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<ns0:Description>
<ns0:Id>20250SB__059298AMD</ns0:Id>
<ns0:VersionNum>98</ns0:VersionNum>
<ns0:History>
<ns0:Action>
<ns0:ActionText>INTRODUCED</ns0:ActionText>
<ns0:ActionDate>2025-02-20</ns0:ActionDate>
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<ns0:Action>
<ns0:ActionText>AMENDED_SENATE</ns0:ActionText>
<ns0:ActionDate>2025-04-21</ns0:ActionDate>
</ns0:Action>
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<ns0:LegislativeInfo>
<ns0:SessionYear>2025</ns0:SessionYear>
<ns0:SessionNum>0</ns0:SessionNum>
<ns0:MeasureType>SB</ns0:MeasureType>
<ns0:MeasureNum>592</ns0:MeasureNum>
<ns0:MeasureState>AMD</ns0:MeasureState>
</ns0:LegislativeInfo>
<ns0:AuthorText authorType="LEAD_AUTHOR">Introduced by Senator Smallwood-Cuevas</ns0:AuthorText>
<ns0:AuthorText authorType="COAUTHOR_OPPOSITE">(Coauthor: Assembly Member Mark González)</ns0:AuthorText>
<ns0:Authors>
<ns0:Legislator>
<ns0:Contribution>LEAD_AUTHOR</ns0:Contribution>
<ns0:House>SENATE</ns0:House>
<ns0:Name>Smallwood-Cuevas</ns0:Name>
</ns0:Legislator>
<ns0:Legislator>
<ns0:Contribution>COAUTHOR</ns0:Contribution>
<ns0:House>ASSEMBLY</ns0:House>
<ns0:Name>Mark González</ns0:Name>
</ns0:Legislator>
</ns0:Authors>
<ns0:Title> An act to add Section 62.1.1 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. </ns0:Title>
<ns0:RelatingClause>taxation, to take effect immediately, tax levy</ns0:RelatingClause>
<ns0:GeneralSubject>
<ns0:Subject>Property tax: change in ownership: residential rental property.</ns0:Subject>
</ns0:GeneralSubject>
<ns0:DigestText>
<html:p>The California Constitution limits the maximum amount of any ad valorem tax on real property to 1% of the full cash value of the property, and defines “full cash value” for these purposes to mean the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred, as provided. Existing property tax law requires the reassessment of real property upon a change in ownership and specifies what transfers of property do and do not constitute a change in ownership and excludes from a change in ownership, and hence from reassessment, certain transfers. Among these excluded transfers, existing property tax law provides that certain transfers of mobilehome parks to a nonprofit corporation, stock cooperative corporation, limited equity stock cooperative, or other entity formed by the tenants of a mobilehome park if specified conditions are met, including
that the individual tenants who were renting at least 51% of the spaces in the mobilehome park prior to the transfer participate in the transaction through the ownership of an aggregate of at least 51% of the voting stock of, or other ownership or membership interests in, the entity which acquires the park.</html:p>
<html:p>This bill would provide that a transfer of a real property containing dwelling units occupied by tenants to a limited-equity housing cooperative, as defined,
formed by the tenants of the real property for the purpose of purchasing the real property at which they reside, provided that the individual tenants who were renting at least 51% of the units in the real property before the transfer participate in the transaction through the ownership of an aggregate of at least 51% of the voting shares or membership interests in the entity that acquires the real property, as specified, is not a change in ownership. The bill would also provide that a transfer of a real property containing dwelling units occupied by tenants to a community land trust,
as specified, is not a change in ownership. The bill would require a community land trust utilizing the above-described exclusion to indicate that use on a preliminary change of ownership report or change in ownership statement filed with the county recorder. The bill would authorize the county counsel to require a limited-equity housing cooperative claiming the above-described exclusion to provide specified documentation, including the Articles of Incorporation of the limited-equity housing cooperative. By adding to the duties of local tax officials with respect to the determination of whether a change in ownership has occurred for purposes of taxing real property, the bill would impose a state-mandated local program.</html:p>
<html:p>The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.</html:p>
<html:p>This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.</html:p>
<html:p>Existing law requires the state to reimburse local agencies annually for certain property tax revenues lost as a result of any exemption or classification of property for purposes of ad valorem property taxation.</html:p>
