New bill seeks to make some property fees deductible
| Tuesday, Jan 31 2012 03:45 PM
Last Updated Tuesday, Jan 31 2012 03:46 PM
A state assemblyman has introduced legislation aimed at easing and simplifying property tax payments.
Assembly Bill 1552, introduced by Assemblyman Jim Silva, R-Huntington Beach, would codify Mello-Roos fees as tax deductible.
California lawmakers enacted the Mello-Roos Community Facilities Act in 1982. The law allows cities, counties, school districts and other local entities to create special tax districts. The districts sell tax-exempt bonds to raise money for public services and facilities and then place a tax on properties within the district to repay the bonds.
Mello-Roos fees have been used by some communities as a way to fund projects without using traditional property taxes, the growth of which are limited by Proposition 13.
Unlike property taxes, Mello-Roos fees are not tax deductible, but most taxpayers don't know that and lump them in with their property taxes when they file income tax returns. That's because the total on county property tax statements includes both Mello-Roos fees and property taxes.
Recently, the Franchise Tax Board launched a campaign to educate taxpayers about the difference between the two. Plans are for next year's tax form to contain two lines where fees and taxes can be entered separately, along with a parcel number for the property.
When he introduced the new bill Thursday, Silva called that initiative "a tax on a tax" that must be stopped.
In a telephone interview Monday, Silva said he had no qualms about the timing of the bill as the state faces a $13 billion budget deficit.
"It's always the right time to be fair, and I look at this as nothing more than fairness to the California taxpayers," he said. "Mello-Roos is nothing more than an end run to circumvent Prop. 13."
The new policy of separating out Mello-Roos fees will affect millions of homeowners across California and could cumulatively increase property taxes by as much as $140 million, Silva said.
A Franchise Tax Board spokesman said the board is in the process of conducting a bill analysis and does not yet know what the impact would be were the legislation to pass.
Jon Coupal, president of the Howard Jarvis Taxpayers' Association, said in a statement that "in the middle of the worst foreclosure crisis in 70 years, we must do everything possible to ensure homeowners retain the property tax deductions they've been receiving for the last 30 years. I support AB 1552 and applaud Assemblyman Silva for stepping up and fighting this blatant money grab."
Kern County property tax bills break down Mello-Roos and other charges individually on statements, but the acronyms and esoteric language can be difficult to understand.
One strategy is to look at the portion of your tax bill that is under the heading "Tax Bill Detail." Next to the list of charges there is a rate column where some assessments have a percentage after them, and others do not.
If the assessment has a tax rate, it's likely the assessment is a tax and it's deductible. If the tax rate column is empty, it's probably a non-deductible assessment.
