Two bills and a lawsuit that sought to limit Proposition 13's restriction of commercial property taxes were failed or flagging as of late June.
The Sacramento Bee's Dan Walters reported at http://bit.ly/UMvc7E that AB 2372 was losing momentum as it entered the State Senate. The bill had been hailed earlier as a breakthrough compromise to close a Prop 13 commercial property tax loophole. But Walters wrote that lobbyist Lenny Goldberg, representing the California Tax Reform Association, pulled support from the measure June 25, the same day it passed the Senate Governance and Finance Committee. Goldberg, he wrote, had been a key party to a compromise announced in May that brought together perennial opponents and defenders of Prop 13 to support the bill.
The bill, by Assemblymembers Tom Ammiano, D-San Francisco, and Raul Bocanegra, D-San Fernando Valley, would block a method of avoiding reassessment for property tax purposes when business real estate changes hands: instead of transferring the property formally to a new owner, control over the owning entity is divided among a new group of people or entities, invoking an existing definition of corporate reorganization that currently exempts such transactions from reassessment. The bill would impose reassessment if 90% or more of the ownership interests changed hands within three years -- though successive amendments have narrowed its application. For prior coverage see http://www.cp-dr.com/articles/node-3494 and the Socketsite real estate blog at http://bit.ly/1qpbGeF.
Walters quoted Goldberg's withdrawal letter to Assembly sponsor Tom Ammiano as saying the bill did not "provide real reform" because it would not apply retroactively to the kinds of exemption it was meant to stop and would allow too many other ways around reassessment. Walters suggested that, if the measure failed, it might strengthen the possibility of a ballot initiative for a "split roll" giving different tax treatment to residential and commercial properties.
Also in June, the LA County Assessor's challenge to a version of this type of transaction was defeated in Ocean Avenue LLC v. County of Los Angeles. The Second District Court of Appeal found on June 3 that reassessment was not triggered when three entities closely linked to Michael Dell of the Dell computer company acquired ownership of the LLC that holds the Fairmont Miramar Hotel in Santa Monica. (The June 23 committee analysis of AB 2372 at http://bit.ly/1i0mbN1 mentions that outcome specifically, saying "more than $1 million" in tax liability was saved.) The Second District issued orders slightly revising the decision and publishing it as of June 24. See http://bit.ly/1m0Wn8C. For a detailed analysis of the case -- written on the assumption that AB 2372 was likely to pass -- see the Pillsbury law firm's site at http://bit.ly/1k3I7Id.
SB 1021, a measure allowing limited higher commercial parcel taxes that was criticized by opponents as a "split roll" proposal, still had prospects when Walters' article on AB 2372 went to press, but the Assembly Revenue and Taxation Committee rejected it 4-1 the same day. On June 26 the Howard Jarvis Taxpayers' Association crowed on Twitter, "Yesterday SB 1021 was defeated... changed how education parcel taxes are assessed for tens of thousands of properties. Victory for #prop13." (https://twitter.com/HJTA/status/482283390432198656). For the bill's formal history see http://bit.ly/TIgFcl. For more detail and links see our prior coverage at http://www.cp-dr.com/articles/node-3494.
