Property taxation: change in ownership.
With these changes, the bill proposes that the Franchise Tax Board includes a new question on tax returns to help determine if a change in ownership has occurred under these new rules. The State Board of Equalization is also tasked with notifying assessors of changes in control or ownership, ensuring that properties are reassessed in accordance with ownership changes. This could significantly impact the revenue derived from property taxes, particularly for large entities holding substantial real estate assets, as regular reassessments are likely to occur more frequently with these clarified definitions.
Senate Bill 1319, introduced by Senator Bates, is focused on amending property taxation laws related to changes in ownership for legal entities such as corporations and partnerships. The bill specifies new criteria under which a transfer of ownership interests in a legal entity will trigger a change in ownership of the real property held by that entity. Primarily, if 90% or more of the ownership interests are sold or transferred in a single transaction, a change in ownership is recognized, regardless of whether any individual entity gains control in the transaction. This aims to close loopholes in the existing law that could allow entities to avoid property tax reassessment following ownership transfers.
Designated as an urgency statute, SB1319 is framed as necessary for the immediate preservation of public peace and financial equity among property holders across California. The bill is intended to take immediate effect to prevent further exploitation of existing tax loopholes, aiming for fair treatment of all property owners under the state's property taxation system.
The bill has received some contention regarding its urgency and the implications of higher penalties for failing to file a change in ownership statement. It increases the penalties for non-compliance from 10% to 15%, impacting those who fail to file a complete statement after such transfers. Critics may argue that increasing the penalties further could disproportionately affect smaller entities that may struggle with compliance due to the complex nature of property ownership structures. Additionally, the provision concerning the state's lack of reimbursement for certain local agencies may lead to concerns about financial burdens on municipalities tasked with enforcement.