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AB-1199 Homes for Families and Corporate Monopoly Transparency Excise Tax: qualified property: reporting requirements.(2021-2022)

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Date Published: 04/05/2021 01:31 PM
AB1199:v98#DOCUMENT

Amended  IN  Assembly  April 05, 2021

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 1199


Introduced by Assembly Member Gipson

February 18, 2021


An act to add Article 8 (commencing with Section 12280) to Chapter 3 of Part 2 of Division 3 of Title 2 of the Government Code, and to add Part 6.8 (commencing with Section 11951) to Division 2 of the Revenue and Taxation Code, relating to landlords, and declaring the urgency thereof, to take effect immediately.


LEGISLATIVE COUNSEL'S DIGEST


AB 1199, as amended, Gipson. Homes for Families and Corporate Monopoly Transparency Excise Tax: qualified property: reporting requirements.
Existing law requires the Secretary of State to perform various duties relating to business entities.
This bill would require a qualified entity, as defined, that owns qualified property, as defined, to report annually to the Secretary of State specified information regarding the qualified property owned by the qualified entity. The bill would require the Secretary of State to create a searchable database, updated annually, on the Secretary of State’s internet website, with the information provided by the qualified entity.
Existing law imposes various taxes, including taxes on the privilege of engaging in certain activities. The Fee Collection Procedures Law, the violation of which is a crime, provides procedures for the collection of certain fees and surcharges.
This bill would impose an annual excise tax upon a qualified taxpayer, as defined, for the privilege of renting or leasing out qualified property, as defined, in this state at an unspecified a rate based on of 25% of the gross receipts of the qualified taxpayer that are derived from rental income. The bill would require the California Department of Tax and Fee Administration to collect the tax pursuant to the Fee Collection Procedures Law and would require all amounts collected, less refunds and administrative costs, to be deposited in the Homes for Families Fund, which the bill would create. Upon appropriation, the bill would require that moneys in the fund be used for specified purposes relating to rental assistance, homelessness, affordable housing, and housing counseling services.
Because the bill would expand the scope of the Fee Collection Procedures Law, the violation of which is a crime, the bill would impose a state-mandated local program.
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 no reimbursement is required by this act for a specified reason.
This bill would declare that it is to take effect immediately as an urgency statute.
Vote: 2/3   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

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


SECTION 1.

 The Legislature finds and declares all of the following:
(a) California has an unprecedented shortage of housing. According to the California Housing Partnership Corporation, 1,299,120 low-income renter households in California do not have access to an affordable home.
(b) Currently, 500,000 properties in California are owned by corporations, and over 250,000 properties are owned by entities that own 10 or more properties.
(c) Sixty-seven percent of rental units in the City of Los Angeles are owned by investment vehicles, according to Strategic Actions for a Just Economy.
(d) Research of the Great Recession found that foreclosed properties in the urban core and inner-ring suburbs of the Los Angeles region were much more likely to be purchased by corporate investors rather than owner-occupants, signaling a longer-term transfer of wealth out of the hands of Black and Latinx communities and into those of real estate investors that were able to sweep up foreclosed properties during the Great Recession.
(e) COVID-19 has created physical, emotional, and financial distress for millions, with the federal Consumer Financial Protection Bureau finding that 11,000,000 Americans are worried about imminent foreclosure or eviction for failure to make housing payments.
(f) Nearly one-fifth (17 percent) of renters in California, or over 2,000,000 families, were behind in their rent payments as of the beginning of January 2021.
(g) Analysis by Neighborhood Housing Services of Los Angeles County and the Center for Neighborhood Knowledge at the University of California, Los Angeles, found that compared with non-Hispanic Whites, African American households experienced more pandemic job losses resulting in financial difficulties in paying for usual household expenses, are nearly one and one-half times as likely to have difficulty paying a mortgage, feel less financially secure about the immediate future, and are over twice as likely to have low confidence in meeting next month’s mortgage payments. Further, the foreclosure notice rate is over one and one-half times as great in Black neighborhoods. The paper concluded that thousands of African Americans will lose their homes if no actions are taken.
(h) At the same time, real estate interests have received billions of dollars in tax breaks, and 10 of the largest landlords in California have increased their wealth by billions of dollars during the pandemic and have amassed $191 billion cash on hand and available to purchase additional properties.
(i) It is the intent of the Legislature to prevent large corporations and investors from denying working class families and first-time homebuyers the option to buy homes.
(j) It is the intent of the Legislature to prevent corporations from unnecessarily inflating rental prices and gouging tenants with high and unnecessary fees.
(k) It is the intent of the Legislature to mitigate the impact of abusive practices of large corporate landlords who are more likely to acquire available homes, raise rents, evict tenants, and operate rental units with habitability issues, as compared to smaller “mom and pop” landlords.
(l) It is the intent of the Legislature to prevent landlords from hiding behind limited liability corporations (LLCs) and similarly opaque legal structures. Property records and ownership have been historically transparent in America for the good of the public. The rise of LLCs and other legal entities has made it harder for tenants to know who owns their home and how to address problems, as well as making it harder for law enforcement agencies to investigate and prosecute crimes, such as money laundering.
(m) It is the intent of the Legislature that the California Department of Tax and Fee Administration, the Franchise Tax Board, and the Secretary of State coordinate activities as appropriate so that residents know who their landlords are, so that communities know who owns property in their neighborhoods, and so that large corporate landlords are taxed according to the provisions of this act.

