Hancock, Mitchell Introduce Legislation to Make California’s Commercial Property Tax Code Fair

June 10, 2015

SCA 5 would assess commercial properties at their fair market value, provide tax relief for businesses and protect homeowners and renters

Sacramento, CA – State Senators Holly Mitchell and Loni Hancock today introduced SCA 5, the Property Tax Fairness amendment, which would finally make California’s property tax code fair by assessing commercial and industrial properties at their market value, after a phase-in period. It would also provide significant tax relief for businesses, protect homeowners and renters from any changes to their property tax status, and create strict new accountability measures for new revenues. 

“This legislation will address structural flaws in the commercial property side of Prop. 13 that have allowed a minority group of wealthy corporations and commercial property owners to dramatically lower their tax bills and shift that responsibility onto homeowners and renters,” said Senator Hancock. “Our homeowners are now being asked to pay the vast majority – 72% – of property taxes, while the commercial side pays only 28%. In 1978 when Prop. 13 passed, each paid about 50%. That’s not fair, and it has strained the community services our residents rely on.”

“The impact of this tax inequity has been cuts to the services that create opportunity in our public schools, libraries and health services,” said Senator Mitchell. “Our K-12 student-teacher ratio is now 50th in the nation, many services are shut down or on reduced hours, and public safety is at dangerously low staffing levels. This divestment from our kids and our communities has led to less social mobility and more income inequality than existed just a generation ago.”

 

SCA 5 would reassess commercial and industrial properties at their fair market value, after a phase-in period. This would bring into line a minority group who has not had their property re-assessed in decades, and who pay far less than the majority of businesses, including their competitors. It would also provide significant tax relief for businesses by exempting the first $500,000 in equipment and fixtures subject to business personal property taxes (beginning in 2019). This exemption will especially benefit small businesses by eliminating the tax for more than 90% of them, whether they rent or own the facilities in which their business operates.

The legislation also maintains existing constitutional protections for all residential property, for both homeowners and renters, and also for agricultural land, and maintains existing constitutional provisions limiting property tax rates.