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AB-528 Property taxation: tax-defaulted property: sales to nonprofits.(2021-2022)

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Date Published: 05/04/2021 09:00 PM
AB528:v97#DOCUMENT

Amended  IN  Assembly  May 04, 2021
Amended  IN  Assembly  March 25, 2021

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 528

Introduced by Assembly Member Wicks

February 10, 2021

An act to amend Sections 3691, 3692.4, 3772.5, 3775, 3791.4, 3794.3, and 3795 of, and to add Section 3797.5 to, the Revenue and Taxation Code, relating to taxation.


LEGISLATIVE COUNSEL'S DIGEST


AB 528, as amended, Wicks. Property taxation: tax-defaulted property: sales to nonprofits.
Existing law generally authorizes a county tax collector to sell tax-defaulted property 5 or more years after the real property has become tax defaulted. Existing law authorizes a nonprofit organization to purchase residential or vacant property, with the approval of the board of supervisors of the county in which it is located, that has been tax defaulted for 5 years or more, or 3 years or more after the property has become tax defaulted and is subject to a nuisance abatement lien, as long as the property is used for low-income housing or public use, as specified. Existing law defines “nonprofit organization” as a nonprofit public benefit corporation organized for the purpose of the acquisition of either single-family or multifamily dwellings for rehabilitation and sale or rent to low-income persons or for other use to serve low-income persons, or vacant land for construction of residential dwellings and subsequent sale or rent to low-income persons, for other use to serve low-income persons, or for dedication of that vacant land to public use.
This bill, among other things, would revise the definition of nonprofit organization to also require that the nonprofit organization (1) own or manage housing units located on property that is exempt from taxation, as specified, (2) contract with a nonprofit corporation that has received a tax exemption for properties intended to be sold to low-income families with financing in the form of zero interest rate loans, (3) is a community housing development organization, or (4) is a community land trust. The bill would reduce the number of years a vacant or residential property is required to be tax defaulted before a nonprofit organization can buy it, with the approval of the county board of supervisors for the county where the property is located, to 2 or more years after a property subject to a nuisance abatement lien is tax defaulted or one or more years after a property subject to a nuisance abatement lien is tax defaulted and is vacant.
This bill would require the tax collector to document each step in the tax sale process and provide a file of those documents to the nonprofit organization or public agency that purchases the property at the time of the sale. The bill would require the nonprofit organization to indicate via a checklist to be developed by the tax collector that to the best of their knowledge that the property is free and clear of any issues that may cloud transfer of title. The bill would require tax collectors to provide their lists of tax-defaulted properties eligible for tax sale to the Controller, and the Controller would be required to maintain an up-to-date list of all upcoming tax sales in the state on its internet website. The bill would also require tax collectors, at any time after the property has become tax defaulted, but before it is eligible for tax auction, to provide certain nonprofit organizations with a nonpublic list of tax-defaulted properties at their request.
Existing law requires that whenever the county or the state is the purchaser of a tax-defaulted property that the price be agreed upon between the county board of supervisors, the Controller, and the governing body of any city in which that property is located, and that the price be paid to the county tax collector for distribution.
This bill would require that whenever a nonprofit organization is the purchaser, the price is zero if the state reimburses the tax collector for the minimum bid price and all costs associated with the transaction. The bill would authorize a county, after a property becomes eligible for tax sale, to lower the purchase price to an amount below the minimum bid price for public agencies and nonprofit organizations.
Existing law requires that the county board of supervisors approve certain tax-defaulted property sales and that the Controller approve the agreement.
This bill would require that the county board of supervisors make the decision to approve or disapprove a sale within 90 calendar days of receiving a request for approval, approval and that the Controller make the determination of approval or rejection of the agreement within one calendar month of receipt of the agreement. The bill would also require the Controller, on or before January 30, 2023, to develop a standardized set of best practices for the sale of tax delinquent properties to nonprofit organizations with input from all relevant stakeholders. The bill would require tax collectors to formally adopt those practices on or before December 31, 2024.
Because this bill would add to the duties of county tax collectors, the bill would impose a state-mandated local program.
Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.
This bill would make legislative findings to that effect.
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.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

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


SECTION 1.

