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Bill Would End Tax Loopholes Under Prop. 13 For California Businesses

Liberal San Francisco Assemblyman Tom Ammiano, the man behind a legislative proposal to legalize marijuana, wants to close some of the loopholes in state tax law that have allowed some businesses to change hands without being reassessed for rising property values and corresponding taxes.

In other words, Ammiano wants to tweak a third rail of California politics, Prop. 13, in order to ensure that businesses aren't using the law as an excuse to avoid paying proper taxes. His proposal would ultimately have to be approved by voters.

In Los Angeles late last year the Garment & Citizen newspaper found that some country clubs were finding ways around paying appropriate property taxes by claiming that, while their member-owners had turned over, there had rarely been a proper change of ownership.

Ammiano's office recently pointed out that the 2002 purchase of Jiffy Lube by Shell Oil did not trigger reassessments of Jiffy Lube locations throughout the state: Many were paying taxes based on two-decade-old values.

As a result of such tax policy, Ammiano's office argues, the tax burden of commercial property owners has decreased since 1979 in Los Angeles County: Back then commercial property accounted for 47 percent of property tax collected in the county. Today it accounts for 31 percent, with homeowners making up the bigger piece of the pie.

Ironically, Prop. 13 was intended as a measure to ensure that rising property values didn't overburden homeowners with a corresponding increase in taxes. Proponents of the proposition invoked an image of older couples being pushed out of the homes they had lived in for decades.

Prop. 13 only assesses property value for tax purposes when real estate changes hands. Therefore the old couple who lives down the street is paying a rate based on when they bought their house, which could be 10, sometimes 15 times less than what new neighbors are paying. The same goes for businesses, except that legal definitions of a sale of business property were changed following Prop. 13 to allow buyers to claim the the land had not, in fact, changed hands. (Background).

Enter Ammiano, whose AB 2492 cleared the Assembly Revenue and Taxation Committee Monday. The bill would require businesses that change hands to be reassessed in a straight-forward manner for tax purposes. Ammiano argues that Prop. 13 passed the burden of state taxation from business to residences. He says the bill will help even things out again.

"For over thirty years, California has allowed corporate landowners to benefit from tax loopholes while shifting the real tax burden to individual homeowners and reducing California's tax base" Ammiano states. "We cannot continue to cut funding from our schools, our parks and our vital human services without addressing the need for new revenue and an equitable tax system."


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