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 CALIFORNIA TAXPAYERS' ASSOCIATION JAMES W. BARNES Chairman LARRY McCARTHY President CAROL ROSS EVANS Vice President REBECCA K. TAYLOR Chief Policy Consultant DAVID R. DOERR Chief Tax Consultant STEPHEN J. KROES Director of Research JOYCE SHOWALTER Director - Corporate Relations RON ROACH Editor Cal-Tax Digest (ISSN 0008-0543) is published monthly, except
August and December, by the California Taxpayers Association,
921 11th Street, Suite 800, Sacramento, CA 95814. Subscriptions
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AB 1027, Trial de Novo and California's ImageBy Carol Ross Evans
In the property tax area - the largest tax paid by business - there have been significant law changes in recent years that should be yielding a more positive perception of California's tax environment. Landmark legislation (SB 657, Maddy) was sponsored by Cal-Tax in 1995. It provided several major property tax administration reforms designed to give taxpayers and tax officials needed clarity to assure correct property tax assessments. Among its provisions, SB 657 clarified the proper treatment of business intangibles and special franchises, established parameters for possessory interests, clarified the proper interest rates on tax refunds, and shifted the burden of proof to assessors on assessments arising from audits (escape assessments). Another bill in 1995 moved the property tax lien date to January 1 from March 1, something taxpayers had been requesting for 30 years (SB 327, Campbell). Yet another bill clarified the proper valuation procedures to be used by assessors to determine inclusion of entrepreneurial profit on special purpose buildings (AB 315, McDonald). Besides legislation, the State Board of Equalization has undertaken a rigorous agenda to overhaul its outdated property tax rules and assessor handbooks. This effort has been applauded by taxpayers as long overdue. One would think that these law changes and BOE actions would benefit California's business climate as it relates to property tax administration. In a vacuum they would. Taxpayers, however, do not have an exclusive one-on-one relationship with the law. The law is administered and in some cases liberally interpreted through county assessors for the vast majority of taxpayers. (Property of taxpayers such as railroad, telecommunication and utility companies, where property typically spans county lines, is assessed by the State Board of Equalization.) Enter AB 1027 (Caldera), sponsored by the California Assessors Association and the California State Association of Counties. The bill has already been significantly amended, but its detrimental effect on taxpayers has not been minimized. In a nutshell, it would adversely affect taxpayers' access to fair property tax assessments by denying California property owners due process, allowing assessors to make undue requests for information (and then imposing a 10 percent penalty if the information is not forthcoming), contradicting recent landmark court decisions favorable to taxpayers, and hindering the BOE's ability to establish rules and guidelines to encourage statewide uniform assessment practices, among other provisions. While pushing this bill, assessors also have filed court actions challenging recent BOE property tax rule amendments and a statute that is over nine years old. This bill would toss taxpayer certainty, uniformity of administration and ease of compliance out the window. AB 1027 has generated nationwide reaction and overwhelming opposition from property taxpayers. Cal-Tax does not recall any piece of legislation generating this degree and breadth of opposition from taxpayers in recent history. One concerned Cal-Tax member wrote that under AB 1027 "forecasting and budgeting for property tax expense will become a trip into the twilight zone." So much for the perception of a positive business climate if you own property in California. One reform which would ring positive for property taxpayers is trial de novo for locally assessed taxpayers, giving them a better opportunity to succeed with appeals. (See this issue's Guest Commentary by Eric Miethke.) Pursued by Cal-Tax in legislation last year (SB 1903, Maddy), but unsuccessful due to opposition from assessors and counties, this one reform would greatly advance a positive perception of California's business climate. Taxpayers not getting a fair shake on property value would at least know they had the opportunity for an impartial judicial review. More likely, however, knowing the judiciary would be looking over their shoulders, assessors and appeal boards might work just a little harder to find the lawful and correct property values without need for judicial review. This has been the result in other states providing trial de novo for property tax assessments, and should be the law in California. - Carol Ross Evans is vice president and legislative director of the California Taxpayers' Association (Cal-Tax). |
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Business
climate has as much to do with perception as it does with the
law, whether it be in the environmental, employment or tax arena.
Business taxpayers have recently seen important advances made
in California tax law, which should improve the state's business
climate. But to the extent business experiences a hostile environment
through actions of the state's tax administrators, no amount
of tax law changes will do much to change the perception that
California has a negative business climate.