Ammiano's Prop. 13 reform bill moves forward with unlikely business community support

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Assemblymember Tom Ammiano has had a run of legislative successes leading up to this, his last year in office.

Assemblymember Tom Ammiano’s (D-SF) legislation to close a state loophole that has allowed big corporations and other commercial property owners to avoid paying higher property taxes that normally come when land is sold is moving toward becoming law after yesterday getting some unlikely support from the business community.

Assembly Bill 2372 would overturn state laws passed in the wake of Proposition 13, the landmark 1978 measure capping annual property tax increases until a property is sold, that define an ownership change as occurring only when a single purchaser buy more than 50 percent interest, a threshold easily avoided by creating shell corporation and LLCs.

“It costs the local jurisdictions a lot of money that could be going to potholes, teacher, or whatever,” Ammiano Press Secretary Carlos Alcala told the Guardian. “When I buy a house, I have to pay the increased property taxes, and when you buy a commercial building you should have to pay that increased tax.”

AB 2372 changes the threshold to allow reassessment if an owner sells 90 percent of his/her/its interest in a property, not matter how many ways the new controlling interest is sliced up. The California Chamber of Commerce and the usual business groups had opposed the measure, but they withdrew that opposition yesterday as the bill cleared the Assembly Revenue and Taxation Committee, thanks to some minor amendments and political finessing by committee Chair Raul Bocanegra (D-San Fernando Valley), who has pledged to sign on a co-sponsor.

“Now we have a bill that does exactly what I wanted, and yet it has the support of the business community,” Ammiano said in a prepared statement. “I’m grateful to Assemblymember. Bocanegra for helping with amendments that would remove opposition and make it clear that we are not targeting the average property owner. The average Californian is who we are trying to protect.”

“Homeowners are consistently reassessed but other properties aren’t,” Assemblymember Phil Ting (D-SF) -- a committee member and former San Francisco Assessor -- also said.

A spokesperson for the California Chamber of Commerce -- a powerful conservative lobby and fierce defender of maintain Prop. 13 protections for commercial property -- confirmed for the Guardian that it has changed its position on the bill, citing the amendments.

The conservative California Business Properties Association and the California Tax Reform Association also followed the Chamber in deciding to support the bill yesterday, according to Ammiano’s office, and even the Howard Jarvis Taxpayers Association -- named for the author of Prop. 13 -- has dropped its opposition to the measure. A statement by Ammiano’s office said sudden about-face “led one Republican committee member to refer to hell freezing over and pigs flying.”

But sources close to the action also say it was the work of Bocanegra -- whose committee is crucial to legislation involving business interests -- and a recent Field Poll showing 69 percent of Californians support closing this loophole and just 17 percent are opposed that may have made the difference.

At the hearing, Bocanegra thanked Ammiano for tackling “something that’s vexed us policywise in the state for a very, very long time.”

Comments

the 90% mark.

So I create two companies, A and B, that own a property such that A owns 89% and B owns 11%. Then I sell company A to company C, while retaining company B. No re-assessment.

Businesses will create layers of legal entities to scrape just beneath these thresholds.

But whatever, as long as the homeowners' Prop 13 entitlement endures, we're all good.

Posted by Guest on May. 14, 2014 @ 2:15 pm

As a homeowner every time I even upgrade a bathroom the city does a reassessment. It's absurd the same thing doesn't happen with commercial properties. Prop 13 will remain but this makes it stronger and removes one of the arguments progressives are always using for total repeal.

Posted by Guest on May. 14, 2014 @ 2:20 pm

supporting this.

It's because this change is largely symbolic, but takes the pressure off them for the forseeable future.

Residential Prop13 is rock solid and cannot be touched.

Posted by Guest on May. 14, 2014 @ 2:23 pm

Does this address sales of stock corporations and the exemption for properties held by a stock corporation when the stock is sold?

Posted by Richmondman on May. 14, 2014 @ 3:08 pm

If 90% of the shares change hands then any property that that corporation owns would be deemed to have been sold for Prop13 re-assessment purposes.

Posted by Guest on May. 14, 2014 @ 3:44 pm

If more than 50% of shares are purchased, that should trigger a reassessment of commercial property.

Posted by Richmondman on May. 15, 2014 @ 10:21 am

manipulate share transfers below the threshold of any arbitrary limit, through the use of super-shares, non-voting shares, and derivatives.

Posted by Guest on May. 15, 2014 @ 10:46 am

Prop 13 is unfair and is a barrier to attracting wealthy people to the state. Why should they pay over ten times that of their neighbors? Why should people be able to pass on an artificially low base to their heirs? It's just so wrong.

Posted by Guest on May. 14, 2014 @ 5:45 pm

Both favor those who hoard homes rather than adopt a more dynamic lifestyle.

