Significant Changes to California Property Tax Abatement Law for Affordable Housing Developments to be Considered by the California Board of Equalization

Proposed rules will limit the scope and availability of the Welfare Exemption under California Revenue &Taxation Code Section 214(g) for new and existing affordable housing developments. Without the benefit of property tax relief under the Welfare Exemption, many existing affordable housing developments could be left with funding gaps and future affordable housing production could be hindered.

The California Board of Equalization ("BOE") is considering four (4) new rules which, if adopted, will limit the scope of the "Welfare Exemption" under Revenue & Taxation Code Section 214(g) for qualifying affordable housing developments. The four (4) new rules will govern the implementation of the statutory exemption from property taxes which benefit certain affordable housing developments under Section 214(g). Under particular scrutiny are joint-venture developments between for-profit and non-profit developers. Although no additional information has been provided as to the substance of the new rules, on March 16, 2005, the BOE will meet to consider the key issues identified below prior to the drafting of the new rules.

Whether the exemption on low-income housing properties should be limited to the stated percentage specified in the regulatory agreement(s) that the owner is legally required to restrict for rental to lower income households.

Whether Section 214, subd. (g)(2)(B) requires owners to charge lower-rents than those prescribed by statute (Health and Safety Code) or the regulatory agreement for the property.

Whether properties without government financing that are awarded federal lowincome housing tax credits and operating under regulatory agreements that restrict a portion of the property for rental to lower income housing continue to be eligible for exemption after the period in which the property received tax credits has expired.

Whether the requirements with respect to the management authority and duties of a managing general partner should be strengthened beyond those currently required on BOE-267-L1, Welfare Exemption Supplemental Affidavit, Housing- Lower-Income Households (Limited Partnership), or OE-277-L1, Claim For Supplemental Clearance Certificate For Management General Partner. These forms are posted on the BOE's Web site at www.boe.ca.gov/proptaxes/pdf/boe267l1.pdf; and www.boe.ca.gov/proptaxes/pdf/boe277l1.pdf.

Whether properties without government financing that are awarded federal lowincome housing tax credits and...