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AB-2711 Property tax revenue allocations: County of Orange: county equity amount.(2017-2018)

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Date Published: 03/20/2018 09:00 PM
AB2711:v98#DOCUMENT

Amended  IN  Assembly  March 20, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 2711


Introduced by Assembly Member Chen

February 15, 2018


An act to amend Section 110 of the Revenue and Taxation Code, relating to taxation. An act to add Section 97.80 to the Revenue and Taxation Code, relating to local government finance.


LEGISLATIVE COUNSEL'S DIGEST


AB 2711, as amended, Chen. Property taxation: assessment: full cash value. Property tax revenue allocations: County of Orange: county equity amount.
Existing property tax law requires the county auditor, in each fiscal year, to allocate property tax revenue to local jurisdictions in accordance with specified formulas and procedures, and generally requires that each jurisdiction be allocated an amount equal to the total of the amount of revenue allocated to that jurisdiction in the prior fiscal year, subject to certain modifications, and that jurisdiction’s portion of the annual tax increment, as defined. Existing property tax law also reduces the amounts of ad valorem property tax revenue that would otherwise be annually allocated to the county, cities, and special districts pursuant to these general allocation requirements by requiring, for purposes of determining property tax revenue allocations in each county for the 1992–93 and 1993–94 fiscal years, that the amounts of property tax revenue deemed allocated in the prior fiscal year to the county, cities, and special districts be reduced in accordance with certain formulas. Existing property tax law requires that the revenues not allocated to the county, cities, and special districts as a result of these reductions be transferred to the Educational Revenue Augmentation Fund in that county for allocation to school districts, community college districts, and the county office of education.
This bill, for the 2019–20 fiscal year and each fiscal year thereafter, would require the auditor of the County of Orange to increase the total amount of ad valorem property tax revenue that is otherwise required to be allocated to the county by the county equity amount, as defined, and to commensurately decrease the amount of ad valorem property tax revenue that is otherwise required to be allocated to the county Educational Revenue Augmentation Fund and, if necessary, the amount of those revenue otherwise required to be allocated to school districts.
By imposing new duties upon local officials in the allocation of ad valorem property tax revenues, this bill would impose a state-mandated local program.
This bill would make legislative findings and declarations as to the necessity of a special statute for the County of Orange.
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.

The California Constitution generally limits ad valorem taxes on real property to 1% of the full cash value of that property. For purposes of this limitation, existing property tax law defines “full cash value” as the assessor’s fair market value valuation of real property as shown on the 1975–76 tax bill under “full cash value” or, thereafter, the appraised value of that real property when purchased, newly constructed, or a change in ownership has occurred. Existing property tax law generally defines this “full cash value” of property as the property’s “fair market value,” and defines these terms to mean the amount of cash or its equivalent that property would bring if exposed for sale in the open market, as provided.

This bill would make a nonsubstantive change to that latter definition.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NOYES  

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


SECTION 1.

 Section 97.80 is added to the Revenue and Taxation Code, to read:

97.80.
 (a) Notwithstanding any other law, for the 2019–20 fiscal year and for each fiscal year thereafter, the auditor of the County of Orange shall do both of the following:
(1) Increase the total amount of ad valorem property tax revenue that is otherwise required to be allocated to the county by the county equity amount.
(2) (A) Decrease the total amount of ad valorem property tax revenue that is otherwise required to be allocated to the county’s Educational Revenue Augmentation Fund by the county equity amount.
(B) If, for any fiscal year, there is not enough ad valorem property tax revenue that is otherwise required to be allocated to a county Educational Revenue Augmentation Fund for the auditor to complete the allocation reduction required by subparagraph (A), the auditor shall additionally reduce the total amount of ad valorem property tax revenue that is otherwise required to be allocated to all school districts in the county for that fiscal year by an amount equal to the difference between the county equity amount and the amount of ad valorem property tax revenue that is otherwise required to be allocated to the county Educational Revenue Augmentation Fund for that fiscal year. This reduction for each school district in the county shall be the percentage share of the total reduction that is equal to the proportion that the total amount of ad valorem property tax revenue that is otherwise required to be allocated to the school district bears to the total amount of ad valorem property tax revenue that is otherwise required to be allocated to all school districts in a county. For purposes of this subparagraph, “school districts” do not include any districts that are excess tax school entities, as defined in Section 95.
(C) Any reduction in the amount of ad valorem property tax revenues deposited in the county’s Educational Revenue Augmentation Fund as a result of subparagraph (A) shall be applied exclusively to reduce the amounts that are allocated from that fund to school districts and county offices of education, and shall not be applied to reduce the amounts of ad valorem property tax revenues that are otherwise required to be allocated from that fund to community college districts.
(b) For purposes of this section:
(1) For the 2019–20 fiscal year, “county equity amount” means one percent of the total amount of property tax revenue otherwise required to be allocated to the county Educational Revenue Augmentation Fund.
(2) For the 2020–21 fiscal year, and each fiscal year thereafter, “county equity amount” means the sum of the following three amounts:
(A) The county equity amount for the prior fiscal year.
(B) The product of the two following amounts:
(i) The amount described in subparagraph (A).
(ii) The percentage change from the prior fiscal year to the current fiscal year in gross taxable assessed valuation within the jurisdiction of the County of Orange, as reflected in the equalized assessment roll for those fiscal years.
(C) If the county property tax threshold amount is less than 12 percent of countywide ad valorem property tax revenues and the percentage change from the prior fiscal year to the current fiscal year in gross taxable assessed valuation within the jurisdiction of the County of Orange, as reflected in the equalized assessment roll for those fiscal years, is greater than three percent, then the product of the following two amounts:
(i) The total amount of property tax revenue otherwise required to be allocated to the county Educational Revenue Augmentation Fund.
(ii) The percentage change from the prior fiscal year to the current fiscal year in gross taxable assessed valuation within the jurisdiction of the County of Orange, as reflected in the equalized assessment roll for those fiscal years, minus 3 percent.
(3) “County property tax threshold amount” equals the sum of the following two amounts:
(A) County of Orange’s allocation of countywide ad valorem property tax revenues, which are not subject to Section 6503.1 of the Government Code.
(B) The county equity amount for the prior year.
(c) For the 2019–20 fiscal year and each fiscal year thereafter, ad valorem property tax revenue allocations made pursuant to Sections 96.1 and 96.5, or any successor to either of those provisions, shall not incorporate the allocation adjustments made by this section.

