1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 REPORTER'S TRANSCRIPT 8 MARCH 21, 2012 9 10 11 ITEM J RULEMAKING 12 ITEM J1 13 PETITION TO AMEND PROPERTY TAX RULE 462.040 14 CHANGE IN OWNERSHIP - JOINT TENANCIES 15 16 17 18 19 20 21 22 Reported by: Juli Price Jackson 23 No. CSR 5214 24 25 26 27 28 1 1 P R E S E N T 2 3 For the Board Jerome E. Horton of Equalization: Chairman 4 5 Michelle Steel Vice-Chairwoman 6 7 Betty T. Yee Member 8 9 George Runner Member 10 11 Marcy Jo Mandel Appearing for John 12 Chiang, State Controller (per 13 Government Code Section 7.9) 14 15 Diane G. Olson Chief, Board 16 Proceedings Division 17 18 For Staff: Richard Moon Tax Counsel IV 19 Tax and Fee Division Legal Department 20 21 Christine Bisauta Acting Assistant 22 Chief Counsel 23 ---oOo--- 24 25 26 27 28 2 1 SPEAKERS 2 NAME PAGE 3 BARBARA EDGINTON 5 Assessment Manager 4 San Luis Obispo 5 RICHARD BENSON 7 Assessor-Recorder-County Clerk 6 Marin 7 JOEL BUTLER 8 Assessor 8 Yolo 9 ---O0O--- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 MARCH 21, 2012 4 ---oOo--- 5 MS. OLSON: Our next matter is Chief Counsel 6 Matters, J1, Petition to Amend Property Tax Rule 7 462.040, Change in Ownership - Joint Tenancies. 8 MR. HORTON: Members, as the Department comes, 9 we have a few witnesses that would like to testify. I 10 would ask that they come forward -- Mr. Richard Benson, 11 Marin County Assessor-Recorder-County Clerk; Joel 12 Butler, Yolo County Assessor; welcome, and Barbara 13 Edginton, I believe with San Luis Obispo. Am I correct? 14 MS. EDGINTON: Yes, correct. 15 MR. HORTON: Okay, all right, welcome to our 16 friends from the County Assessors. Good seeing you 17 guys. 18 We'll start with the -- please introduce the 19 matter. 20 MR. MOON: Good afternoon, Chairman Horton, 21 Members of the Board. I'm Richard Moon with the Legal 22 Department, along with Christine Bisauta, the Acting 23 Assistant Chief Counsel. 24 This property tax petition is to amend Property 25 Tax Rule 462.040, which governs the change in ownership 26 of joint tenancies. And it requests to amend the rule 27 to address four specific issues that are related to the 28 creation and application of original transferor status 4 1 by which a change in ownership and a reassessment of 2 property can be delayed. 3 This rule was last amended in 2003. And staff 4 recommends that the Board institute an interested 5 parties process to hear testimony and evidence regarding 6 the assessors' and taxpayers' experience with the 7 application and administration of the rule, so that we 8 can determine whether the requested amendment should be 9 approved. 10 Thank you. 11 MR. HORTON: Thank you very much. 12 Members, we will hear the witnesses on the 13 subject matter. 14 ---o0o--- 15 BARBARA EDGINTON 16 ASSESSMENT MANAGER 17 SAN LUIS OBISPO COUNTY 18 ---o0o--- 19 MS. EDGINTON: Thank you. My name is Barbara 20 Edginton. I'm an Assessment Manager with San Luis 21 Obispo County. 22 And I've been asked to to speak on behalf of 23 the -- of Tom Bordonaro, who is the President of the 24 California Assessors' Association. 25 And we'd like to thank you for hearing us on 26 this issue. And we'd like to respectfully request that 27 you approve our proposed revisions to the Property Tax 28 Rule 462.040 on joint tenancy. We've requested three 5 1 changes to the rule, plus an addition of two clarifying 2 examples. But our biggest concern and our primary 3 objective is to remove any language in the property tax 4 rule regarding trusts. In 2003 the property tax rule 5 was amended to add, among other changes, the ability for 6 trusts to become original transferors under certain 7 circumstances. And at the time it was intended to help 8 registered domestic partners, who had no other 9 exclusions for changes from -- transfers that would 10 exclude them from reassessment of property taxes. 