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SB-539 Property taxation: intergenerational transfers of real property: base year value transfers.(2021-2022)

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Date Published: 02/18/2021 09:00 PM
SB539:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Senate Bill
No. 539


Introduced by Senator Hertzberg
(Principal coauthors: Senators Allen and McGuire)

February 18, 2021


An act to add Sections 63.2 and 69.6 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


SB 539, as introduced, Hertzberg. Property taxation: intergenerational transfers of real property: base year value transfers.
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, among other things, the appraised value of that real property when a change in ownership has occurred. Existing property tax law provides that specified transfers are not deemed a change in ownership for which a claim is filed, including the purchase or transfer from parent to child, and in some cases from grandparent to grandchild, of the transferor’s principal residence or the first $1,000,000 of full cash value of all other real property.
Existing provisions of the California Constitution, adopted as Proposition 19 by the voters at the November 3, 2020, general election, provide that on and after February 16, 2021, the above-described exclusion is inoperative. Existing law provides instead that a change in ownership does not include (1) the purchase or transfer of real property that is the principal residence of an eligible transferor in the case of a purchase or transfer between parents and their children or sometimes between grandparents and their grandchildren, if the property continues as the family home of the transferee, and (2) the purchase or transfer between parents and their children or between grandparents and their grandchildren of a family farm. Existing law authorizes, if certain conditions are fulfilled, the new base year value of the purchased or transferred family home or family farm to be the sum of (1) the taxable value of the property, subject to adjustment, as determined as of the date immediately prior to the transfer or purchase, and (2) the assessed value, if any, of the property that exceeds $1,000,000.
This bill would implement these newly adopted constitutional provisions, as provided. The bill would require that the principal residence transferred is the principal residence of the transferor, and that it become the principal residence of the transferee within one year of the transfer. The bill would require that in order to claim the exclusion, a claim be filed with the assessor. Because the bill would require county assessors to provide new services in relation to family farms, it would impose a state-mandated local program. The bill would also require the State Board of Equalization to adopt emergency regulations in order to implement these provisions, as provided. The bill would also provide that a claim filed under this section is not a public document and is not subject to public inspection, except to specified parties.
Existing property tax law authorizes, pursuant to constitutional authorization, a person over 55 years of age, or any severely and permanently disabled person, who resides in property eligible for the homeowners’ exemption to transfer the base year value of the property to a replacement dwelling, subject to certain conditions and limitations.
The California Constitution, beginning on and after April 1, 2021, instead authorizes an owner who is over 55 years of age, severely disabled, or a victim of a wildfire or natural disaster to transfer the taxable value, defined as the base year value determined as provided above plus any inflation adjustment, of a primary residence eligible for either the homeowner’s exemption or the disabled veteran’s exemption 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 2 years of the sale of the original primary residence. Under the California Constitution, a person who is 55 years of age or severely disabled may transfer the taxable value of their primary residence up to 3 times. The California Constitution requires that a person seeking to transfer the taxable value of a primary residence under these provisions file an application, containing specified information, with the assessor of the county in which the replacement primary residence is located.
This bill, in accordance with the above-described constitutional provisions, on and after April 1, 2021, would authorize any person over 55 years of age or any severely and permanently disabled person who resides in property that is eligible for the homeowner’s exemption or the disabled veteran’s exemption to transfer the taxable value of that property to a replacement dwelling that is purchased or newly constructed as a principal residence within 2 years of the sale of the original property, as provided. The bill would limit a person to 3 transfers of taxable value under these provisions. By adding to the duties of local tax officials with respect to the transfer of the taxable value of real property, this 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 no reimbursement is required by this act for a specified reason.
This bill would take effect immediately as a tax levy.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

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


SECTION 1.

 Section 63.2 is added to the Revenue and Taxation Code, to read:

