Today's Law As Amended


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AB-1040 Property taxation: change in ownership.(2015-2016)



As Amends the Law Today


SECTION 1.

 Section 64 of the Revenue and Taxation Code is amended to read:

64.
 (a) Except as provided in subdivision (i) of Section 61 and subdivisions (c) and (d) of this section,  (d),  the purchase or transfer of ownership interests in legal entities, such as corporate stock or partnership or limited liability company interests, shall not be deemed to  does not  constitute a transfer of the real property of the legal entity. This subdivision is applicable  applies  to the purchase or transfer of ownership interests in a partnership without regard to whether it is a continuing or a dissolved partnership.
(b) Any corporate reorganization, where all of the corporations involved are members of an affiliated group, and that qualifies as a reorganization under Section 368 of the United States Internal Revenue Code and that is accepted as a nontaxable event by similar California statutes, or any transfer of real property among members of an affiliated group, or any reorganization of farm credit institutions pursuant to the federal Farm Credit Act of 1971 (Public Law 92-181), as amended, shall not be a change of ownership. The taxpayer shall furnish proof, under penalty of perjury, to the assessor that the transfer meets the requirements of this subdivision.
For purposes of this subdivision, “affiliated group” means one or more chains of corporations connected through stock ownership with a common parent corporation if both of the following conditions are met:
(1) One hundred percent of the voting stock, exclusive of any share owned by directors, of each of the corporations, except the parent corporation, is owned by one or more of the other corporations.
(2) The common parent corporation owns, directly, 100 percent of the voting stock, exclusive of any shares owned by directors, of at least one of the other corporations.
(c) (1) (A)  When a corporation, partnership, limited liability company, other legal entity, or any other person obtains control through direct or indirect ownership or control of more than 50 percent of the voting stock of any corporation, or obtains a majority ownership interest in any partnership, limited liability company, or other legal entity through the purchase or transfer of corporate stock, partnership, or limited liability company interest, or ownership interests in other legal entities, including any purchase or transfer of 50 percent or less of the ownership interest through which control or a majority ownership interest is obtained, the purchase or transfer of that stock or other interest shall be a change of ownership of the real property owned by the corporation, partnership, limited liability company, or other legal entity in which the controlling interest is obtained.
(B) (i) When more than ___ percent of the direct or indirect ownership interests in a legal entity are sold or transferred in a single transaction, the purchase or transfer of the ownership interests is a change in ownership of the real property owned by the legal entity, including the real property owned by legal entities under its control, whether or not any one legal entity or person that is a party to the transaction obtains control, except when the sale or transfer qualifies for an exclusion from change in ownership under any other law or does not result in a change in ownership under any other law.
(ii) For purposes of this subparagraph:
(I) “Control” means control as described in subparagraph (A).
(II) “Legal entity” means a corporation, partnership, limited liability company, or other legal entity.
(III) “Ownership interests” means corporate voting stock, partnership capital and profits interests, limited liability company membership interests, and other ownership interests in legal entities.
(IV) “Single transaction” means a plan consisting of one or more sales or transfers of ownership interests that occur on or after January 1, 2016. For purposes of this subclause, it shall be rebuttably presumed that a sale or transfer is part of a single transaction if either of the following occur:
(ia) The transferees are persons described in Section 267(b) of Title 26 of the United States Code.
(ib) The sales or transfers occur with a 36-month period, commencing on the date of the first sale or transfer of the ownership interests that occurs on or after January 1, 2016.
