Bill Could Have Generated $269 Million – Without Raising Taxes
SACRAMENTO – The Senate Finance and Governance Committee today rejected Senate Bill 1319 on a party-line vote by Senator Patricia Bates (R-Laguna Niguel) that would have corrected an outdated interpretation of property “change of ownership” that has been part of the long running debate around commercial property and Proposition 13 (the 1978 initiative that limited property tax increases).
“California faces a $54 billion budget deficit and local governments are pleading for additional revenue to help fund essential services,” said Senator Bates. “The committee’s rejection of my bill that could have generated $269 million in new tax revenue – without raising taxes – is misguided. This is yet another case of politics prevailing over common sense.”
SB 1319 would have required the reassessment of any property or single transaction if 90 percent of the ownership interest changes hands within any three-year period. The bill would have prevented a repeat of examples similar to the 2006 purchase of Santa Monica’s Miramar Hotel where the purchaser realized he could structure the transaction without any one entity owning a 50 percent majority share in the property.
Despite the fact that 100 percent of the hotel’s ownership changed hands, reassessment of the property did not occur, resulting in a tax loss to Los Angeles County of over $1 million annually. Had SB 1319 been in effect in 2006, Los Angeles County would have reassessed the Miramar Hotel.
SB 1319 would have also increased the penalty for failure to file a “change in ownership” statement, from 10 to 15 percent of the taxes applicable to the new base year value (or old base year value, if there is no change in ownership). The bill would have required the California Board of Equalization (BOE) to notify assessors if a legal entity change in ownership occurs and to submit a report to the Legislature by January 1, 2023, regarding the bill’s economic impact and frequency of assessment.
As the COVID-19 pandemic unfolded, senators were asked by Senate President pro Tem Toni Atkins to scale down their legislative packages and prioritize. Senator Bates has delayed consideration of several of her legislative proposals until next year. She prioritized SB 1319 to help California generate tax revenue without raising taxes on families or businesses.
Democratic-controlled legislative committees have also killed bills similar to SB 1319 – SB 259 (Bates) in 2015 and SB 1237 (Bates) in 2018. The BOE estimated that SB 1237 could have generated $269 million annually in new tax revenue.
SB 1319 is also similar to a 2014 bill authored by former Democratic Assembly Members Tom Ammiano and Raul Bocanegra. Their bill, AB 2372 (2014), cleared the Assembly with bipartisan support, only to die in the Senate.