Laws, Regulations & Annotations
Property Taxes Law Guide – Revision 2016
Additional Government Code Provisions
Provisions Relating to Public Pension and Retirement Plans
TITLE 1. GENERAL
DIVISION 7. MISCELLANEOUS
CHAPTER 21. Public Pension and Retirement Plans
7510. Investment of assets in real property; payment of fee for general governmental services. (a) (1) Except as provided in subdivision (b), a public retirement system, which has invested assets in real property and improvements thereon for business or residential purposes for the production of income, shall pay annually to the city or county, in whose jurisdiction the real property is located and has been removed from the secured roll, a fee for general governmental services equal to the difference between the amount that would have accrued as real property secured taxes and the amount of possessory interest unsecured taxes paid for that property. The governing bodies of local entities may adopt ordinances and regulations authorizing retirement systems to invest assets in real property subject to the foregoing requirements.
(2) This subdivision shall not apply to any retirement system which is established by a local governmental entity if that entity is presently authorized by statute or ordinance to invest retirement assets in real property.
(3) This subdivision shall not apply to property owned by any state public retirement system.
(b) (1) Whenever a state public retirement system, which has invested assets in real property and improvements thereon for business or residential purposes for the production of income, leases the property, the lease shall provide, pursuant to Section 107.6 of the Revenue and Taxation Code, that the lessee's possessory interest may be subject to property taxation and that the party in whom the possessory interest is vested may be subject to the payment of property taxes levied on that interest. The lease shall be valued in accordance with Section 21 of Title 18 of the California Code of Regulations, as that section was in effect on January 1, 2015, for the valuation of taxable possessory interests.
(2) Except as provided in this subdivision, the property shall be assessed and its taxes computed and collected in the same manner as privately owned property. The lessee's possessory interest shall be placed on the unsecured roll and the tax on the possessory interest shall be subject to the collection procedures for unsecured property taxes.
(3) An investment by a state public retirement system in a legal entity that invests assets in real property and improvements thereon shall not constitute an investment by the state public retirement system of assets in real property and improvements thereon. For purposes of this paragraph, "legal entity" includes, but is not limited to, partnership, joint venture, corporation, trust, or association. When a state public retirement system invests in a legal entity, the state public retirement system shall be deemed to be a person for the purpose of determining a change in ownership under Section 64 of the Revenue and Taxation Code.
(4) Notwithstanding any other provision of law, fees charged pursuant to this section and collected prior to July 1, 1992, shall be deemed valid and not refundable under any circumstance. Notwithstanding any other provision of law, fees, interest and penalties, if any, asserted to be due pursuant to this section that were not charged or collected prior to July 1, 1992, shall be deemed invalid and not collectable under any circumstance.
(5) This subdivision shall apply to the assessment, computation, and collection of taxes for the fiscal year beginning on July 1, 1992, and each fiscal year thereafter. For the 1992 93 and 1993 94 fiscal years, in the case where a lessee's possessory interest existed for less than the full fiscal year for which the tax was levied, the amount of tax shall be prorated in accordance with the number of months for which the lessee's interest existed.
History.—Added by Stats. 1982, Ch. 24, in effect January 1, 1983. Stats. 1992, Ch. 1158, in effect September 30, 1992, substituted "(a)(1) Except as provided in subdivision (b), a" for "A" and added a comma after "system" in the first sentence of subdivision (a)(1); added (2) at the beginning of the formal second paragraph, and substituted "subdivision" for "section" after "This" in subdivision (a)(2); added subdivision (a)(3); and added subdivision (b). Stats. 1993, Ch. 1187, in effect January 1, 1994, substituted "this section" for "Section 7510" after "pursuant to" in the first and second sentences of subdivision (b)(4); and added "each fiscal year" after "July 1, 1992, and" in the first sentence of subdivision (b)(5), and added the second sentence thereto. Stats. 1994, Ch. 1281, in effect September 30, 1994, added the third sentence and added ", subject to the preceding sentence," after "allocable share shall" in the fourth sentence of paragraph (1) of subdivision (b). Stats. 2015, Ch. 454 (SB 803), in effect January 1, 2016, added the second sentence to paragraph (1) of subdivision (b) and deleted the former second, third, and fourth sentences therein which provided that "The lease shall also provide that the full cash value, as defined in Sections 110 and 110.1 of the Revenue and Taxation Code, of the possessory interest upon which property taxes will be based shall equal the greater of (A) the full cash value of the possessory interest, or (B), if the lessee has leased less than all of the property, the lessee’s allocable share of the full cash value of the property that would have been enrolled if the property had been subject to property tax upon acquisition by the state public retirement system. The full cash value as provided for pursuant to either (A) or (B) of the preceding sentence shall reflect the anticipated term of possession if, on the lien date described in Section 2192 of the Revenue and Taxation Code, that term is expected to terminate prior to the end of the next succeeding fiscal year. The lessee’s allocable share shall, subject to the preceding sentence, be the lessee’s leasable square feet divided by the total leasable square feet of the property."
Constitutionality.—Insofar as a county included the exempt reversionary interest pursuant to Government Code Section 7510, subdivision (b)(1) when the county assessed a commercial lessee's possessory interest under Revenue and Taxation Code Section 107 for property owned by a state public retirement system, the valuation methodology is facially unconstitutional because it violates California Constitution Article XIII, Section 3, subdivision (a), by assessing property tax on publicly-owned real property; further, the valuation methodology violates California Constitution Article XIII, Section 1, by assessing property in excess of its fair market value as defined in Revenue and Taxation Code Sections 110, subdivision (a), and 110.5. California State Teachers’ Retirement System v. County of Los Angeles (2013) 216 Cal.App.4th 41.