(V) “Sold or transferred” does not include a sale of stock or interests of a publicly traded corporation or a publicly traded partnership in the regular course of a trading activity on an established securities market, as defined in Section 1.7704-1(b) of Title 26 of the Code of Federal Regulations, unless shares are acquired as part of a merger, acquisition, private equity buyout, transfer of partnership shares, or any other means by which a change in ownership would otherwise occur pursuant to this subparagraph.
(2) On or after January 1, 1996, when an owner of a majority ownership interest in any partnership obtains all of the remaining ownership interests in that partnership or otherwise becomes the sole partner, the purchase or transfer of the minority interests, subject to the appropriate application of the step-transaction doctrine, shall not be a change in ownership of the real property owned by the partnership.
(3) For purposes of this section, indirect ownership or transfer of ownership interests shall be measured proportionately.
(d) If property is transferred on or after March 1, 1975, to a legal entity in a transaction excluded from change in ownership by paragraph (2) of subdivision (a) of Section 62, then the persons holding ownership interests in that legal entity immediately after the transfer shall be considered the “original coowners.” Whenever shares or other ownership interests representing cumulatively more than 50 percent of the total interests in the entity are transferred by any of the original coowners in one or more transactions, a change in ownership of that real property owned by the legal entity shall have occurred, and the property that was previously excluded from change in ownership under the provisions of paragraph (2) of subdivision (a) of Section 62 shall be reappraised.
The date of reappraisal shall be the date of the transfer of the ownership interest representing individually or cumulatively more than 50 percent of the interests in the entity.
A transfer of shares or other ownership interests that results in a change in control of a corporation, partnership, limited liability company, or any other legal entity is subject to reappraisal as provided in subdivision (c) rather than this subdivision.
(e) (1)  To assist in the determination of whether a change of ownership has occurred under subdivisions (c) and (d), the Franchise Tax Board shall include a question in substantially the following form on returns for partnerships, banks, and corporations (except tax-exempt organizations):
(A)  If the corporation (or partnership or limited liability company) owns real property in California, has cumulatively more than 50 percent of the voting stock (or more than 50 percent of total interest in both partnership or limited liability company capital and partnership or limited liability company profits) (1) been transferred by the corporation (or partnership or limited liability company) since March 1, 1975, or (2) been acquired by another legal entity or person during the year? (See instructions.)
(B) If the corporation (or partnership or limited liability company) owns real property in California, has more than ___ percent of the direct or indirect ownership interests in that legal entity been sold or transferred (1) in a single transaction, or (2) amongst persons described in Section 267(b) of Title 26 of the United States Code, or (3) in multiple transactions (other than those occurring on an established securities market) within a 36-month period? (See instructions.)
(2)  If the entity answers “yes” to (1) or (2) in  any of  the above question, questions,  then the Franchise Tax Board shall furnish the names and addresses of that entity and of the stock or partnership or limited liability company ownership interest transferees to the State Board of Equalization.
(f) For purposes of this section, ownership interests counted to determine that a change in control or change in ownership of a legal entity has occurred shall not be counted again in determining whether any other sale or transfer of ownership interests results in a change in ownership of the real property reassessed as a result of the change in control or change in ownership.
(g) The board shall prescribe regulations as may be necessary to carry out the purposes of the act adding this subdivision.