11 Now the registered domestic partners have 12 virtual parity with married couples as far as property 13 tax assessment law. And this, in conjunction with the 14 current AB 1700, a potentially new co-tenancy exclusion, 15 would cover most of the target group that was looked at 16 in 2003. Amending the rule would accomplish the goals 17 of both of our groups as determined by a number of joint 18 meetings back in 2007. 19 Administratively the rule, as it currently 20 stands, is confusing as to the nature of trusts and the 21 estates in joint tenancy and it's virtually impossible 22 to handle effectively, con -- particularly since many 23 attorneys and title companies don't recognize the 24 ability of a trust to be a joint tenant. 25 We hear, "After all, joint tenancy is a right 26 of survivorship and how can the trust die?" 27 Even if one accepts that a trust is a joint 28 tenant, a trust is capable of being amended and the 6 1 wording changed in a way that would disqualify it from 2 the exclusion without any notification to assessment 3 staff. And having a trust as a joint tenant also has 4 the potential for causing legal problems for the actual 5 owners of the property who are trying to use this. 6 Because of the complexities and difficulties in 7 the particular part of the rule, it's an area that's 8 extremely likely to be handled inconsistently throughout 9 the state by assessment staff. And we believe that by 10 approving the amendments, it would give your Board the 11 opportunity to increase consistency and efficiency in 12 assessment offices throughout the state with very little 13 harm to property owners. 14 And we thank you for your consideration. 15 MR. HORTON: Thank you as well. 16 ---o0o--- 17 RICHARD BENSON 18 ASSESSOR-RECORDER-COUNTY CLERK 19 MARIN COUNTY 20 ---o0o--- 21 MR. BENSON: Good afternoon, Members of the 22 Board. My name is Richard Benson. I'm the 23 Assessor-Recorder-County Clerk for the County of Marin. 24 And I just also wanted to express my support 25 for staff's recommendation to open up an interested 26 parties meeting. I think the -- one of the big benefits 27 will be to simplify the confusion of joint tenancy rules 28 and the application for practitioners, both for 7 1 assessors' offices and practitioners outside of 2 assessors' offices. 3 And I also wanted to say that as a recorder, in 4 addition to being an assessor, one of the issues that we 5 see frequently now in the public's eye is how important 6 it is to have the public record transparency for 7 property owners. And one of the things that can come up 8 when a trust is a so-called joint tenant is changes to 9 the -- inside the trust may affect the joint tenancy, 10 but not be recorded. So, from a recorder's perspective, 11 it also helps create some better public record of the 12 ownership record, in particular regard to changes in 13 ownership for reassessment purposes. 14 So, for all these reasons, I again want to 15 express my support for an -- opening up an interested 16 parties. And thank you for your time and consideration. 17 MR. HORTON: Thank you as well. 18 Next? 19 ---o0o--- 20 JOEL BUTLER 21 ASSESSOR 22 YOLO COUNTY 23 ---o0o--- 24 MR. BUTLER: Thank you, Mr. Chair and Board 25 Members, Joel Butler, Yolo County Assessor. 26 I just want to add my support to this matter 27 too to add clarity and remove confusion in the way this 28 rule is written and, basically, to simplify the 8 1 administration. 2 I think it's a benefit to not only the State 3 Board's staff, our staff, but to the taxpayer, that they 4 can actually understand what they're getting into. 5 Thank you. 6 MR. HORTON: Thank you, thank you very much. 7 Discussion, Members? 8 Member Yee. 9 MS. YEE: Thank you very much, Mr. Chairman. 