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Calif. Property Tax Ballot Measure Resubmitted With Changes
By James Nani
Law360 (August 13, 2019, 8:29 PM EDT) --
Supporters of a 2020 California ballot measure that could change how large commercial and industrial properties are taxed and increase property tax revenues by billions resubmitted the measure on Tuesday with changes to help more small businesses, organizers said.
The Schools and Communities First campaign, the organizing group behind the ballot measure, said it would refile the initiative Tuesday with the secretary of state to change several elements of the proposal. Those changes include new implementation dates, more tax relief for small businesses, “clarified education financing” and new language to try to stop large businesses from avoiding reassessment, according to the group.
The group's spokesman, Tyler Law, said the new measure has the same intentions as the previous initiative and that California's way of taxing commercial and industrial property “has starved funding for schools and local communities, disadvantaged small and startup businesses, and exacerbated our housing crisis.” Refiling the measure means supporters will need to gather enough signatures statewide to get the measure on the ballot.
“A robust statewide signature-gathering organization began prior to the 2018 election, but the ultimate submission and qualification process placed the initiative on the 2020 ballot,” Law said. “As a result, we are refiling the initiative to substantively strengthen the measure, including expansive new small-business tax relief, and widen the path to victory in November 2020.”
The new measure includes what the group said is a clarified definition of a small business and increases a reassessment exemption for small-business owners with property valued at $3 million or less. The first measure set the threshold at $2 million.
The new measure would also delay reassessment for at least three years for buildings occupied at least 50% or more by small businesses, according to the group. The new measure also includes unchanged from the previous proposal, a proposal to exempt certain small businesses in California from the business personal property tax.
The measure was filed Tuesday afternoon, but an official version wasn't immediately available. Tyler Law provided a copy to Law360.
In October 2018 the California secretary of state said supporters of the initiative had gathered enough signatures to put it on the ballot in 2020. The “split-roll” measure, formally called the California Schools and Local Communities Funding Act, would require certain commercial and industrial real property to be taxed based on fair-market value rather than the current method of purchase price with limited inflation. It would dedicate a portion of any increased revenue to education and local services.
Supporters of the measure said it would be the first commercial property tax reform initiative to qualify for the ballot since the passage of Proposition 13 in 1978. Proposition 13 limits property tax rates to 1% for all local governments serving the property, with certain exceptions to finance local infrastructure, and caps the growth of a property's taxable value to the lower of 2% or the rate of inflation per year.
The initiative in 2018 needed at least 643,948 projected valid signatures to qualify by random sampling, and it exceeded that threshold Tuesday. But the threshold to get on the ballot has since increased for such initiatives to close to one million, according to the secretary of state's office. In 2018, the group Housing California said it submitted more than 860,000 signatures to get the act onto the November 2020 ballot.
Rob Lapsley, president of the California Business Roundtable and co-chair of Californians to Stop Higher Property Taxes, said on Tuesday the announcement to refile proved there were significant flaws in the first proposition and said the new measure was equally flawed. His group has adamantly supported Proposition 13.
“There are no tweaks or amendments that can be made to this split-roll measure that will prevent it from being a major, multibillion-dollar tax on all Californians in the form of higher prices on everything we buy — from groceries and gasoline to diapers and day care,” Lapsley said. “Should either measure appear on the November 2020 ballot, an aggressive, broad-based coalition will fight it.”
Rex Hime, president and CEO of the California Business Properties Association and co-chair of Californians to Stop Higher Property Taxes, said the proposed changes don't change the negative impact of the measure.
“This last-ditch attempt to tinker with the details is like rearranging the chairs on the deck of the Titanic,” Hime said. “No matter how you shuffle, dismantling Proposition 13 will result in disaster for California families, workers and the economy.”
If the proposition makes it onto the ballot and is then passed by voters in 2020, commercial and industrial properties, as well as vacant land not intended for housing or commercial agriculture, would be taxed based on market value instead of the purchase price. Properties would be exempt from market value assessment and continue to use purchase price if the owner operates a business on the property and the owner's holdings in the state are less than $3 million, adjusted for inflation biannually beginning in 2023.
--Editing by Vincent Sherry.
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