SEC. 2.

 Section 480.1 of the Revenue and Taxation Code is amended to read:

480.1.
 (a) Whenever there is a change in control of any corporation, partnership, limited liability company, or other legal entity, as defined in subparagraph (A) of paragraph (1) of  subdivision (c) of Section 64, a signed change in ownership statement as provided for in subdivision (b), shall be filed by the person or legal entity acquiring ownership control of the corporation, partnership, limited liability company, or other legal entity with the board at its office in Sacramento within 90 days from the date of the change in control of the corporation, partnership, limited liability company, or other legal entity. The statement shall list all counties in which the corporation, partnership, limited liability company, or legal entity owns real property.
(b) The change in ownership statement as required pursuant to subdivision (a), shall be declared to be true under penalty of perjury and shall give such that  information relative to the ownership control acquisition transaction as the board shall prescribe after consultation with the California Assessors’ Association. The information shall include, but not be limited to, a description of the property owned by the corporation, partnership, limited liability company, or other legal entity, the parties to the transaction, and the date of the ownership control acquisition. The change in ownership statement shall not include any question which is not germane to the assessment function. The statement shall contain a notice that is printed, with the title in at least 12-point boldface type and the body in at least 8-point boldface type, in the following form:

“Important Notice”

“The law requires any person or legal entity acquiring ownership control in any corporation, partnership, limited liability company, or other legal entity owning real property in California subject to local property taxation to complete and file a change in ownership statement with the State Board of Equalization at its office in Sacramento. The change in ownership statement must be filed within 90 days from the date of the change in control of a corporation, partnership, limited liability company, or other legal entity. The law further requires that a change in ownership statement be completed and filed whenever a written request is made therefor by the State Board of Equalization, regardless of whether a change in control of the legal entity has occurred. The failure to file a change in ownership statement within 90 days from the earlier of the date of the change in control of the corporation, partnership, limited liability company, or other legal entity, or the date of a written request by the State Board of Equalization, results in a penalty of 10 15  percent of the taxes applicable to the new base year value reflecting the change in control of the real property owned by the corporation, partnership, limited liability company, or legal entity (or 10 15  percent of the current year’s taxes on that property if no change in control occurred). This penalty will be added to the assessment roll and shall be collected like any other delinquent property taxes, and be subject to the same penalties for nonpayment.”
(c) In the case of a corporation, the change in ownership statement shall be signed either by an officer of the corporation or an employee or agent who has been designated in writing by the board of directors to sign such statements on behalf of the corporation. In the case of a partnership, limited liability company, or other legal entity, the statement shall be signed by an officer, partner, manager, or an employee or agent who has been designated in writing by the partnership, limited liability company, or legal entity.
(d) No person or entity acting for or on behalf of the parties to a transfer of real property shall incur liability for the consequences of assistance rendered to the transferee in preparation of any change in ownership statement, and no action may be brought or maintained against any person or entity as a result of that assistance.
Nothing in this section shall create a duty, either directly or by implication, that such assistance be rendered by any person or entity acting for or on behalf of parties to a transfer of real property.
(e) The board or assessors may inspect any and all records and documents of a corporation, partnership, limited liability company, or legal entity to ascertain whether a change in control as defined in subparagraph (A) of paragraph (1) of  subdivision (c) of Section 64 has occurred. The corporation, partnership, limited liability company, or legal entity shall shall,  upon request, make those documents available to the board during normal business hours.
(f) Notwithstanding Section 20, for purposes of this section “State Board of Equalization” and “board” mean the State Board of Equalization.

SEC. 3.

 Section 480.2 of the Revenue and Taxation Code is amended to read:

480.2.
 (a) Whenever there is a change in ownership of any corporation, partnership, limited liability company, or other legal entity, as defined in subdivision  subparagraph (B) of paragraph (1) of subdivision (c) or subdivision  (d) of Section 64, a signed change in ownership statement as provided in subdivision (b) shall be filed by the corporation, partnership, limited liability company, or other legal entity with the board at its office in Sacramento within 90 days from the date of the change in ownership of the corporation, partnership, limited liability company, or other legal entity. The statement shall list all counties in which the corporation, partnership, limited liability company, or legal entity owns real property.
(b) The change in ownership statement required pursuant to subdivision (a) shall be declared to be true and  under penalty of perjury and shall give such that  information relative to the ownership interest acquisition transaction as the board shall prescribe after consultation with the California Assessors’ Association. The information shall include, but not be limited to, a description of the property owned by the corporation, partnership, limited liability company, or other legal entity, the parties to the transaction, the date of the ownership interest acquisition, and a listing of the “original coowners” of the corporation, partnership, limited liability company, or other legal entity prior to the transaction. The change in ownership statement shall not include any question which is not germane to the assessment function. The statement shall contain a notice that is printed, with the title in at least 12-point boldface type and the body in at least 8-point boldface type, in the following form:

“Important Notice”

