Bill to close Prop. 13 loophole clears Assembly

Assembly members approved a bill Thursday that would close a loophole associated with Proposition 13, the state’s property tax law that for decades has been a political third rail.

Assemblyman Raul Bocanegra (D-Pacoima), a co-author of the bill, said the legislation offered “a historic opportunity to fix a problem that has vexed the state for many years.”

The legislation would curb businesses’ ability to divvy up stakes in commercial property purchases so no one has majority ownership. The maneuver avoids triggering a reassessment of the property that can increase its taxes.

The loophole gained notoriety from the 2006 sale of Santa Monica’s Fairmont Miramar Hotel to computer magnate Michael Dell. Dell split ownership shares among his wife and two business partners, with no one taking on more than 49% of the property.

The move saved him about $1 million a year in property taxes.

Changes to Prop. 13, the state’s landmark property tax law, have been considered untouchable for decades. But the plan to address the change of ownership loophole was boosted by support from business groups, including the California Chamber of Commerce.

The Howard Jarvis Taxpayers Assn., the staunchest defender of Prop. 13 withdrew their opposition to the measure; its president Jon Coupal argued the plan would “strengthen” the property tax system created by the initiative.

Assemblyman Tom Ammiano (D-San Francisco), co-author of AB 2372, said the collaboration between those that have often been at odds over Prop. 13 “shows the moral fiber of this chamber.”

The measure, which needed a two-thirds vote, passed on a 56-9 vote. Seven Republicans voted for the bill. Three Democrats facing tough reelection fights -- Assembly members Ken Cooley of Rancho Cordova, Steve Fox of Palmdale and Sharon Quirk-Silva of Fullerton -- voted no.

The bill now heads to the Senate.