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ACA-9 Property taxation: transfers of principal residences.(2021-2022)

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CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Constitutional Amendment
No. 9


Introduced by Assembly Member Kiley

May 03, 2021


A resolution to propose to the people of the State of California an amendment to the Constitution of the State, by amending Section 2.1 of Article XIII A thereof, relating to taxation.


LEGISLATIVE COUNSEL'S DIGEST


ACA 9, as introduced, Kiley. Property taxation: transfers of principal residences.
The California Constitution limits the amount of ad valorem taxes on real property to 1% of the full cash value of that property, defined as the county assessor’s valuation of real property as shown on the 1975–76 tax bill and, thereafter, the appraised value of the real property when purchased, newly constructed, or a change in ownership occurs after the 1975 assessment, subject to an annual inflation adjustment not to exceed 2%. The California Constitution, until February 15, 2021, excluded from classification as a “purchase” or “change in ownership” requiring reppraisal the purchase or transfer of a principal residence and the first $1,000,000 of other real property of a transferor in the case of a transfer between parents and their children, or between grandparents and their grandchildren if all the parents of those grandchildren are deceased. On November 3, 2020, the voters approved Proposition 19. Pursuant to Proposition 19, the California Constitution, on and after February 16, 2021, removes the above-described exclusion from classification as a “purchase” and “change in ownership” requiring reappraisal, and instead excludes from classification as a “purchase” and “change in ownership” the purchase or transfer of a family home or family farm, as those terms are defined, of the transferor in the case of a transfer between parents and their children, or between grandparents and their grandchildren if all the parents of those grandchildren are deceased, if the property continues as the family home or family farm of the transferee. In the case of the exclusion so provided to a transfer of a family home, the California Constitution, pursuant to Proposition 19, requires the transferee to claim the homeowner’s or disabled veteran’s exemption within one year of the transfer.
This measure would repeal the above-described provisions of Proposition 19. The measure would reinstate the prior rule excluding from classification as a “purchase” or “change in ownership” requiring reappraisal the purchase or transfer of the principal residence and the first $1,000,000 of other real property of a transferor in the case of a transfer between parents and their children, or between grandparents and their grandchildren if all the parents of those grandchildren are deceased. The measure would apply retroactively to all effected purchases or transfers occurring on or after February 16, 2021.
Vote: 2/3   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

Resolved by the Assembly, the Senate concurring, That the Legislature of the State of California at its 2021–22 regular session commencing on the seventh day of December 2020, two-thirds of the membership of each house concurring, hereby proposes to the people of the State of California, that the Constitution of the State be amended as follows:

 That Section 2.1 of Article XIII A thereof is amended to read:

SEC. 2.1.
 (a) Limitation on Property Tax Increases on Primary Residences for Seniors, the Severely Disabled, Wildfire and Natural Disaster Victims, and Families. It is the intent of the Legislature in proposing, and the people in adopting, this section to do both of the following:
(1) Limit property tax increases on primary residences by removing unfair location restrictions on homeowners who are severely disabled, victims of wildfires or other natural disasters, or seniors over 55 years of age that need to move closer to family or medical care, downsize, find a home that better fits their needs, or replace a damaged home and limit damage from wildfires on homes through dedicated funding for fire protection and emergency response.
(2) Limit property tax increases on family homes used as a primary residence California families by protecting and restoring the right of parents and grandparents to pass on their family home to transfer, on or after February 16, 2021, a principal residence and a limited amount of other real property to their children and grandchildren for continued use as a primary residence, while eliminating unfair tax loopholes used by East Coast investors, celebrities, wealthy non-California residents, and trust fund heirs to avoid paying a fair share of property taxes on vacation homes, income properties, and beachfront rentals they own in California. children without reassessment, and extending these same protections from reassessment to grandparents and grandchildren if the parents of the grandchildren are deceased, thereby retroactively preserving previous taxpayer protections and preventing what is essentially an inheritance tax on family property.
(b) Property Tax Fairness for Seniors, the Severely Disabled, and Victims of Wildfire and Natural Disasters. Notwithstanding any other provision of this Constitution or any other law, beginning on and after April 1, 2021, the following shall apply:
(1) Subject to applicable procedures and definitions as provided by statute, an owner of a primary residence who is over 55 years of age, severely disabled, or a victim of a wildfire or natural disaster may transfer the taxable value of their primary residence to a replacement primary residence located anywhere in this state, regardless of the location or value of the replacement primary residence, that is purchased or newly constructed as that person’s principal residence within two years of the sale of the original primary residence.
(2) For purposes of this subdivision:
(A) For any transfer of taxable value to a replacement primary residence of equal or lesser value than the original primary residence, the taxable value of the replacement primary residence shall be deemed to be the taxable value of the original primary residence.
(B) For any transfer of taxable value to a replacement primary residence of greater value than the original primary residence, the taxable value of the replacement primary residence shall be calculated by adding the difference between the full cash value of the original primary residence and the full cash value of the replacement primary residence to the taxable value of the original primary residence.
(3) An owner of a primary residence who is over 55 years of age or severely disabled shall not be allowed to transfer the taxable value of a primary residence more than three times pursuant to this subdivision.
(4) Any person who seeks to transfer the taxable value of their primary residence pursuant to this subdivision shall file an application with the assessor of the county in which the replacement primary residence is located. The application shall, at minimum, include information comparable to that identified in paragraph (1) of subdivision (f) of Section 69.5 of the Revenue and Taxation Code, as that section read on January 1, 2020.

