pursuant to the Harbors and Navigation Code.
(e) (1) This section shall apply to property tax lien dates for the 2025–26 fiscal year to the 2029–30 fiscal year, inclusive.
(2) Notwithstanding paragraph (1), a possessory interest that qualifies for an exclusion under this section prior to the inoperative date of this section pursuant to paragraph (1) shall continue to be excluded after the 2029–30 fiscal year, until there is a subsequent change in ownership of the interest or until the date the nonrevenue-generating environmental improvement is used for the operation of any fully automated cargo handling equipment, whichever is earlier.

SEC. 4.

 Notwithstanding Section 41 of the Revenue and Taxation Code, this act does not authorize a tax expenditure.

SEC. 5.

 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. 6.

 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. 7.

 This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
SECTION 1.Section 107.10 of the Revenue and Taxation Code is amended to read:
107.10.

For purposes of paragraph (1) of subdivision (a) of Section 107, there is no independent possession or use of land or improvements if the possession or use is a tenancy in a residential unit of a publicly owned housing project by a low-income household, as defined by Section 50079.5 of the Health and Safety Code, rented at affordable rents as described in Section 50053 of the Health and Safety Code.