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Important New Laws Change Parcel Tax Administration

  • January 30, 2017

January 30, 2017

Administration of local parcel taxes is generally left to the discretion of school and community college districts; however, as of January 1, 2017, two new laws require changes in the way that many districts administer their parcel taxes:

  • AB 1891 requires that taxpayers who are granted exemptions from a parcel tax continue to receive that exemption without re-application.
  • AB 2476 requires districts with “new” parcel taxes to mail notice of the tax to property owners who do not live in the district.

Districts with parcel taxes may need to review their current policies and procedures to make sure they are in compliance with these new requirements.

Continuing Exemption Status

The statutory authority under which districts may levy a parcel tax allows such taxes to include exemptions.  The most common is an exemption from the tax for senior citizens.  Until very recently, the law was silent on how such exemptions were administered by districts.

Because home ownership can change during the term of a tax and thus affect eligibility for exemption, some districts have required residents to file an annual application for exemption for each year the tax is in effect.  Assembly Bill No. 1891 will now change those practices, by specifically providing that  “Any exemption … shall remain in effect until the taxpayer becomes ineligible. If the taxpayer becomes ineligible for the exemption for any reason, a new exemption may be granted in the same manner.”  (Gov. Code, § 50079, subd. (d).)

The legislative history of the bill suggests its intent was to prevent those exempt from parcel taxes from having to pro-actively fill out exemption applications every year.  It described the bill as preventing a district from having “an overly burdensome system that can result in a surreptitious tax against those who often have difficulty affording it.”  At the same time, the Legislature acknowledged that districts may need to “implement a strategy for determining whether or not [a] taxpayer is eligible for the exemption.”

Based on the amended law and legislative history, districts may no longer require property owners to re-apply for an exemption every year.  However, the law does not prohibit a district from monitoring or auditing exemption eligibility.  The following procedures could be used to determine whether taxpayers are still eligible for an exemption while staying within the limits of the new law:

  • Annually send a letter to those receiving an exemption confirming that they are receiving the exemption and asking them to contact the district if they no longer qualify or do not wish to receive the exemption.
  • Implement an annual “spot-check” system which would require a limited number of taxpayers receiving the exemptions (selected at random) to verify their eligibility.
  • Where possible, perform annual owner verification by review of public records regarding property transactions in the district.

While these steps may not be able to fully determine if all taxpayers receiving exemptions are eligible, it appears that these are the most effective options left in light of the new law.

Mailed Notice of “New” Parcel Taxes

Assembly Bill No. 2476 added an additional requirement for districts with new parcel taxes.  It requires a district to provide mailed notice of a new tax to property owners that do not reside within the district.  The notice must include the rate, duration, frequency and manner of collection of the tax, and provide contact information for taxpayers with questions about the tax.  The notice can be provided by way of a postcard (the statute provides a sample notice format), and the district may use proceeds of the parcel tax to pay for the reasonable cost of preparing and mailing the notice.

The statute, however, raises the following issues:

  • First, it does not state which taxes qualify as “new” taxes subject to the notice requirement. While many districts “renew” parcel tax authority, technically each measure approved by voters provides new authority for a specific tax for a specific duration.  Thus, any taxes which are first levied (even if as the result of a “renewal” measure) after January 1, 2017, are likely subject to this new notice requirement.
  • Second, the statute does not state when the notice should be mailed. Given the apparent intent of the amendment and to avoid any impact from the failure to provide the notice, districts may want to provide this notice before the first tax bills containing the tax are sent to property owners.
  • Third, the statute does explain how a district is to identify those who must receive the notice. The law indicates the notice must go to “a property owner, if that owner does not reside within the jurisdictional boundaries of the taxing entity subject to the new tax, whose name and address appear on the last equalized county assessment roll or the State Board of Equalization roll, as applicable.”  Districts should work with their county assessors/tax collectors and/or any consultants who assist with implementation of their parcel tax to identify these property owners.

If you have any questions about these new requirements or other questions about the implementation of your district’s parcel tax, please contact a DWK attorney for more information.

PRACTICE AREAS
  • Business and Property

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