December 16, 2008

Taxation Committee
Legislative Committee

The following is for study only and has NOT been approved by the Taxation Committee, Legislative or Executive Committees or the Board of Directors.

Issue
Should C.A.R. support legislation informing homeowners via their property tax bill as to the tax benefit available under Propositions 60 and 90?

Action
Optional

Options
1. Support legislation informing homeowners via their property tax bill as to the tax benefit available under Propositions 60 and 90. (In other words, C.A.R. would support such legislation if it is introduced.)

2. Sponsor legislation informing homeowners via their property tax bill as to the tax benefit available under Propositions 60 and 90. (C.A.R. would seek a legislator to author such legislation.)

3. Do nothing.

Status/Summary
The Property Tax Basis Portability Task Force was appointed with the charge to make recommendations as to what actions C.A.R. should take with regard to expanding property tax basis portability. Under existing law, senior homeowners are allowed to transfer the base year value of their original home to a replacement home so long as the replacement home has a value equal to, or less than, that of the original home and is located within the same county, or a different county if the receiving county has opted into the program. A survey conducted by the task force found that awareness of the ability to transfer property tax basis available under Propositions 60 and 90 is extremely low. As a result, the task force recommended that consideration be given to “informing homeowners via their property tax bill as to the tax benefit available under Propositions 60 and 90.” There is a precedent for counties informing senior homeowners of property tax assistance programs since current law already provides that when a county sends a tax bill to an individual that it be accompanied by a notice regarding the property tax assistance and postponement programs available under the Senior Citizens Property Tax Assistance Law and the Senior Citizens Property Tax Postponement Law.

Discussion
The Property Tax Basis Portability Task Force was appointed with the charge to make recommendations as to what actions C.A.R. should take with regard to expanding property tax basis portability. Under Proposition 60, senior (55 years of age and older) homeowners are allowed to transfer the base year value of their original home to a replacement home so long as the replacement home has a value equal to, or less than, that of the original home and is located within the same county.

For example, a senior who purchased their home in 1981 for $100,000 who twenty-five years later sells their home for $600,000 and purchases a new home for $600,000 (which by virtue of being equal to or less than $600,000 qualifies the senior to participate in the Proposition 60 program) can be taxed on the base year value of their former $100,000 home instead of on the value of their new $600,000 home.

However, Proposition 60 was limited to senior homeowners moving within the same county. Consequently, Proposition 90 was placed on the ballot and approved by the voters. Proposition 90 allows seniors to participate in the Proposition 60 program when moving to another county if the county in the which the replacement home is located has adopted an ordinance allowing property tax base year value transfers from other counties. Only about half a dozen counties are currently accepting property tax basis transfers from other counties.

In order to help determine the likelihood of success of attempting to expand property tax basis portability, the task force had a survey conducted of longtime homeowners as well as homeowners that had either already qualified or would soon qualify to transfer their property tax basis. The survey measured homeowner awareness of the impact of property taxes on the cost of owning a home as well as awareness of property tax benefits available under Propositions 60 and 90. The survey found that property taxes play a small part in the home buying decision. Additionally, the survey found that awareness of the ability to transfer property tax basis available under Propositions 60 and 90 is extremely low.

After hearing from several authoritative sources, the task force determined that the existing political and economic realities do not lend themselves to sponsoring legislation that would increase the portability of homeowners’ property tax base year values. As a result, the task force’s recommendations focused on C.A.R. educating REALTORS® and homeowners about the property tax benefit available under Propositions 60 and 90. The recommendations included a direction that: “Staff prepare an Issue Briefing Paper for consideration by the Taxation Committee discussing whether C.A.R. should support legislation informing homeowners via their property tax bill as to the tax benefit available under Propositions 60 and 90.”

Current state law already provides that when a county sends a tax bill to an individual that it be accompanied by a notice regarding the property tax assistance and postponement programs available to senior citizens under the Senior Citizens Property Tax Assistance Law and the Senior Citizens Property Tax Postponement Law. The former program provides direct cash assistance to homeowners 62 years of age or older with limited household income. The latter program also helps senior homeowners on limited incomes with their property taxes by allowing the homeowner to postpone paying their property taxes; generally speaking, the postponed taxes and accrued interest become payable when the homeowner sells or moves from the home, or when the homeowner dies without a spouse still residing in the home. It appears that the information on the Senior Citizens Property Tax Assistance Law and the Senior Citizens Property Tax Postponement Law is generally provided by counties via an insert included with the property tax bill.

Thus, there is clearly a precedent for counties informing senior homeowners of the programs available to provide assistance with meeting the cost of paying property taxes. Providing information on the property tax benefits available to senior homeowners under Propositions 60 and 90 would be very consistent with the information that is already required to be provided to senior homeowners with regard to assistance with, or postponement of, paying their property taxes.

Clearly, the rationale for providing information relating to the senior citizen property tax assistance and postponement programs with the property tax bill is that it is at that the time that the senior homeowner is going to be most interested in learning about reducing or postponing their property taxes. Again, providing information to senior homeowners relating to being able to transfer the property tax base year value of their home with their property tax bill would similarly be timely.

However, it should be said that many senior homeowners may not notice the information relating to property tax assistance programs because it generally is provided in via an insert with the property tax bill. Many may simply discard the insert and only pay attention to the property tax bill itself. (Should consideration be given to noting the property tax assistance information insert on the property tax bill itself?) And, if the property tax bill is paid via an impound account such that the homeowner does not directly pay the property tax bill themselves, the homeowner may pay less attention to the property tax assistance programs available.

Finally, it should be noted that legislation to require counties to provide information regarding the tax benefits available under Propositions 60 and 90 may meet with muted resistance from counties. Muted because, clearly, taxpayers are entitled to know about programs intended to assist them pay their taxes. Resistance, nonetheless, because it would be perceived as yet one more burden that the state wants to place on counties.