SECTION 1.SEC. 2.

 Article 8 (commencing with Section 12280) is added to Chapter 3 of Part 2 of Division 3 of Title 2 of the Government Code, to read:
Article  8. Reporting Requirements for Qualified Entities

12280.
 (a) On or before February 1, 2023, and on or before February 1 each year thereafter, a qualified entity that owns qualified property shall shall, upon registration or renewal of registration with the Secretary of State, or submission of a statement of information to the Secretary of State, report the following information to the Secretary of State in the form and manner as required by the Secretary of State:
(1) The identity of the beneficial owner of each qualified property owned by the qualified entity in the previous calendar year.
(2) The number of units for each qualified property owned by the qualified entity in the previous calender year that were offered for rent or lease.
(b) The Secretary of State shall create a searchable database, updated annually, on the Secretary of State’s internet website, with the information provided by the qualified entity in subdivision (a).
(c) For purposes of this section, both of the following definitions shall apply:
(1) (A) Except as otherwise provided in subparagraph (B), “beneficial owner” means a natural person for whom, directly or indirectly and through any contract arrangement, understanding, relationship, or otherwise, any of the following applies:
(i) The person exercises substantial control over a qualified entity.
(ii) The person owns 25 percent or more of the equity interest of a qualified entity.
(iii) The person receives substantial economic benefits from the assets of a qualified entity.
(B) “Beneficial owner” does not include any of the following:
(i) A minor child.
(ii) A person acting as a nominee, intermediary, custodian, or agent on behalf of another person.
(iii) A person acting solely as an employee of a qualified entity and whose control over or economic benefits from that qualified entity derives solely from the employment status of the person.
(iv) A person whose only interest in a qualified entity is through a right of inheritance.
(v) A creditor of a qualified entity, unless the creditor meets the requirements specified in subparagraph (A).

(1)

(2) “Qualified entity” means a limited liability company or a limited partnership. corporation, limited liability company, limited partnership, trust, or other similar legal entity.

(2)

(3) “Qualified property” has the same meaning as that term is defined in Section 11952 of the Revenue and Taxation Code.
(d) It is the intent of the Legislature that the reporting obligations established by this section be subject to the same penalties and enforcement provisions as provided in the Fee Collection Procedures Law (Part 30 (commencing with Section 55001) of Division 2 of the Revenue and Taxation Code).

SEC. 2.SEC. 3.

 Part 6.8 (commencing with Section 11951) is added to Division 2 of the Revenue and Taxation Code, to read:

PART 6.8. Homes for Families and Corporate Monopoly Transparency Excise Tax

11951.
 This part shall be known, and may be cited, as the Homes for Families and Corporate Monopoly Transparency Excise Tax Law.

11952.
 For purposes of this part:

(a)“Affordable housing unit” means a housing unit where rents are legally restricted to reflect no more than 30 percent of the household income for persons and families of low or moderate income.

(a) “Affordable housing unit” means a housing unit where occupancy is legally restricted by a recorded covenant with a public entity, with a term of at least 30 years, to lower income households at an affordable rent, as that term is defined in Section 50053 of the Health and Safety Code, or at a rent that is consistent with the limits established by the California Tax Credit Allocation Committee.
(b) “Department” means the California Department of Tax and Fee Administration.
(c) “Fund” means the Homes for Families Fund created pursuant to Section 11960.
(d) “Lower income households” has the same meaning as that term is defined in Section 50079.5 of the Health and Safety Code.