63.2.
 (a) Notwithstanding any provision of this chapter, beginning on and after February 16, 2021, a change in ownership shall not include, in whole or in part, any of the following purchases or transfers for which a claim is filed:
(1) The purchase or transfer of real property that is the principal residence of an eligible transferor in the case of a purchase or transfer between parents and their children or between grandparents and their grandchildren, if all of the parents, other than stepparents, of that grandchild or those grandchildren, who qualify as the children of the grandparents, are deceased as of the date of purchase or transfer.
(A) The transfer is required to be of a principal residence of the transferor, and become the principal residence of the transferee within one year of the transfer.
(B) The transferee shall file for the homeowners’ or disabled veterans’ exemption within a year of the transfer, and the exclusion shall be removed on the date an eligible transferee is no longer eligible for either the homeowners’ or disabled veterans’ exemption.
(2) The purchase or transfer is of a family farm of an eligible transferor in the case of a purchase or transfer between parents and their children or between grandparents and their grandchildren, if all of the parents, other than stepparents, of that grandchild or those grandchildren, who qualify as the children of the grandparents, are deceased as of the date of purchase or transfer. A family farm need not be the principal residence of the transferor or transferee.
(b) The exclusions provided for in this section shall not be allowed unless a claim for the exclusion sought, pursuant to subdivision (g), is filed with the assessor.
(c) A claim filed under this section is not a public document and is not subject to public inspection, except that a claim shall be available for inspection by the transferee and the transferor or their respective spouse, the transferee’s legal representative, the transferor’s legal representative, the trustee of the transferee’s trust, the trustee of the transferor’s trust, and the executor or administrator of the transferee’s or transferor’s estate.
(d) The new base year value of the family home or family farm shall be the sum of both the following:
(1) The taxable value of the family home or family farm as determined in accordance with Section 110.1, with the adjustments permitted by subdivision (b) of Section 2 of Article XIII A of the California Constitution and subdivision (f) of Section 110.1, determined as of the date immediately prior to the date the principal residence or family farm is purchased or transferred to the transferee.
(2) The applicable of the following amounts:
(A) If the fair market value, as defined in subdivision (a) of Section 110, of the family home or family farm upon purchase by, or transfer to, the transferee is less than the sum of the taxable value described in paragraph (1) plus one million dollars ($1,000,000), then zero dollars ($0).
(B) If the fair market value, as defined in subdivision (a) of Section 110, of the family home or family farm upon purchase by, or transfer to, the transferee is equal to or more than the sum of the taxable value described in paragraph (1) plus one million dollars ($1,000,000), an amount equal to the fair market value of the family home upon purchase by, or transfer to, the transferee, minus the sum of the taxable value described in paragraph (1) and one million dollars ($1,000,000).
(e) As used in this section, the following terms have the following meanings:
(1) “Children” means any of the following:
(A) Any child born of the parent or parents, except a child, as defined in subparagraph (D), who has been adopted by another person or persons.
(B) Any stepchild of the parent or parents and the spouse of that stepchild while the relationship of stepparent and stepchild exists. For purposes of this paragraph, the relationship of stepparent and stepchild shall be deemed to exist until the marriage on which the relationship is based is terminated by divorce, or, if the relationship is terminated by death, until the remarriage of the surviving stepparent.
(C) Any son-in-law or daughter-in-law of the parent or parents. For the purposes of this paragraph, the relationship of parent and son-in-law or daughter-in-law shall be deemed to exist until the marriage on which the relationship is based is terminated by divorce, or, if the relationship is terminated by death, until the remarriage of the surviving son-in-law or daughter-in-law.
(D) Any child adopted by the parent or parents pursuant to statute, other than an individual adopted after reaching 18 years of age.
(2) “Eligible transferee” means a parent, child, grandparent, or grandchild of an eligible transferor.
(3) “Eligible transferor” means a grandparent, parent, grandchild, or child of an eligible transferee.
(4) “Family farm” means any real property 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.
(5) “Family home” or “principal place of residence” means a dwelling that is eligible for a homeowners’ exemption or a disabled veterans’ exemption as a result of the transferor’s ownership and occupation of the dwelling. “Family home” or “principal residence” includes only that portion of the land underlying the residence that consists of an area of reasonable size that is used as a site for the residence.
(6) “Full cash value” means full cash value, as defined in Section 2 of Article XIII A of the California Constitution and Section 110.1, with any adjustments authorized by those sections, and the full value of any new construction in progress, determined as of the date immediately prior to the date of a purchase by or transfer to an eligible transferee of real property subject to this section.
(7) “Grandchild” or “grandchildren” means any child or children of the child or children of the grandparent or grandparents.
(8) “Real property” means real property as defined in Section 104. Real property does not include any interest in a legal entity. For purposes of this section, real property includes any of the following:
(A) An interest in a unit or lot within a cooperative housing corporation, as defined in subdivision (i) of Section 61.
(B) A pro rata ownership interest in a mobilehome park, as defined in subdivision (b) of Section 62.1.
(C) A pro rata ownership in a floating home marina, as defined in subdivision (c) of Section 62.5.
(9) “Transfer” includes, and is not limited to, any transfer of the present beneficial ownership of property from an eligible transferor to an eligible transferee through the medium of an inter vivos or testamentary trust.
(f) (1) If the assessor notifies the transferee in writing of potential eligibility for exclusion from change in ownership under this section, a certified claim for exclusion shall be filed with the assessor within 45 days of the date of the notice of potential eligibility. If a certified claim for exclusion is not filed within 45 days, the assessor may send a second notice of potential eligibility for exclusion, notifying the transferee that a certified claim for exclusion has not been received and that reassessment of the property will commence unless a certified claim for exclusion is filed within 60 days of the date of the second notice of potential eligibility. The second notice of potential eligibility shall indicate whether a certified claim for exclusion that is not filed within 60 days will be subject to a processing fee as provided in paragraph (2).
(2) If a certified claim for exclusion is not filed within 60 days of the date of the second notice of potential eligibility and an eligible transferee subsequently files a claim and qualifies for the exclusion, the assessor may, upon authorization by a county board of supervisors, require an eligible transferee to pay a one-time processing fee, collected at the time the claim is submitted, and reimbursed by the assessor if the claim is ineligible. The fee shall be subject to the provisions of Chapter 12.5 (commencing with Section 54985) of Part 1 of Division 2 of Title 5 of the Government Code and shall not exceed the amount of the actual and reasonable costs incurred by the assessor for reassessment work done due to failure to file the claim for exclusion or one hundred seventy-five dollars ($175), whichever is less.
(g) (1) After consultation with the California Assessors’ Association, the board shall, by emergency regulation, adopt regulations and produce claim forms and instructions necessary to implement this section and Section 2.1 of Article XIII A of the California Constitution.
(2) Any emergency regulation 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 the regulation 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.

