As the State Senate revived a bill to freeze speculative evictions in San Francisco, the State Assembly passed a bill designed to expand the definition of a “change of ownership” for properties in California in an attempt to close a Proposition 13 loophole.
Passed by a vote of 57-13 and on to the Senate, Assembly Bill 2372 would expand the definition of a “change of ownership” for properties owned by a legal entity to include the sale or transfer of 90% or more of the ownership interests in the entity within three years versus simply the sale or transfer of 50% or more of the interests to a single entity. By structuring sales with sub 50% shares to multiple legal entities, buyers had been able to avoid a tax reassessment.
The bill would also increase the penalty for failing to file a “change in ownership” statement from 10% to 15%.
From Bernie Vogel, CEO of the esteemed law firm, Silicon Valley Law Group, in the recent SF Weekly article:
“When the gist of Ammiano’s proposal was explained to him, Vogel zeroed in on its weak point in a matter of seconds. If the operative percentage of a property needing to be sold or transferred to mandate a change of ownership is 90 percent — why not sell or transfer 89 percent? If the operative time period is three years — why not drag out a deal to three years and one day?”
I can’t wait to read Ammiano’s revisions to his anti-Ellis legislation. There is sure to be a weakness.
So we’ve closed a loophole by creating a new one. It would now be in the interest of every party involved in the sale of a property for the original owner to maintain 11% ownership interest for three years and one day before fully divesting. A real reform would be to drop the time limit entirely.
The real reform would be cutting spending to to be more aligned with tax revenue. All the new construction has added to the tax rolls in addition to the 2% “automatic” increase that they get.
The real reform would be to repeal Prop 13.
FTFY