<html:p>This bill would provide that, notwithstanding those provisions, no appropriation is made and the state shall not reimburse local agencies for property tax revenues lost by them pursuant to the bill.</html:p>
<html:p>This bill would take effect immediately as a tax levy.</html:p>
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<ns0:DigestKey>
<ns0:VoteRequired>MAJORITY</ns0:VoteRequired>
<ns0:Appropriation>NO</ns0:Appropriation>
<ns0:FiscalCommittee>YES</ns0:FiscalCommittee>
<ns0:LocalProgram>YES</ns0:LocalProgram>
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<ns0:MeasureIndicators>
<ns0:ImmediateEffect>YES</ns0:ImmediateEffect>
<ns0:ImmediateEffectFlags>
<ns0:Urgency>NO</ns0:Urgency>
<ns0:TaxLevy>YES</ns0:TaxLevy>
<ns0:Election>NO</ns0:Election>
<ns0:UsualCurrentExpenses>NO</ns0:UsualCurrentExpenses>
<ns0:BudgetBill>NO</ns0:BudgetBill>
<ns0:Prop25TrailerBill>NO</ns0:Prop25TrailerBill>
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</ns0:Description>
<ns0:Bill id="bill">
<ns0:Preamble>The people of the State of California do enact as follows:</ns0:Preamble>
<ns0:BillSection id="id_0C7FBB3A-1E4F-49F5-9A8F-1CF72EDCAC6F">
<ns0:Num>SECTION 1.</ns0:Num>
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Section 62.1.1 is added to the
<ns0:DocName>Revenue and Taxation Code</ns0:DocName>
, to read:
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<ns0:LawSection id="id_D5C2B63B-1040-4820-BF4D-2490B0D86CEC">
<ns0:Num>62.1.1.</ns0:Num>
<ns0:LawSectionVersion id="id_D9F0E985-48DC-4DAD-A960-E716DE5F805D">
<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
A change in ownership shall not include a transfer of real property containing dwelling units occupied by tenants to either of the following entities:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
A limited-equity housing cooperative formed by the tenants of the real property for the purpose of purchasing the real property at which they reside, provided that the individual tenants who were renting at least 51 percent of the units in the real property before
the transfer participate in the transaction through the ownership of an aggregate of at least 51 percent of the voting shares or membership interests of the limited-equity housing cooperative. The limited-equity housing cooperative that acquires the property shall have a grace period of up to two years after the date of the transfer to attain a tenant participation level of at least 51 percent. If a transferee of real property declares an intent to rely on this section on a preliminary change of ownership report or a change in ownership statement filed with the county recorder, the real property may not be reappraised by the assessor during that period. However, if a tenant participation level of at least 51 percent is not attained within the two-year grace period, the county assessor shall thereafter levy escape assessments for the real property transfer.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
If the real property is not subject to a contract as described in paragraph (11) of
subdivision (a) of Section 402.1, the limited-equity housing cooperative shall demonstrate to the assessor’s satisfaction that at the time of transfer at least a majority of the tenant households qualified as lower income households, as defined in Section 50079.5 of the Health and Safety Code.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
A community land trust, as that term is defined in Section 402.1. A community land trust shall indicate it is relying on this section in a preliminary change of ownership report or change in ownership statement filed with the county recorder.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
A change in ownership shall not include a transfer of voting stock or membership interests that are appurtenant to an exclusive right to occupy a dwelling unit in the real property acquired by a limited-equity housing cooperative described in paragraph (1)
of subdivision (a) if (1) the tenant participation conditions of paragraph (1) of subdivision (a) are met, and if (2) the transfer occurs within
that two-year grace period afforded in subparagraph (A) of paragraph (1) of subdivision (a) following the transfer of the real property to the limited-equity housing cooperative. If an individual tenant or tenants notify the county assessor of the intention to comply with the conditions set forth in this section, any share or membership interest in the
