California group announces intent to qualify second taxation initiative for 2020
Over the past decade, California has averaged 10 initiatives on the ballot. The average cost per measure during that time to qualify an initiative for the ballot was $2.46 million.
A California group—Schools & Communities First—announced last week that it would file a new version of an initiative to require commercial and industrial properties, except those zoned as commercial agriculture, to be taxed based on their market value. It’s uncommon for a group to successfully qualify an initiative for the ballot and then attempt to replace it, so here’s a summary.
Under current California law—established by the state’s approval of Proposition 13 in 1978—governments are required to tax residential, commercial, and industrial properties based on the property's purchase price, with an annual adjustment equal to the rate of inflation or 2 percent, whichever is lower. Taxing business and residential properties based on different valuations is known as a split roll tax.
In 2018, proponents of the measure qualified their initiative for the 2020 ballot after initially targeting the 2018 ballot. As we previously covered in the Brew, Democratic presidential candidate Bernie Sanders endorsed the measure when speaking at the Los Angeles teachers’ union conference in July. Schools & Communities First then filed a new version of the initiative on August 13 and announced they would be focusing on a new signature petition drive to put the revised version on the ballot.
Tyler Law, a spokesperson for the campaign, said the group would not officially withdraw the currently qualified initiative from the ballot until the refiled initiative qualifies.
Both the initiative that already qualified for the 2020 ballot and the refiled version would allocate revenue from the increased commercial and industrial property taxes to local community college and school districts and local governments. The new version is estimated to provide $6.5 billion to $10.5 billion in additional revenue.
Here are some differences between the two versions:
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The qualified initiative would provide an exception for businesses with property value up to $2 million. The revised version would widen that exception to include up to $3 million.
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Both versions provide a full property tax exemption for businesses with 50 or fewer full-time equivalent employees. The new initiative would require that the business be independently owned and operated, located in California, and owned by California residents to qualify for the exemption.
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The currently qualified initiative would go into effect on January 1, 2020. The new version would go into effect on January 1, 2022, and would phase in over up to three years for any property at least 50% occupied by small businesses.
The initiative that already qualified for the ballot required 585,407 valid signatures. Proponents spent $3.5 million to collect 855,623 signatures, with 661,306 of them deemed valid.
The revised initiative will need to qualify for the ballot according to requirements determined by turnout in the 2018 election. This means it will need 997,139 valid signatures, the largest initiative signature requirement in California history.
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