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AB-2013 Property taxation: new construction: damaged or destroyed property.(2019-2020)

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Date Published: 09/24/2020 09:00 PM
AB2013:v95#DOCUMENT

Assembly Bill No. 2013
CHAPTER 124

An act to add Section 70.5 to the Revenue and Taxation Code, relating to taxation.

[ Approved by Governor  September 24, 2020. Filed with Secretary of State  September 24, 2020. ]

LEGISLATIVE COUNSEL'S DIGEST


AB 2013, Irwin. Property taxation: new construction: damaged or destroyed property.
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, “full cash value” is defined as the assessor’s 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 law defines “newly constructed” and “new construction” to mean any addition to real property since the last lien date and any alteration of land or of any improvement since the last lien date that constitutes a major rehabilitation thereof or that converts the property to a different use. Existing law, where real property has been damaged or destroyed by misfortune or calamity, excludes from the definition of “newly constructed” and “new construction” any timely reconstruction of the real property, or portion thereof, where the property after reconstruction is substantially equivalent to the property prior to damage or destruction. Existing law, pursuant to the authorization of the California Constitution, authorizes the transfer of the base year value of property that is substantially damaged or destroyed by a disaster, as declared by the Governor, to comparable replacement property within the same county that is acquired or newly constructed within 5 years after the disaster, as provided.
This bill would authorize the owner of property substantially damaged or destroyed by a disaster, as declared by the Governor, to apply the base year value of that property to replacement property reconstructed on the same site of the damaged or destroyed property within 5 years after the disaster if the reconstructed property is comparable to the substantially damaged or destroyed property, determined as provided. The bill would specify that property is substantially damaged or destroyed for these purposes if the improvements sustain physical damage amounting to more than 50% of the improvements’ full cash value immediately prior to the disaster. The bill would provide that person who owns substantially damaged or destroyed property that receives property tax relief under these provisions is not eligible to transfer the base year value of that property to a comparable replacement property, as described above. Under the bill, the adjusted base year value of the original property substantially damaged or destroyed would apply to the reconstructed property if the full cash value of the reconstructed property does not exceed 120% of the full cash value of the original property immediately prior to its substantial damage or destruction. If the full cash value of the reconstructed property exceeds 120% of the full cash value of the original property, the bill would require that the base year value of the reconstructed property be the sum of the full cash value that exceeds 120% of the full cash value of the original property plus the adjusted base year value of the original property. The bill would apply these provisions to real property damaged or destroyed by misfortune or calamity on or after January 1, 2017.
By imposing new duties on county assessors with respect to assessing reconstructed property that has been substantially damaged or destroyed by a disaster, this bill would impose a state-mandated local program.
This bill would make legislative findings and declarations regarding the public purpose served by the bill.
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.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

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


SECTION 1.

 Section 70.5 is added to the Revenue and Taxation Code, to read:

70.5.
 (a) Notwithstanding Section 70, and pursuant to Section 2 of Article XIII A of the Constitution, the base year value of property that is substantially damaged or destroyed by a disaster, as declared by the Governor, may be applied to replacement property reconstructed on the site of the damaged or destroyed property within five years after the disaster as a replacement for the substantially damaged or destroyed property if that reconstructed property is comparable to the substantially damaged or destroyed property. A person who owns substantially damaged or destroyed property that receives property tax relief under this section shall not be eligible for property tax relief provided under Section 69.
(b) (1) The replacement base year value of the reconstructed property shall be determined in accordance with this section.
(2) The assessor shall use the following procedure in determining the appropriate base year value of the reconstructed property:
(A) If the full cash value of the reconstructed property does not exceed 120 percent of the full cash value of the property substantially damaged or destroyed, then the adjusted base year value of the property substantially damaged or destroyed shall apply to the reconstructed property as its base year value.
(B) If the full cash value of the reconstructed property exceeds 120 percent of the full cash value of the property substantially damaged or destroyed, then the amount of the full cash value over 120 percent of the full cash value of the property substantially damaged or destroyed shall be added to the adjusted base year value of the original property substantially damaged or destroyed. The sum of these amounts shall become the reconstructed property’s base year value.
(C) If the full cash value of the reconstructed property is less than the adjusted base year value of the original property substantially damaged or destroyed, then that lower value shall become the reconstructed property’s base year value.
(D) The full cash value of the property substantially damaged or destroyed shall be the amount of its full cash value immediately prior to its substantial damage or destruction, as determined by the county assessor of the county in which the property is located.
(c) For purposes of this section:
(1) Property is substantially damaged or destroyed if the improvements sustain physical damage amounting to more than 50 percent of the improvements’ full cash value immediately prior to the disaster.
(2) Reconstructed property shall be considered comparable to the original property substantially damaged or destroyed if it is similar in size, utility, and function to the property which it replaces. For purposes of this paragraph:
(A) Property is similar in function if the reconstructed property is subject to similar governmental restrictions, such as zoning.
(B) (i) Both the size and utility of property are interrelated and associated with value. Property shall be considered similar in size and utility only to the extent that the reconstructed property is, or is intended to be, used in the same manner as the original property substantially damaged or destroyed and its full cash value does not exceed 120 percent of the full cash value of the original property substantially damaged or destroyed.
(ii) A reconstructed property or any portion of reconstructed property used or intended to be used for a purpose substantially different than the use made of the original property substantially damaged or destroyed shall to the extent of the dissimilar use be considered not similar in utility.
(iii) A reconstructed property or any portion of reconstructed property that satisfies the use requirement but has a full cash value that exceeds 120 percent of the full cash value of the original property substantially damaged or destroyed shall be considered, to the extent of the excess, not similar in utility and size.
(C) To the extent that reconstructed property or any portion of reconstructed property is not similar in function, size, and utility, the property or portion of that property shall be considered to be newly constructed.
(3) “Disaster” means a major misfortune or calamity in an area subsequently proclaimed by the Governor to be in a state of disaster as a result of that misfortune or calamity.
(d) Only the owner or owners of the property substantially damaged or destroyed, whether one or more individuals, partnerships, corporations, other legal entities, or a combination thereof, shall be eligible to receive property tax relief under this section. Relief under this section shall be granted to an owner or owners of substantially damaged or destroyed property who have reconstructed that property.
(e) This section shall apply to real property damaged or destroyed by misfortune or calamity on or after January 1, 2017.

SEC. 2.

 The Legislature finds and declares that adding Section 70.5 to the Revenue and Taxation Code, as provided in this act, serves a public purpose and does not constitute a gift of public funds within the meaning of Section 6 of Article XVI of the California Constitution by providing necessary property tax relief to taxpayers whose property was damaged or destroyed by a destructive California wildfire.

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.