The California Chamber of Commerce is urging legislators to oppose legislation that could dramatically increase the cost of doing business in California for both business property owners and their business tenants and in turn chill investments, jobs and the economy.
AB 2492 (Ammiano; D-San Francisco) could lead to higher employer property taxes by removing Proposition 13 protections from business property owners and imposing a volatile, arbitrary system of increasing their property taxes, including a rebuttable presumption that every three years business properties have changed ownership and need to be reassessed.
The proposal is scheduled to be considered on May 10 by the Assembly Revenue and Taxation Committee.
The Chamber believes AB 2492 is based on the faulty assumption that there has been a major statewide shift in tax burden from businesses to homeowners. It proposes a split roll property tax by dramatically revising a number of change of ownership rules for business properties, including:
- Significantly expanding the change of ownership definition so that even small or partial ownership transfers (such as sales of stock) of less than 50 percent trigger a reassessment.
- Requiring taxpayers to prove every three years that they did not undergo a change in ownership that would trigger reassessment.
Proposition 13 protects both residential and commercial property owners by capping property tax rates at 1 percent of assessed value and to a growth rate of 2 percent a year.
A “split roll” property tax seeks to divide the tax treatment of commercial and residential properties by removing Proposition13 protections from commercial properties, while leaving those protections intact for residential properties.
Only when ownership changes or there is new construction may the value of the property be reassessed at more than 2 percent.
Corporate property often is owned by multiple interests such as through shares of stock. Under current law, when an individual obtains more than 50 percent of ownership or control in a corporation, a property reassessment is triggered.
Why Oppose ‘Split Roll’? A “split roll” tax would undermine the intent of the protections cemented in Proposition 13, and have a negative effect on job-producing operations and the state’s well-regarded property tax structure.
Commercial properties already contribute significantly in tax dollars - generating approximately two-thirds of the property tax revenues, just as they did before the passage of Proposition 13. Implementation of a “split roll” tax would mean significantly higher property taxes for California businesses, likely exceeding $3 billion or more. Property owners may be forced to pass along some of the increased costs in the form of higher rents and higher consumer prices.
Since many small businesses rent rather than own building space, they will be hardest hit. Higher property taxes reduce capital available for investment in rental housing and business plants and equipment within California, meaning fewer jobs.
AB 2492 would also result in a tremendous paperwork and tracking burden for both companies and assessors.
The Chamber urges businesses to contact members of Assembly Revenue and Taxation Committee and your local Assembly representative and ask them to oppose AB 2492. If you would like to sign on to the California Chamber coalition letter being developed contact Chamber staff person laura Lively via email: laurie.lively@calchamber.com.
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