10 I just want to add my support to the staff 11 recommendation to begin an interested parties process in 12 this regard. I know that back in 2003, as we looked at 13 the amendments then to this rule, there was a specific 14 purpose and objective. And now, with years of 15 experience with the rule, it's become somewhat untenable 16 with respect to administering it from the County 17 Assessor's perspective and for the taxpayer it's been 18 very unwieldy, such that we thought it would be a tool 19 that could be easily availed, when, in fact, many 20 taxpayers are having to incur additional costs to 21 consult with estate planning attorneys to figure all of 22 this out. 23 So, I did want to mention, as Ms. Edginton did 24 reference, there is a bill that is pending now, AB 1700, 25 by Assembly Member Butler that does look at trying to 26 preserve this -- a particular benefit for the 27 communities that we were contemplating in the past, even 28 though it was specifically targeted back in 2003 as 9 1 being a tool for registered domestic partners, we know 2 that there are other co-owner relationships that the 3 rule was intended to also apply to, including older 4 adults, seniors who are unmarried who co-own property. 5 And that particular bill is intended to be sure that the 6 benefit that was intended in 2003 is still going to be 7 there for the various communities. 8 So, I think the bill moving in concert with 9 this particular interested parties process is the 10 appropriate process to follow. 11 Thank you. 12 MR. HORTON: Thank you, Member Yee. 13 Member Runner. 14 MR. RUNNER: Yeah, I'm -- I'm supportive of 15 moving this to an interested parties discussion, 16 however, I think that's kind of precisely what I'm 17 concerned about and that is those who may have made some 18 decisions based upon what that -- what the -- what the 19 original rule had done in regard to trust and then 20 the -- then the -- how that affects them. 21 And, so, certainly that's going to be the 22 discussion that can be had in this -- in this interested 23 parties discussion. You know, maybe -- you know, it'd 24 be interesting to see if, indeed, a bill then cleans 25 that up or not. 26 But regardless of that, it's going to be, I 27 think, a part of this discussion that takes place in 28 regards to this interested party and that is, you know, 10 1 moving away from what the kind of an intended target was 2 and who -- who -- who are the groups that actually -- or 3 who are the individuals who actually then ended up using 4 it and what effect it will have on them. 5 MR. HORTON: Member Steel. 6 MS. STEEL: I have a question that there is 7 pending court case right now? 8 MR. MOON: Yes, there is. 9 MS. STEEL: So, how it's going to affect for 10 this rule? 11 MR. MOON: Well, what we've recommended is for 12 that part of the rule that's affected by the litigation, 13 that we delay that. 14 And, actually, Marin County has asked us to 15 file an amicus on their side and that will be coming up 16 before the Board -- 17 MS. STEEL: Okay, okay. 18 MR. MOON: -- for -- for recommendation next 19 month. 20 MS. STEEL: Okay. 21 MR. HORTON: Okay. Thank you. 22 Further discussion, Members? 23 Is there a motion? 24 MS. YEE: Move to adopt the staff 25 recommendation. 26 MR. HORTON: Moved by Member Yee to adopt staff 27 recommendation. Second by Member Steel . 28 Without objection, such will be the order. 11 1 Thank you very much for appearing before us -- 2 those are to our visitors and friends. Thank you for 3 taking the time to come down to the Board of 4 Equalization and share your thoughts. 5 MR. BUTLER: Thank you. 6 ---o0o--- 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 12 1 . 2 REPORTER'S CERTIFICATE 3 4 State of California ) 5 ) ss 6 County of Sacramento ) 7 8 I, JULI PRICE JACKSON, Hearing Reporter for the 9 California State Board of Equalization certify that on 10 MARCH 21, 2012 I recorded verbatim, in shorthand, to the 11 best of my ability, the proceedings in the 12 above-entitled hearing; that I transcribed the shorthand 13 writing into typewriting; and that the preceding pages 1 14 through 12 constitute a complete and accurate 15 transcription of the shorthand writing. 16 17 Dated: April 5, 2012 18 19 20 ____________________________ 21 JULI PRICE JACKSON 22 Hearing Reporter 23 24 25 26 27 28 13