 Section 3691 of the Revenue and Taxation Code is amended to read:

3691.
 (a) (1) (A) Five years or more, or three years or more in the case of nonresidential commercial property, after the property has become tax defaulted, the tax collector shall have the power to sell and shall attempt to sell in accordance with Section 3692 all or any portion of tax-defaulted property that has not been redeemed, without regard to the boundaries of the parcels, as provided in this chapter, unless by other provisions of law the property is not subject to sale. Any person, regardless of any prior or existing lien on, claim to, or interest in, the property, may purchase at the sale. In the case of tax-defaulted property that has been damaged by a disaster in an area declared to be a disaster area by local, state, or federal officials and whose damage has not been substantially repaired, the five-year period set forth in this subdivision shall be tolled until five years have elapsed from the date the damage to the property was incurred.
(B) A county may elect, by an ordinance or resolution adopted by a majority vote of its entire governing body, to adopt conditions and procedures for the delay of sale of properties as described in subparagraph (A) that it finds may be eligible to file a property tax postponement claim with the State Controller prior to January 1, 2017, and may cancel any delinquent penalties, costs, fees, and interest associated with these properties.
(C) A county may elect, by an ordinance or resolution adopted by a majority vote of its entire governing body, to have the five-year time period described in subparagraph (A) apply to tax-defaulted nonresidential commercial property.
(D) For purposes of this subdivision, “nonresidential commercial property” means all property except the following:
(i) A constructed single-family or multifamily unit that is intended to be used primarily as a permanent residence, is used primarily as a permanent residence, or that is zoned as a residence, and the land on which that unit is constructed.
(ii) Real property that is used and zoned for producing commercial agricultural commodities.
(2) When a part of a tax-defaulted parcel is sold, the balance continues subject to redemption and shall be separately valued for the purpose of redemption in the manner provided by Chapter 2 (commencing with Section 4131) of Part 7.
(3) (A) The tax collector shall provide notice of an intended sale under this subdivision in the manner prescribed by Sections 3704 and 3704.5 and any other applicable statute. If the intended sale is of nonresidential commercial property that has been tax defaulted for fewer than five years, all of the following apply:
(i) On or before the notice date, the tax collector shall also mail, in the manner specified in paragraph (1) of subdivision (c) of Section 2924b of the Civil Code, notice containing any information contained in the publication required under Sections 3704 and 3704.5 to, as applicable, all of the following:
(I) The parties specified in paragraph (2) of subdivision (c) of Section 2924b of the Civil Code.
(II) Each taxing agency specified in paragraph (3) of subdivision (c) of Section 2924b of the Civil Code.
(III) Any beneficiary of a deed of trust or a mortgagee of any mortgage recorded against the nonresidential commercial property, and any assignee or vendee of these beneficiaries or mortgagees.
(ii) For purposes of this paragraph:
(I) “Notice date” means a date not less than 45 days nor more than 120 days before an intended sale or not less than 45 days nor more than 120 days before the date upon which the property may be sold.
(II) “Recording date of the notice of default” as used in subdivision (c) of Section 2924b of the Civil Code means a date that is 30 days before the notice date.
(III) “Deed of trust or mortgage being foreclosed” as used in subdivision (c) of Section 2924b of the Civil Code means the defaulted tax lien.
(B) If the property subject to the notice required by this paragraph is the subject of a bankruptcy proceeding, the notice shall constitute a “notice of tax deficiency” pursuant to Section 362(b)(9)(B) of Title 11 of the United States Code.
(b) (1) (A) Except as provided in Section 3791.4, three years or more after the property has become tax defaulted and a request has been made by a city, county, city and county, or nonprofit organization pursuant to Section 3692.4, or a request has been made by a person or entity that has recorded a nuisance abatement lien on that property, to offer that property at the next scheduled tax sale, the tax collector shall have the power to sell and may sell all or any portion of tax-defaulted property that has not been redeemed, without regard to the boundaries of parcels, as provided in this chapter at the next scheduled tax sale, unless by other provisions of law the property is not subject to sale. Any person, regardless of any prior or existing lien on, claim to, or interest in, the property, may purchase at the sale.
(B) (i) At any time after the property has become tax defaulted, but before the property is eligible for tax auction, tax collectors shall provide nonprofit organizations, as described in Section 3772.5, and public agencies with a list of tax-defaulted properties at their request. A list of the nonprofit organizations and public agencies that have requested the list shall be a public record. Any list of tax-defaulted properties created pursuant to this clause is a not a public document and is not subject to public inspection, except as specified in this subparagraph.
(ii) The Controller shall create a means for indicating interest on its internet website to direct requests from nonprofit organizations to the relevant tax collectors.
(C) When a part of a tax-defaulted parcel is sold, the balance continues subject to redemption and shall be separately valued for the purpose of redemption in the manner provided by Chapter 2 (commencing with Section 4131) of Part 7.
(2) Before the tax collector sells vacant residential developed property pursuant to this subdivision, actual notice, by certified mail, shall be provided to the property owner, if the property owner’s identity can be determined from the county assessor’s or county recorder’s records. The tax collector’s power of sale shall not be affected by the failure of the property owner to receive notice.
(3) Before the tax collector sells vacant residential developed property pursuant to this subdivision, notice of the sale shall be given in the manner specified by Section 3704.7.
(c) The amendments made to this section by the act adding this subdivision apply to property that becomes tax defaulted on or after January 1, 2005.

