Calif. bill seeks to close property tax loopholes

Democratic lawmakers are determined to close tax loopholes they say cost state and local governments hundreds of millions of dollars each year, as they search for ways to trim California's enormous deficit.

A report by the union-funded California Tax Reform Association found that the share of property tax paid on residential property has increased since two-thirds of voters approved California's landmark Proposition 13 tax law in 1978, while the share paid on commercial property has decreased.

Under the current system, when property changes owners, its land value is reassessed and the new owner pays taxes based on the new value, which is often higher.

But it only applies when a person or legal entity obtains more than 50 percent of the property, allowing corporations to structure sales to avoid a reassessment. AB 2492, would redifine an ownership change to 100 percent of a property being sold, regardless of the number of new owners.

Republicans whose votes are needed to reach the two-thirds legislative approval to pass any tax increase are opposed, along with the California Taxpayers Association. The group said a switch would increase taxes on business owners.