“The law requires any corporation, partnership, limited liability company, or other legal entity owning real property in California subject to local property taxation and transferring shares or other ownership interest in such legal entity which constitute a change in ownership pursuant to subdivision  subparagraph (B) of paragraph (1) of subdivision (c) or subdivision  (d) of Section 64 of the Revenue and Taxation Code to complete and file a change in ownership statement with the State Board of Equalization at its office in Sacramento. The change in ownership statement must be filed within 90 days from the date that shares or other ownership interests representing either (1)  cumulatively more than 50 percent of the total control or ownership interests in the entity are transferred by any of the original coowners in one or more transactions.  transactions, or (2) when more than ___ percent of the direct or indirect ownership interests in a legal entity are sold or transferred in a single transaction, as defined in subparagraph (B) of paragraph (1) of subdivision (c) of Section 64.  The law further requires that a change in ownership statement be completed and filed whenever a written request is made therefor by the State Board of Equalization, regardless of whether a change in ownership of the legal entity has occurred. The failure to file a change in ownership statement within 90 days from the earlier of the date of the change in ownership of the corporation, partnership, limited liability company, or other legal entity, or the date of a written request by the State  Board of Equalization, results in a penalty of 10 15  percent of the taxes applicable to the new base year value reflecting the change in ownership of the real property owned by the corporation, partnership, limited liability company, or legal entity (or 10 15  percent of the current year’s taxes on that real property if no change in ownership occurred). This penalty will be added to the assessment roll and shall be collected like any other delinquent property taxes, and be subject to the same penalties for nonpayment.”
(c) In the case of a corporation, the change in ownership statement shall be signed either by an officer of the corporation or an employee or agent who has been designated in writing by the board of directors to sign such statements on behalf of the corporation. In the case of a partnership, limited liability company, or other legal entity, the statement shall be signed by an officer, partner, manager, or an employee or agent who has been designated in writing by the partnership, limited liability company, or legal entity.
(d) No person or entity acting for or on behalf of the parties to a transfer of real property shall incur liability for the consequences of assistance rendered to the transferee in preparation of any change in ownership statement, and no action may be brought or maintained against any person or entity as a result of that assistance.
Nothing in this section shall create a duty, either directly or by implication, that such assistance be rendered by any person or entity acting for or on behalf of parties to a transfer of real property.
(e) The board or assessors may inspect any and all records and documents of a corporation, partnership, limited liability company, or legal entity to ascertain whether a change in ownership as defined in subdivision  subparagraph (B) of paragraph (1) of subdivision (c) or subdivision  (d) of Section 64 has occurred. The corporation, partnership, limited liability company, or legal entity shall upon request, make those documents available to the board during normal business hours.
(f) Notwithstanding Section 20, for purposes of this section “State Board of Equalization” and “board” mean the State Board of Equalization.

SEC. 4.

 Section 480.9 is added to the Revenue and Taxation Code, to read:

480.9.
 The board shall notify assessors if a change in control or a change in ownership described in Section 64 has occurred.

SEC. 5.

 Section 482 of the Revenue and Taxation Code is amended to read:

482.
 (a) (1) If a person or legal entity required to file a statement described in Section 480 fails to do so within 90 days from the date a written request is mailed by the assessor, a penalty of either: (A) one hundred dollars ($100), or (B) 10 percent of the taxes applicable to the new base year value reflecting the change in ownership of the real property,  property or  manufactured home, or floating home,  whichever is greater, but not to exceed five thousand dollars ($5,000) if the property is eligible for the homeowners’ exemption or twenty thousand dollars ($20,000) if the property is not eligible for the homeowners’ exemption if the failure to file was not willful, shall, except as otherwise provided in this section, be added to the assessment made on the roll. The penalty shall apply for failure to file a complete change in ownership statement notwithstanding the fact that the assessor determines that no change in ownership has occurred as defined in Chapter 2 (commencing with Section 60) of Part 0.5. The penalty may also be applied if after a request the transferee files an incomplete statement and does not supply the missing information upon a second request.
(2) The assessor shall mail the written request specified in paragraph (1) to the mailing address of the transferee as provided by subdivision (f).
(b) If a person or legal entity required to file a statement described in Section 480.1 or 480.2 fails to do so within 90 days from the earlier of (1) the date of the change in control or the change in ownership of the corporation, partnership, limited liability company, or other legal entity, or (2) the date of a written request by the State Board of Equalization, a penalty of 10 15  percent of the taxes applicable to the new base year value reflecting the change in control or change in ownership of the real property owned by the corporation, partnership, or legal entity, or 10 15  percent of the current year’s taxes on that property if no change in control or change in ownership occurred, shall be added by the county assessor to the assessment made on the roll. The penalty shall apply for failure to file a complete statement with the board following a transfer of legal entity ownership interests  notwithstanding the fact that the board determines that no change in control or change in ownership has occurred as defined in subdivision (c) or (d) of Section 64. The penalty may also be applied if after a request the person or legal entity files an incomplete statement and does not supply the missing information upon that second request to complete the statement. That penalty shall be in lieu of the penalty provisions of subdivision (a).
(c) The penalty for failure to file a timely statement pursuant to Sections 480, 480.1, and 480.2 for any one transfer may be imposed only one time, even though the assessor may initiate a request as often as he or she deems necessary.
(d) The penalty shall be added to the roll in the same manner as a special assessment and treated, collected, and subject to the same penalties for the delinquency as all other taxes on the roll in which it is entered.
(1) When the transfer to be reported under this section is of a portion of a property or parcel appearing on the roll during the fiscal year in which the 90-day period expires, the current year’s taxes shall be prorated so the penalty will be computed on the proportion of property which has transferred.
(2) Any penalty added to the roll pursuant to this section between January 1 and June 30 may be entered either on the unsecured roll or the roll being prepared. After January 1, the penalty may be added to the current roll only with the approval of the tax collector.
(3) If the property is transferred or conveyed to a bona fide purchaser for value or becomes subject to a lien of a bona fide encumbrancer for value after the transfer of ownership resulting in the imposition of the penalty and before the enrollment of the penalty, the penalty shall be entered on the unsecured roll in the name of the transferee whose failure to file the change in ownership statement resulted in the imposition of the penalty.
(e) When a penalty imposed pursuant to this section is entered on the unsecured roll, the tax collector may immediately file a certificate authorized by Section 2191.3.
(f) Notice of any penalty added to either the secured or unsecured roll pursuant to this section, which shall identify the parcel or parcels for which the penalty is assessed, and the written request to file a statement specified in subdivision (a), which shall identify the real property, manufactured home, or floating property or manufactured  home for which the statement is required to be filed, shall be mailed by the assessor to the transferee at his or her address contained in any recorded instrument or document evidencing a transfer of an interest in real property, manufactured home, or floating property or manufactured  home or the address specified for mailing tax information contained in the preliminary change in ownership report. If the transferee has subsequently notified the assessor of a change in address for mailing tax information, the assessor shall mail the notice of any penalty, or the written request to file a statement specified in subdivision (a), to this address. If there is no address specified for mailing tax information on either the recorded instrument, the document evidencing a transfer of an interest in real property,  property or  manufactured home, or floating home or  on the filed preliminary change in ownership report, and the transferee has not provided an address for purposes of mailing tax information, the assessor shall mail the notice of any penalty, or the written request to file a statement specified in subdivision (a), to the transferee at any address reasonably known to the assessor.

SEC. 6.

 Section 486 is added to the Revenue and Taxation Code, to read:

486.
 (a) The board shall report to the Legislature, no later than January 1, 2021, regarding the implementation of subparagraph (B) of paragraph (1) of subdivision (c) of Section 64, including, but not limited to, the economic impact and frequency of reassessments of real property owned by legal entities.
(b) (1) A report submitted pursuant to subdivision (a) shall be submitted in compliance with Section 9795 of the Government Code.
(2) Pursuant to Section 10231.5 of the Government Code, this section is repealed on January 1, 2025.
SEC. 7.
 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution for certain costs that may be incurred by a local agency or school district because, in that regard, this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.
However, if the Commission on State Mandates determines that this act contains other 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. 8.
 This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect.