May 15, 2012
Pursuant to Elections Code Section 9005, we have reviewed the
proposed constitutional initiative concerning property tax exemptions
for religious properties (A.G. File No. 12-0012).
Local Property Tax
The local property tax is a 1 percent tax levied on the assessed
value of real and personal property. County officials collect property
tax revenues and allocate them to local governments: the county, cities,
special districts, K-12 schools, and community colleges.
Real property includes land, buildings, and other structures.
Personal property includes boats, airplanes, manufacturing equipment,
and other mobile property. Household items and personal effects,
although personal property, are generally not taxed.
The taxable value of real property (its assessed value) is the
purchase price of the property. Each year thereafter, it grows by up to
2 percent. Personal property, on the other hand, is assessed at market
value (taking into account depreciation) regardless of its purchase
Exemptions From the Property Tax
The State Constitution exempts certain properties from the property
tax, including those used for nonprofit charitable, hospital,
scientific, educational, and religious purposes.
Religious Property Is Exempt From the Property Tax.
Parochial schools are also exempt. Some churches own other property that
is not used for religious services, such as administrative offices,
clergy residences, community centers, disaster relief shelters, and
bingo halls. These properties are exempt under a separate property tax
exemption, the same law that also exempts nonprofit private schools,
charities, and hospitals.
The assessed value of exempt religious property in 2010-11 was
approximately $17 billion. In addition, the assessed value of property
owned by churches but not used for religious services was several
This measure would amend the Constitution to remove the property tax
exemption for churches and other religious property. The measure would
take effect in 2013.
Church Property Used for Worship Would No Longer Be
Exempt From the Property Tax. Property used for other
religious services, including reading rooms, clergy residencies, and
church parking lots, would also not be exempt.
Some Church-Owned Property Could Retain Property Tax
Exemption. Church property used for educational or
charitable purposes may be eligible under the state’s property tax
exemption that applies to nonprofit education and charitable
organizations. Whether these properties qualify would be subject to
interpretation by state and county officials.
Increased Property Tax Revenue for Local Governments.
As a result of this measure, local governments likely would receive
approximately $225 million annually beginning in 2013-14. This amount
could vary depending on the assessed value of religious property that
would qualify for the charitable or educational exemption.
General Fund Revenue Savings. In most
cases, local property taxes distributed to schools and community
colleges offset state General Fund spending for education. Under current
property tax allocation law, approximately 40 percent of local property
tax revenue is distributed to schools and community colleges each year.
Therefore, the measure would result in General Fund savings of roughly
$100 million annually.
Summary of Fiscal Effects
The measure would have the following fiscal effects:
- Annual local government revenue increase of roughly $225 million
from property taxes levied on religious property.
- State General Fund savings in most years of roughly $100 million
from increased local property tax revenues for school and community
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