limited-equity housing cooperative that is purchased by an individual tenant in that real property during that grace period shall not be reappraised by the assessor. However, if all of the conditions set forth in this paragraph are not satisfied, the county assessor shall thereafter levy escape assessments for the real property.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
The county assessor may require a limited-equity housing cooperative relying on this section to provide the following documentation to demonstrate compliance with this section:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Articles of Incorporation of the limited-equity housing cooperative.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Bylaws of the limited-equity housing cooperative.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Stock or membership certificates naming tenants of the real property issued by the limited-equity housing cooperative or signed purchase contracts for shares or memberships between the limited-equity housing cooperative and tenants of the real property.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
Documentation such as copies of lease agreements,
copies of utility bills, or similar documentation to provide evidence reasonably satisfactory to the assessor that the owners of at least 51 percent of the voting shares or membership interests in the limited-equity housing cooperative were tenants at the property immediately prior to the transfer that is excluded from a change in ownership pursuant to this section.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
If the transfer of a real property has been excluded from a change in ownership pursuant to paragraph (1) of subdivision
(a) and the real property has not been converted
to an entity in accordance with subdivision (a), or if the entity has not fulfilled the requisite tenant participation requirements of this section, then the transfer shall be a change in ownership of the real property unless the transfer is for the purpose of converting the ownership of the property to ownership by a community land trust or limited-equity housing cooperative or is otherwise excluded from change in ownership by Section 62, 62.1, 62.2, 63, 63.1, 63.2, or 64.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
For the purposes of this subdivision, “pro rata portion of the real property” means the total real property multiplied by a fraction consisting of the number of shares of voting stock, or other ownership or membership interests, transferred divided by the total number of outstanding issued or unissued shares of voting stock of the respective nonprofit or cooperative entity.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Any pro rata portion or portions of real property that changed ownership pursuant to this subdivision may be separately assessed as provided in Section 2188.7, as applicable.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
A limited-equity housing cooperative relying on this section that does not utilize recorded deeds to transfer ownership of
membership interests appurtenant to exclusive occupancy rights in the property shall file, by February 1 of each year, a report with the county assessor’s office containing all of the following information:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
The full name and mailing address of each owner, stockholder, or holder of an ownership interest in the real property that is appurtenant to an exclusive right to occupy a dwelling unit.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The property address, including the number associated with each unit.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
The date that the ownership interest referred to in subparagraph (A) was acquired, or if applicable, a statement that no changes in ownership occurred since the last annual report.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
Within
30 days of a change in ownership, the new resident owner or other purchaser or transferee of a membership interest in a cooperative that does not utilize recorded deeds to transfer ownership interests shall file a change in ownership statement described in either Section 480 or 480.2, if applicable.
</html:p>
<html:p>
(6)
<html:span class="EnSpace"/>
Failure to comply with any reporting requirement required by this section shall result in a penalty pursuant to Section 482.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
It is the intent of the Legislature that, in order to facilitate affordable conversions of housing to tenant
ownership, subdivision (a)
applies to all bona fide transfers of rental properties to tenant ownership or community land trust ownership.