SEC. 2.

 Section 3692.4 of the Revenue and Taxation Code is amended to read:

3692.4.
 (a) Notwithstanding any other law, any county, city, city and county, or any nonprofit organization as defined in Section 3772.5, may request the tax collector to bring to the next scheduled public auction any residential real property that meets all of the following requirements:
(1) The property taxes have been delinquent for at least two three years.
(2) The real property will serve the public benefit of providing housing directly related to low-income persons.
(3) The real property is not occupied by the owner as their the owner’s principal place of residence, and any tenant occupying the property has been given an opportunity to purchase it.
(b) Every request submitted to the tax collector shall include the following:
(1) A formal resolution of the governing board of the county, city, city and county, or nonprofit organization, requesting the accelerated auction of the real property and stating the public benefit.
(2) A written plan for the development, rehabilitation, or proposed use of the real property and how low-income persons will be served.
(c) (1) Upon receiving a request as provided by this section, the tax collector shall include the real property in the next scheduled public auction.
(2) The tax collector shall document each step they are required to take in the tax sale process and provide a file of those documents to the nonprofit organization or public agency that purchases the property at the time of the sale.
(d) (1) If the real property is acquired by a nonprofit organization at auction, a deed restriction shall be placed on the real property, requiring the real property to be used for low-income housing for a period of at least 55 years for rental housing and 45 years for ownership housing, and in no event shall the maximum affordable sales price or rent level be higher than 20 percent below the median market rents or sales prices for the ZIP Code in which the site is located.
(2) (A) In lieu of the restriction required by paragraph (1), the deed may provide for equity sharing upon resale, if the real property is a single-family home that will be sold by the nonprofit organization to a low-income owner-occupant.
(B) To the extent not in conflict with another public funding source or law, all of the following shall apply to an equity-sharing agreement provided for by the deed:
(i) Upon resale by an owner-occupant of the home, the owner-occupant of the home shall retain the market value of any improvements, the downpayment, and their proportionate share of appreciation. The nonprofit organization shall recapture any initial subsidy and its proportionate share of appreciation, which shall then be used for the purpose of providing financial assistance to low-income homebuyers.
(ii) For purposes of this subdivision, the initial subsidy shall be equal to the fair market value of the home at the time of initial sale to the low-income owner-occupant minus the initial sale price to the low-income owner-occupant, plus the amount of any downpayment assistance or mortgage assistance. If upon resale by the owner-occupant the market value is lower than the initial market value, then the value at the time of the resale shall be used as the initial market value.
(iii) For purposes of this subdivision, the nonprofit organization’s proportionate share of appreciation shall be equal to the ratio of the initial subsidy to the fair market value of the home at the time of initial sale.
(e) This section may not be construed to preclude the application, to the real property or the current owners of that property, of any other provision of law not in conflict with this section.

SEC. 3.

 Section 3772.5 of the Revenue and Taxation Code is amended to read:

3772.5.
 For purposes of this chapter:
(a) “Low-income persons” means persons and families of low or moderate income, as defined by Section 50093 of the Health and Safety Code.
(b) (1) “Nonprofit organization” means a nonprofit organization incorporated pursuant to Part 2 (commencing with Section 5110) of Division 2 of Title 1 of the Corporations Code for the purpose of acquisition of either of the following:
(A) Single-family or multifamily dwellings for rehabilitation and sale or rent to low-income persons, or for other use to serve low-income persons.
(B) Vacant land for construction of residential dwellings and subsequent sale or rent to low-income persons, for other use to serve low-income persons, or for dedication of that vacant land to public use.
(2) A “nonprofit organization” shall also meet one of the following criteria:
(A) The nonprofit organization owns or manages housing units located on property that is exempt from taxation pursuant to the welfare exemption established in subdivision (a) of Section 214.
(B) The nonprofit organization contracts with a nonprofit corporation that has received a welfare exemption under Section 214.15 for properties intended to be sold to low-income families with financing in the form of zero interest rate loans.
(C) The nonprofit organization is a community housing development organization as described by in Section 92.300 of Title 24 of the Code of Federal Regulations.
(D) The nonprofit organization is a community land trust as defined in clause (i) of subparagraph (C) of paragraph (11) of subdivision (a) of Section 402.1.
(c) “Rehabilitation” means repairs and improvements to a substandard building, as defined in Section 17920.3 of the Health and Safety Code, necessary to make it a building that is not a substandard building.