(d)

(e) “Multifamily dwelling” means a residential structure with five or more dwelling units.

(e)“Persons and families of low or moderate income” has the same meaning as that term is defined in Section 50093 of the Health and Safety Code.

(f) (1) “Qualified property” means real property that is offered for rent or lease and that is either of the following:
(A) A single-family dwelling.
(B) A multifamily dwelling.
(2) “Qualified property” does not include property where 50 percent or more of the units are affordable housing units.
(g) (1) “Qualified taxpayer” means a person or entity that owns 10 or more qualified properties that are single family dwellings or 25 or more qualified properties that are either single family residential dwellings or multifamily dwellings in this state during the calendar year.
(2) “Qualified taxpayer” does not include any of the following:
(A) An eligible nonprofit corporation based in California whose primary activity is the development and preservation of affordable rental housing.
(B) A limited partnership in which the managing general partner is an eligible nonprofit corporation based in California whose primary activity is the development and preservation of affordable housing.
(C) A limited liability company in which the managing member is an eligible nonprofit corporation based in California whose primary activity is the development and preservation of affordable rental housing.
(D) A community land trust as defined in Section 402.1.
(E) A limited-equity housing cooperative as defined in Section 817 of the Civil Code.
(F) The state, the Regents of the University of California, a county, city, district, public authority, or public agency, and any other political subdivision or public corporation in the state.
(h) “Single family dwelling” means a residential structure with less than five dwelling units.

11955.
 (a) An annual excise tax is hereby imposed upon a qualified taxpayer for the privilege of renting or leasing out qualified property in this state at a rate of ___ 25 percent of the gross receipts of the qualified taxpayer that are derived from rental income.
(b) It is the intent of the Legislature to enact legislation that would increase do the following:
(1) Increase the rate specified in subdivision (a) based on the overall number of qualified properties.
(2) Increase the rate specified in subdivision (a) if the qualified taxpayer receives a certain number of code violations issued by the building department or health department of a city or county.

11957.
 (a) The department shall administer and collect the excise tax imposed by this part pursuant to the Fee Collection Procedures Law (Part 30 (commencing with Section 55001)). For purposes of this part, references in the Fee Collection Procedures Law to “fee” shall include the tax imposed by this part and references to “feepayer” shall include any person or entity liable for the payment of the tax imposed by this part.
(b) The department may prescribe, adopt, and enforce regulations relating to the administration and enforcement of this part, including, but not limited to, provisions governing collections, reporting, refunds, and appeals.
(c) The department may prescribe, adopt, and enforce emergency regulations relating to the administration and enforcement of this part. Any emergency regulations prescribed, adopted, or enforced pursuant to this section shall be adopted in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, and, for purposes of that chapter, including Section 11349.6 of the Government Code, the adoption of these regulations is an emergency and shall be considered by the Office of Administrative Law as necessary for the immediate preservation of the public peace, health and safety, and general welfare.

11958.
 The tax imposed by this part shall not be passed through to tenants by way of higher rents.

11960.
 (a) The Homes for Families Fund is hereby created in the State Treasury.
(b) All taxes, interest, penalties, and other amounts collected pursuant to this part, less refunds and costs of administration, shall be deposited in the fund.
(c) Upon appropriation, moneys in the fund shall be used for the following purposes:
(1) Rental assistance and relief for California tenants.
(2) Support for legal services to prevent evictions, harassment, and violations of law by landlords.
(3) Providing services and programs for persons experiencing homelessness in this state. state, including veterans.
(4) Supporting the protection of existing, and the production of new, housing with an affordable housing cost or affordable rent, as defined in Sections 50052.5 and 50053, respectively, of the Health and Safety Code.
(5) Housing counseling services to promote home ownership, job ownership.
(6) Job training apprenticeship programs, and programs.
(7) Financial support for landlords that own fewer than 10 properties and have lost been unable to collect rental income from tenants due to as a result of COVID-19.

SEC. 3.SEC. 4.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because 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.

SEC. 4.SEC. 5.

 This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to discourage large corporate landlords from increasing acquisitions of distressed assets, raising rents rents, and displacing tenants, to provide relief to tenants facing evictions, and to provide support for home ownership during a health and economic crisis, crisis as soon as possible, it is necessary that this act take effect immediately.