(c)Property Tax Fairness for Family Homes. Notwithstanding any other provision of this Constitution or any other law, beginning on and after February 16, 2021, the following shall apply:

(1)For purposes of subdivision (a) of Section 2, the terms “purchased” and “change in ownership” do not include the purchase or transfer of a family home of the transferor in the case of a transfer between parents and their children, as defined by the Legislature, if the property continues as the family home of the transferee. This subdivision shall apply to both voluntary transfers and transfers resulting from a court order or judicial decree. The new taxable value of the family home of the transferee shall be the sum of both of the following:

(A)The taxable value of the family home, subject to adjustment as authorized by subdivision (b) of Section 2, determined as of the date immediately prior to the date of the purchase by, or transfer to, the transferee.

(B)The applicable of the following amounts:

(i)If the assessed value of the family home upon purchase by, or transfer to, the transferee is less than the sum of the taxable value described in subparagraph (A) plus one million dollars ($1,000,000), then zero dollars ($0).

(ii)If the assessed value of the family home upon purchase by, or transfer to, the transferee is equal to or more than the sum of the taxable value described in subparagraph (A) plus one million dollars ($1,000,000), an amount equal to the assessed value of the family home upon purchase by, or transfer to, the transferee, minus the sum of the taxable value described in subparagraph (A) and one million dollars ($1,000,000).

(2)Paragraph (1) shall also apply to a purchase or transfer of the family home between grandparents and their grandchildren if all of the parents of those grandchildren, who qualify as children of the grandparents, are deceased as of the date of the purchase or transfer.

(3)Paragraphs (1) and (2) shall also apply to the purchase or transfer of a family farm. For purposes of this paragraph, any reference to a “family home” in paragraph (1) or (2) shall be deemed to instead refer to a “family farm.”

(4)Beginning on February 16, 2023, and every other February 16 thereafter, the State Board of Equalization shall adjust the one million dollar ($1,000,000) amount described in paragraph (1) for inflation to reflect the percentage change in the House Price Index for California for the prior calendar year, as determined by the Federal Housing Finance Agency. The State Board of Equalization shall calculate and publish the adjustments required by this paragraph.

(5)(A)Subject to subparagraph (B), in order to receive the property tax benefit provided by this section for the purchase or transfer of a family home, the transferee shall claim the homeowner’s exemption or disabled veteran’s exemption at the time of the purchase or transfer of the family home.

(B)A transferee who fails to claim the homeowner’s exemption or disabled veteran’s exemption at the time of the purchase or transfer of the family home may receive the property tax benefit provided by this section by claiming the homeowner’s exemption or disabled veteran’s exemption within one year of the purchase or transfer of the family home and shall be entitled to a refund of taxes previously owed or paid between the date of the transfer and the date the transferee claims the homeowner's exemption or disabled veteran’s exemption.

(d)Subdivision (h) of Section 2 shall apply to any purchase or transfer that occurs on or before February 15, 2021, but shall not apply to any purchase or transfer occurring after that date. Subdivision (h) of Section 2 shall be inoperative as of February 16, 2021.

(e)

(c) For purposes of this section:
(1) “Disabled veteran’s exemption” means the exemption authorized by subdivision (a) of Section 4 of Article XIII.

(2)“Family farm” means any real property which is under cultivation or which is being used for pasture or grazing, or that is used to produce any agricultural commodity, as that term is defined in Section 51201 of the Government Code as that section read on January 1, 2020.

(3)“Family home” has the same meaning as “principal residence,” as that term is used in subdivision (k) of Section 3 of Article XIII.

(4)

(2) “Full cash value” has the same meaning as defined in subdivision (a) of Section 2.

(5)

(3) “Homeowner’s exemption” means the exemption provided by subdivision (k) of Section 3 of Article XIII.

(6)

(4) “Natural disaster” means the existence, as declared by the Governor, of conditions of disaster or extreme peril to the safety of persons or property within the affected area caused by conditions such as fire, flood, drought, storm, mudslide, earthquake, civil disorder, foreign invasion, or volcanic eruption.

(7)

(5) “Primary residence” means a residence eligible for either of the following:
(A) The homeowner’s exemption.
(B) The disabled veteran’s exemption.

(8)

(6) “Principal residence” as used in subdivision (b) has the same meaning as that term is used in subdivision (a) of Section 2.

(9)

(7) “Replacement primary residence” has the same meaning as “replacement dwelling,” as that term is defined in subdivision (a) of Section 2.

(10)

(8) “Taxable value” means the base year value determined in accordance with subdivision (a) of Section 2 plus any adjustment authorized by subdivision (b) of Section 2.

(11)

(9) “Victim of a wildfire or natural disaster” means the owner of a primary residence that has been substantially damaged as a result of a wildfire or natural disaster that amounts to more than 50 percent of the improvement value of the primary residence immediately before the wildfire or natural disaster. For purposes of this paragraph, “damage” includes a diminution in the value of the primary residence as a result of restricted access caused by the wildfire or natural disaster.

(12)

(10) “Wildfire” has the same meaning as defined in subdivision (j) of Section 51177 of the Government Code, as that section read on January 1, 2020.