SEC. 2.

 The Legislature finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique inequities experienced from fiscal year to fiscal year by the County of Orange that, of all the counties in the state, was allocated the lowest percentage of countywide ad valorem property tax revenues as determined by the State Board of Equalization in its Annual Report for the 2015–16 fiscal year.

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.
SECTION 1.Section 110 of the Revenue and Taxation Code is amended to read:
110.

(a)Except as otherwise provided in Section 110.1, “full cash value” or “fair market value” means the amount of cash or its equivalent that property would bring if exposed for sale in the open market under conditions in which neither buyer nor seller could take advantage of the exigencies of the other, and both the buyer and the seller have knowledge of all of the uses and purposes to which the property is adapted and for which it is capable of being used, and of the enforceable restrictions upon those uses and purposes.

(b)For purposes of determining the “full cash value” or “fair market value” of real property, other than possessory interests, being appraised upon a purchase, “full cash value” or “fair market value” is the purchase price paid in the transaction unless it is established by a preponderance of the evidence that the real property would not have transferred for that purchase price in an open market transaction. The purchase price shall, however, be rebuttably presumed to be the “full cash value” or “fair market value” if the terms of the transaction were negotiated at arms length between a knowledgeable transferor and transferee neither of which could take advantage of the exigencies of the other. “Purchase price,” as used in this section, means the total consideration provided by the purchaser or on the purchaser’s behalf, valued in money, whether paid in money or otherwise. There is a rebuttable presumption that the value of improvements financed by the proceeds of an assessment resulting in a lien imposed on the property by a public entity is reflected in the total consideration, exclusive of that lien amount, involved in the transaction. This presumption may be overcome if the assessor establishes by a preponderance of the evidence that all or a portion of the value of those improvements is not reflected in that consideration. If a single transaction results in a change in ownership of more than one parcel of real property, the purchase price shall be allocated among those parcels and other assets, if any, transferred based on the relative fair market value of each.

(c)For real property, other than possessory interests, the change of ownership statement required pursuant to Section 480, 480.1, or 480.2, or the preliminary change of ownership statement required pursuant to Section 480.4, shall give any information as the board shall prescribe relative to whether the terms of the transaction were negotiated at “arms length.” In the event that the transaction includes property other than real property, the change in ownership statement shall give information as the board shall prescribe disclosing the portion of the purchase price that is allocable to all elements of the transaction. If the taxpayer fails to provide the prescribed information, the rebuttable presumption provided by subdivision (b) shall not apply.

(d)Except as provided in subdivision (e), for purposes of determining the “full cash value” or “fair market value” of any taxable property, all of the following shall apply:

(1)The value of intangible assets and rights relating to the going concern value of a business using taxable property shall not enhance or be reflected in the value of the taxable property.

(2)If the principle of unit valuation is used to value properties that are operated as a unit and the unit includes intangible assets and rights, then the fair market value of the taxable property contained within the unit shall be determined by removing from the value of the unit the fair market value of the intangible assets and rights contained within the unit.

(3)The exclusive nature of a concession, franchise, or similar agreement, whether de jure or de facto, is an intangible asset that shall not enhance the value of taxable property, including real property.

(e)Taxable property may be assessed and valued by assuming the presence of intangible assets or rights necessary to put the taxable property to beneficial or productive use.

(f)For purposes of determining the “full cash value” or “fair market value” of real property, intangible attributes of real property shall be reflected in the value of the real property. These intangible attributes of real property include zoning, location, and other attributes that relate directly to the real property involved.