</html:p>
<html:p>
(f)
<html:span class="EnSpace"/>
For purposes of this section, “limited-equity housing cooperative” means a corporation organized on a cooperative basis that, in addition to complying with Section 817.1 of the Civil Code as may be applicable, meets all of the following requirements:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
The corporation is organized as a nonprofit public benefit corporation pursuant to Part 2 (commencing with Section 5110) of Division 2 of Title 1 of the Corporations Code.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The corporation is any of the
following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Holds title to real property as the beneficiary of a trust providing for distribution for public or charitable purposes upon termination of the trust.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Holds title to real property subject to conditions that will result in reversion to a public or charitable entity upon dissolution of the corporation.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Holds a leasehold interest, of at least 20 years’ duration, conditioned on the corporation’s continued qualification under this section, and provides for reversion to a public entity or charitable corporation.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
The articles of incorporation or bylaws require the purchase and sale of the stock or membership interest of resident owners who cease to be permanent residents, at no more than a transfer value
determined as provided in the articles or bylaws, and that shall not exceed the aggregate of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
The consideration paid for the membership or shares by the first occupant of the unit involved, as shown on the books of the corporation.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
The value, as determined by the board of directors of the corporation, of any improvements installed at the expense of the member or a prior member with the prior approval of the board of directors.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
Accumulated simple interest, an inflation allowance at a rate that may be based on a cost-of-living index, an income index, or market-interest index, or compound interest if specified in the articles of incorporation or bylaws. For newly formed corporations, accumulated simple interest shall apply. Any increment pursuant to this paragraph shall not exceed a
10-percent annual increase on the consideration paid for the membership or share by the first occupant of the unit involved.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
(i)
<html:span class="EnSpace"/>
Except as provided in clause (ii), for purposes of a return of transfer value, both of the following are prohibited:
</html:p>
<html:p>
(I)
<html:span class="EnSpace"/>
A board of directors returning transfer value, either full or partial, to a member while they still remain a member.
</html:p>
<html:p>
(II)
<html:span class="EnSpace"/>
An existing member accepting the return of the member’s transfer value, either full or partial.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
A board of directors may return to an existing member, and the existing member may accept return of, the member’s transfer value in the event that the member moves within the cooperative from a category of unit initially valued at a higher price to a different
category of unit valued at a lower price.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
The articles of incorporation or bylaws require the board of directors to sell the stock or membership interest purchased as provided in subdivision (b) to new member-occupants or resident shareholders at a price that does not exceed the “transfer value” paid for the unit.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
The “corporate equity,” that is defined as the excess of the current fair market value of the corporation’s real property over the sum of the current transfer values of all shares or membership interests, reduced by the principal balance of outstanding encumbrances upon the corporate real property as a whole, shall be applied as follows:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
So long as any such encumbrance remains outstanding, the corporate equity shall not be used for distribution to members, but only for the following purposes,
and only to the extent authorized by the board, subject to the provisions and limitations of the articles of incorporation and bylaws:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
For the benefit of the corporation or the improvement of the real property.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
For expansion of the corporation by acquisition of additional real property.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
For public benefit or charitable purposes.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Upon sale of the property, dissolution of the corporation, or occurrence of a condition requiring termination of the trust or reversion of title to the real property, the corporate equity is required by the articles, bylaws, or trust or title conditions to be paid out, or title to the property transferred, subject to outstanding encumbrances and liens, for the transfer value of membership interests or shares,
for use for a public or charitable purpose.
</html:p>
<html:p>
(6)
<html:span class="EnSpace"/>
Amendment of the bylaws and articles of incorporation requires the affirmative vote of at least two-thirds of the resident-owner members or shareholders.
</html:p>
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</ns0:BillSection>
<ns0:BillSection id="id_7B8BAEFE-DC0C-4365-9889-1F25DA1FE35D">
<ns0:Num>SEC. 2.</ns0:Num>
<ns0:Content>
<html:p>If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.</html:p>
</ns0:Content>
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<ns0:BillSection id="id_E4ADF931-6A3B-473D-B6A2-9D0E05FC1584">
<ns0:Num>SEC. 3.</ns0:Num>
<ns0:Content>
<html:p>Notwithstanding Section 2229 of the Revenue and Taxation Code, no appropriation is made by this act and the state shall not reimburse any local agency for any property tax revenues lost by it pursuant to this act.</html:p>
</ns0:Content>
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<ns0:BillSection id="id_0F57F8F1-A66A-4078-8317-6A00AA7C72D5">
<ns0:Num>SEC. 4.</ns0:Num>
<ns0:Content>
<html:p>This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.</html:p>
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