With the state still facing the challenge of cutting its budget, there are currently no less than six pending bills in the Legislature that would in one way or another create a split roll property tax system, with the intent of taxing commercial properties at a higher rate than residential properties. Some of these bills would also require that all commercial properties be assessed annually, instead of at sale.
In addition, several initiatives have been filed with the secretary of state that would seek to do the same thing.
"With our state struggling in financial crisis, we face more and more attempts to shift the burden of the state's budget problems onto the backs of small businesses," said Glenn Fibiger, property manager for Landmark Asset Management Group and president of BOMA San Diego. "Owners of real property in the state are being targeted as a potential source of new revenue. Make no mistake, this will impact our tenants, and that means small businesses around the state will once again face the choice of cutting their own budgets at a time when the state refuses to be fiscally responsible themselves."
In January, "The High Quality Classrooms Act" Version One and Version Two were introduced to the California Attorney General. This resurrection of last year's failed Proposition SB17 aims to remove commercial properties from the voter-instituted protections of Proposition 13.
Version One proposes to tax commercial real estate property an additional 30 percent, and Version Two taxes commercial property an additional 50 percent. The California Teachers Association is behind both of the bills. Both measures give the money to education before an insignificant giveaway to small businesses as an offset for other taxes.
An additional measure, "The Economic Recovery Tax Relief Act," has also recently been introduced. It proposes to close corporate loopholes in Proposition 13 and other taxes and in return lower state sales taxes. It would split the roll to tax business property, which BOMA believes could open the door to affect the way commercial property tax is assessed.
The Tax Fairness for Homeowners Act of 2005, sponsored by Lenny Goldberg of the California Tax Reform Association, would require annual reassessment of non-residential property to full cash value. A similarly titled bill, The Tax Fairness Act of 2005, would also require annual reassessment of non-residential property with some exceptions, such as qualified agricultural land.
Additionally, SB17 (Escutia) has been introduced into the Senate. This bill would reassess property owned by corporations when 50 percent of the stock in a corporation is transferred. For transfers of less than 50 percent, the bill provides for a change of ownership of property in the same proportion as the transferred ownership interests.
"BOMA CAL, as well as BOMA San Diego, has taken position against passage of any bill that would increase property taxes," Fibiger said. "In addition to lowering property values, these bills would also make it harder for businesses to succeed as building owners pass this expense through to tenants in the form of escalations. Hardest hit would be lessees under triple net leases where 100 percent of the tax liability is passed through. As building owners and managers, we realize the negative impact such actions would have not just on the 'mom and pop' operators of small businesses, but also on larger tenants."
BOMA San Diego continues to oppose any strategy that aims to change the way commercial property is reassessed. BOMA objects to any legislative effort to split commercial property from residential property for the purposes of tax assessment, as well as any increase in commercial property taxes. Like last year, BOMA will continue to insist that commercial properties do indeed pay more than their fair share of the property tax burden.