SEC. 4.

 Section 3775 of the Revenue and Taxation Code is amended to read:

3775.
 (a) Whenever the county or the state is the purchaser, the price shall be agreed upon between the county board of supervisors and the Controller and the governing body of any city in which that property may be located and that price shall be paid to the county tax collector for distribution.
(b) Whenever a nonprofit organization is the purchaser, the purchase price shall be zero if the state reimburses the tax collector for the minimum bid price and all costs associated with the transaction.
(c) After a property becomes eligible for tax sale, the county may, at their discretion, lower the purchase price to an amount below the minimum bid price for public agencies and nonprofit organizations.

SEC. 5.

 Section 3791.4 of the Revenue and Taxation Code is amended to read:

3791.4.
 (a) When residential or vacant property has been tax defaulted for five years or more, or two three years or more after the property has become tax defaulted and is subject to a nuisance abatement lien, or one year or more after the property has become tax defaulted, is subject to a nuisance abatement lien, and is vacant, that property may, with the approval of the board of supervisors of the county in which it is located, be purchased pursuant to this chapter by a nonprofit organization, provided that:
(1) In the case of residential property, the nonprofit organization shall rehabilitate and sell or rent to, or otherwise use the property to serve, low-income persons.
(2) In the case of vacant property, the nonprofit organization shall construct residential dwellings on the property and sell or rent the property to low-income persons, otherwise use the property to serve low-income persons, or dedicate the vacant property to public use.
(3) The nonprofit organization shall conform to all demolition and unit replacement requirements pursuant to Section 66300 of the Government Code.
(b) The terms and conditions of any conveyance to a nonprofit corporation pursuant to this section shall be specified in the deed or other instrument of conveyance.
(c) The nonprofit organization shall indicate via a checklist to be developed by the tax collector that to the best of their knowledge the property is free and clear of any issues that may cloud transfer of title.
(d) Tax collectors shall provide their lists of tax-defaulted properties eligible for tax sale pursuant to this article to the Controller, and the Controller shall maintain an up-to-date list of all upcoming tax sales in the state on its internet website.

SEC. 6.

 Section 3794.3 of the Revenue and Taxation Code is amended to read:

3794.3.
 (a) A sale under this chapter shall take place only if approved by the board of supervisors.
(b) The board of supervisors shall make the decision to approve or disapprove a sale within 90 calendar days of receiving a request for approval.

SEC. 7.

 Section 3795 of the Revenue and Taxation Code is amended to read:

3795.
 (a) The agreement shall be submitted to the Controller. If the Controller does not approve the agreement, the Controller shall return the agreement to each party with a statement of the objections to it, and thereafter a new or modified agreement may be made.
(b) If the Controller approves the agreement, the Controller shall sign the executed copy, return the signed agreement to the tax collector, and keep a copy on file in the Controller’s office.
(c) The Controller shall make the determination of approval or rejection of the agreement within one calendar month of receipt of the agreement.

SEC. 8.

 Section 3797.5 is added to the Revenue and Taxation Code, to read:

3797.5.
 On or before January 30, 2023, the Controller shall develop a standardized set of best practices for the sale of tax delinquent properties pursuant to this chapter to nonprofit organizations with input from all relevant stakeholders. Tax collectors shall formally adopt those practices on or before December 31, 2024.

SEC. 9.

 The Legislature finds and declares that Section 1 of this act, which amends Section 3691 of the Revenue and Taxation Code, imposes a limitation on the public’s right of access to the meetings of public bodies or the writings of public officials and agencies within the meaning of Section 3 of Article I of the California Constitution. Pursuant to that constitutional provision, the Legislature makes the following findings to demonstrate the interest protected by this limitation and the need for protecting that interest:
(a) The records may contain personal information and the right to privacy is a personal and fundamental right protected by Section 1 of Article I of the California Constitution and by the United States Constitution. All individuals have a right of privacy in information pertaining to them.
(b) The list of tax defaulted properties is intended to be used to fulfill the public policy goal of alleviating the affordable housing crisis by making development of affordable housing easier, and the list, if made public, may be used to by predatory investors to thwart that goal.

SEC. 10.

 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.