SEC. 2.

 Section 69.6 is added to the Revenue and Taxation Code, to read:

69.6.
 Notwithstanding any other law, on and after April 1, 2021, the following shall apply:
(a) Pursuant to subdivision (b) of Section 2.1 of Article XIII A of the California Constitution, any person over 55 years of age or any severely and permanently disabled person who resides in property that is eligible for either the homeowners’ exemption, under subdivision (k) of Section 3 of Article XIII of the California Constitution and Section 218, or the disabled veteran’s exemption, under subdivision (a) of Section 4 of Article XIII of the California Constitution and Section 205, may transfer, subject to the conditions and limitations provided in this section, the taxable value of that property to any replacement dwelling that is purchased or newly constructed by that person as their principal residence within two years of the sale by that person of the original property, provided that the taxable value of the original property shall not be transferred to the replacement dwelling until the original property is sold. A person shall not be allowed to transfer the taxable value of a primary residence pursuant to this section more than three times.
(b) In addition to meeting the requirements of subdivision (a), any person claiming the property tax relief provided by this section shall be eligible for that relief only if the following conditions are met:
(1) The claimant is an owner and a resident of the original property either at the time of its sale or within two years of the purchase or new construction of the replacement dwelling.
(2) The original property is eligible for the homeowners’ exemption or the disabled veteran’s exemption, as the result of the claimant’s ownership and occupation of the property as their principal residence, either at the time of its sale or within two years of the purchase or new construction of the replacement dwelling.
(3) At the time of the sale of the original property, the claimant is at least 55 years of age, or is severely and permanently disabled.
(4) At the time of claiming the property tax relief provided by subdivision (a), the claimant is an owner of a replacement dwelling and occupies it as their principal place of residence and, as a result thereof, the property is currently eligible for the homeowners’ exemption or the disabled veteran’s exemption, or would be eligible for the exemption except that the property is already receiving the exemption because of an exemption claim filed by the previous owner.
(5) The claimant sells the original property within two years of the purchase or new construction of the replacement dwelling. For purposes of this paragraph:
(A) Either the sale of the original property or the purchase or new construction of the replacement dwelling, but not both, may occur before April 1, 2021.
(B) The purchase or new construction of the replacement dwelling includes the purchase of that portion of land on which the replacement building, structure, or other shelter constituting a place of abode of the claimant will be situated and that constitutes a part of the replacement dwelling.
(6) The claimant has not previously been granted, as a claimant, the property tax relief provided by this section more than two times. In order to prevent more than three claims under this section within this state per person, each county assessor shall report quarterly to the State Board of Equalization that information from claims filed and from county records as is specified by the board to be necessary to identify fully all claims under this section allowed by assessors and all claimants who have thereby received relief. The board may specify that the information include all or a part of the names and social security numbers of claimants and the identity and location of the replacement dwelling to which the claim applies. The information may be required in the form of data processing media or other media and in a format that is compatible with the recordkeeping processes of the counties and the auditing procedures of the state.

SEC. 3.

 The Legislature finds and declares that Section 1 of this act, which adds Section 63.2 to 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:
(1) Claims filed under Section 63.2 contain taxpayer sensitive personal information, including social security numbers, dates of birth, home addresses, home telephone numbers, marital status, adoption status, financial matters, and medical information. Notwithstanding Section 3 of Article I of the California Constitution, county assessors have a responsibility and an obligation to safeguard from public access a taxpayer’s personal information with which it has been entrusted.
(2) 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.
(3) This state has previously recognized, in Sections 63.1 and 69.5 of the Revenue and Taxation Code, the importance of protecting the confidentiality and privacy of an individual’s personal and financial information contained in homeowners’ exemption claims, property statements, and change of ownership statements filed with county assessors for property tax purposes.
(4) In addition to the right of privacy, there is a need to protect from public disclosure personal information due to the growing prevalence and debilitating nature of identity theft.

SEC. 4.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the duties imposed on a local agency or school district by this act are necessary to implement, or were expressly included in, a ballot measure approved by the voters in a statewide or local election, within the meaning of Section 17556 of the Government Code.

SEC. 5.

 This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.