Assemblymember Tom Ammiano’s (D-SF) legislation to close a state loophole that has allowed big corporations and other commercial property owners to avoid paying higher property taxes that normally come when land is sold is moving toward becoming law after yesterday getting some unlikely support from the business community.
Assembly Bill 2372 would overturn state laws passed in the wake of Proposition 13, the landmark 1978 measure capping annual property tax increases until a property is sold, that define an ownership change as occurring only when a single purchaser buy more than 50 percent interest, a threshold easily avoided by creating shell corporation and LLCs.
“It costs the local jurisdictions a lot of money that could be going to potholes, teacher, or whatever,” Ammiano Press Secretary Carlos Alcala told the Guardian. “When I buy a house, I have to pay the increased property taxes, and when you buy a commercial building you should have to pay that increased tax.”
AB 2372 changes the threshold to allow reassessment if an owner sells 90 percent of his/her/its interest in a property, not matter how many ways the new controlling interest is sliced up. The California Chamber of Commerce and the usual business groups had opposed the measure, but they withdrew that opposition yesterday as the bill cleared the Assembly Revenue and Taxation Committee, thanks to some minor amendments and political finessing by committee Chair Raul Bocanegra (D-San Fernando Valley), who has pledged to sign on a co-sponsor.
“Now we have a bill that does exactly what I wanted, and yet it has the support of the business community,” Ammiano said in a prepared statement. “I’m grateful to Assemblymember. Bocanegra for helping with amendments that would remove opposition and make it clear that we are not targeting the average property owner. The average Californian is who we are trying to protect.”
“Homeowners are consistently reassessed but other properties aren’t,” Assemblymember Phil Ting (D-SF) -- a committee member and former San Francisco Assessor -- also said.
A spokesperson for the California Chamber of Commerce -- a powerful conservative lobby and fierce defender of maintain Prop. 13 protections for commercial property -- confirmed for the Guardian that it has changed its position on the bill, citing the amendments.
The conservative California Business Properties Association and the California Tax Reform Association also followed the Chamber in deciding to support the bill yesterday, according to Ammiano’s office, and even the Howard Jarvis Taxpayers Association -- named for the author of Prop. 13 -- has dropped its opposition to the measure. A statement by Ammiano’s office said sudden about-face “led one Republican committee member to refer to hell freezing over and pigs flying.”
But sources close to the action also say it was the work of Bocanegra -- whose committee is crucial to legislation involving business interests -- and a recent Field Poll showing 69 percent of Californians support closing this loophole and just 17 percent are opposed that may have made the difference.
At the hearing, Bocanegra thanked Ammiano for tackling “something that’s vexed us policywise in the state for a very, very long time.”