Posted by Guest on May. 14, 2014 @ 6:01 pm

Dynamic and vibrant.

Posted by marcos on May. 15, 2014 @ 5:35 am

fiscal advantage is neither dynamic nor vibrant. It is sclerotic and moribund.

Posted by Guest on May. 15, 2014 @ 6:30 am

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Posted by weight-reduction plan on Jun. 02, 2014 @ 9:54 am

Why should home owners and those with second homes still benefit from such artificially low property tax bases when young families must pay so much more. Patently unfair. Ditch Prop 13 Now!!!

Posted by Guest on May. 14, 2014 @ 5:55 pm

have to pay for the spending habits carpet bagger politicians like the average progressive?

Why should a rent controlled building owner have to pay ever higher taxes when the city is controlling his wealth?

Think before you post, it will make you look less stupid.

Posted by Guest on May. 14, 2014 @ 6:58 pm
Posted by Guest on May. 15, 2014 @ 6:31 am

When a person purchases a house, if the finance with a fixed rate mortgage, they have payment stability. The same with Prop 13. Why should an elderly couple who have made 30 years of payments and own their home, be potentially forced to sell if their property tax increases 400%. This is exactly what was happening prior to Prop 13, and it was the driver of the law.

If you want to modify Prop 13 for second homes, fine; but don't mess with owner-occupied homes.

Posted by Richmondman on May. 15, 2014 @ 10:20 am

What is more unfair is the Income Tax code, which subidizes tax payers with real estate debt to the detriment of renters, who don't get tax breaks for home-mortgage deductions. What we need is Income Tax reform; preferably where more than 50% (what's left of the middle class) pay taxes, where the top 0.01% get the biggest tax breaks, and almost half of the citizens don't report all of their income.
Better to have a flat tax, with no deductions, where income up to $24K is non-taxable, all income after $24K is taxed at the same rate, and all sources of income, including capital gains and dividends, are taxed at the same rate.
And we need to tax the underground economy. Too much under the table earnings.

Posted by Richmondman on May. 15, 2014 @ 10:28 am
Posted by Guest on May. 15, 2014 @ 10:45 am

There are better ways than taking money from renters and putting it into the pockets of Home lenders.....

Posted by Richmondman on May. 15, 2014 @ 11:10 am
Posted by Guest on May. 15, 2014 @ 11:19 am

If 2 persons earn the same amount of money, the one that pays mortgage interest will pay less in income tax than the person who rents, even if the Mortgage Payment and property tax equals the rent. That is the same as taking more in taxes from renters in order to reduce the tax bill from debtors.

Posted by Richmondman on May. 15, 2014 @ 1:21 pm

loan interest on the building you live in, then he can afford to charge LESS rent.

Posted by Guest on May. 15, 2014 @ 1:29 pm

loan interest on the building you live in, then he can afford to charge LESS rent.

Posted by Guest on May. 15, 2014 @ 1:30 pm

Where a landlord reduces rent charged based on the renter's relative income tax burder?

Posted by Richmondman on May. 15, 2014 @ 1:47 pm

What he said is that the fact that a LL can deduct his mortgage interest means that he needs less rent to get his required ROI.

So his tenants benefit indirectly from that deduction.

Posted by Guest on May. 16, 2014 @ 4:58 am

So that makes it ok for two people with the same income to pay different amounts in income tax? BS. Mitt Romney pays between 9% (if done by the law) and 13% Federal income tax on millions in income. I paid 19% in income tax. There are more tax laws than all others combined, and most are written to benefit those with wealth - those who can afford tax attorneys. It's time for income tax fairness. Prop 13 brought a degree of fairness back by basing property tax on the sales price. The exemption for stock purchases is a huge loophole that prevents Prop 13 from being fairly applied to commercial property. This is a half-assed measure that will have little or no effect in this area.

Posted by Richmondman on May. 16, 2014 @ 7:34 am

those with the biggest tax liabilities?

Wow. Just wow.

Posted by Guest on May. 16, 2014 @ 7:52 am

If you don't care about this, you are either paying little or no income tax. Everyone who pays income tax should care about this. Every American who believes all persons are created equal should care about this. When people with money buy politicians, tax laws are what they get in return.

Posted by Richmondman on May. 16, 2014 @ 9:58 am

But generally speaking, people vote for politicians who wish to maintain tax deductions for certain kinds of behaviors like home ownership, saving for retirement, giving to charity, and so on.

Those who cannot benefit from those tax deductions are typically poorer, and so are more likely to benefit from welfare programs and subsidies, which are paid for by the taxes on those people who get the deductions.

Posted by Guest on May. 16, 2014 @ 10:27 am

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