Second home tax proposal won’t be moving forward

SACRAMENTO — A proposal to end tax breaks for owners of second homes in order to fund California’s affordable housing programs appears to have fizzled in the state legislature.

Assembly Bill 71 (AB 71), which proposed to assess a levy on any form of non-primary residence owned by state taxpayers, has essentially been inactive since May 30, a few days after Appropriations Committee members narrowly approved the bill. The definition of “second home” is broad enough to include boats with living quarters and not occupied by full-time liveaboards.

Several boating and outdoor advocacy groups express opposition to AB 71 almost immediately after it was proposed, claiming it would impose an extra tax on boaters who already pay fees and levies through other channels – and possibly discourage Californians from buying or maintaining boats.

AB 71 – introduced in December 2016 by Assembly member David Chiu, D-San Francisco – specifically proposed the elimination of tax deductions for second homes. Collecting taxes on properties treated as second homes (such as boats) would go a long way to fund California’s affordable housing programs, Chiu reasoned with his proposal.

The bill was voted on in three Assembly committees during the legislative process, but AB 71 never made it in front of the full body for a roll call vote.

Members of the Housing and Community Development Committee voted 5-2 in favor of AB 71 in early March, while the Revenue and Taxation Committee supported Chiu’s proposal by a 7-3 vote in mid May.

The Assembly’s Appropriations Committee voted 10-6, with one no-vote-recorded, in favor of AB 71 on May 26.

A legislative analysis published in June stated the second home mortgage deduction results in a $300 million loss in revenue to the state. The same analysis stated the second home mortgage deduction primarily benefits taxpayers with higher income levels – whereas low-income housing developments struggle to compete for tax credits.

Attempts to reach Chiu’s office for updates on AB 71 and whether the Assembly member would continue pursuing the elimination of second home mortgage deductions were unsuccessful.

Parimal M. Rohit photo