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Policy: Budgets & Deficits

Anti-tax group OK with closing tax law loophole

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News,Business,Taxes,Budgets and Deficits

LOS ANGELES (AP) — A prominent anti-tax group says it won't oppose a bill that would close a loophole in California's Proposition 13, effectively approving a bid to change the landmark law for the first time since voters passed it 36 years ago.

The proposed change to Proposition 13 would clamp down on companies avoiding higher property taxes when they buy commercial real estate by using a corporate ownership maneuver.

The Howard Jarvis Taxpayers Association, which crusaded for the 1978 measure that limited the tax rate for real estate, said it wouldn't use the proposal as a wedge issue in the upcoming elections, the Los Angeles Times reported Tuesday (http://lat.ms/1mpihSR ).

"I think that the withdrawal of our opposition, at least for now, suggests that we don't see this as a direct threat to Prop. 13," said Jon Coupal, president of the Jarvis group.

The decision is good news for lawmakers who might otherwise hesitate to support the bill, which is backed by a surprise coalition of business interests and Democrats.

Among those supporting it are the California Chamber of Commerce and the California Business Roundtable, the newspaper said.

"It must be a cold day in hell. The cow jumped over the moon. And pigs are flying somewhere," quipped Assemblyman Brian Nestande, R-Palm Desert, at a committee hearing on the legislation Tuesday.

The bill, which passed the Assembly Revenue and Taxation panel Tuesday, will need two-thirds approval in the Legislature.

The legislation would eliminate the ability of businesses to elude higher property taxes by carving up ownership in commercial property purchases so no one has a majority stake. The tactic avoids a reassessment of the property that can increase its taxes.

The loophole came to light during the 2006 sale of Santa Monica's Fairmont Miramar Hotel to computer magnate Michael Dell. Dell divided ownership shares among his wife and two business partners, with no one taking on more than 49 percent of the property.

The move saved him about $1 million a year in property taxes, according to the Times.

"This particular loophole really pushed a button in people," said Assemblyman Tom Ammiano, D-San Francisco. Ammiano co-authored the measure, AB 2372, with Raul Bocanegra, D-Pacoima.

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Information from: Los Angeles Times, http://www.latimes.com

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