Transfer taxes: limitation., the official text

An act to add Section 11911.5 to the Revenue and Taxation Code, relating to taxation.

LEGISLATIVE COUNSEL'S DIGEST

Existing law, the Documentary Transfer Tax Act, authorizes the imposition of a tax by a county or city and county, as provided, with respect to specified instruments that transfer specified interests in real property.
This bill would, beginning January 1, 2027, prohibit a local jurisdiction, defined to include a city, including a charter city, county, or city and county, from collecting a transfer tax, as defined, levied on the sale or transfer of a real property interest conveyed if the combined transfer tax rate levied by the local jurisdiction exceeds 1.5% of the consideration paid for or value of the real property interest conveyed, except as otherwise provided. The bill would also prohibit a local jurisdiction from levying a transfer tax on the first sale of single-family housing property occurring within 5 years of one or more housing units on the real property being destroyed or made uninhabitable by a natural disaster, as defined. By imposing new duties upon local officials with respect to transfer taxes, this bill would impose a state-mandated local program.
The bill would include findings that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.

The people of the State of California do enact as follows:

SECTION 1.
Section 11911.5 is added to the Revenue and Taxation Code, to read:
11911.5.
(a) (1) Beginning January 1, 2027, and except as provided in subdivisions (b) and (c), a local jurisdiction shall not collect a transfer tax levied on the sale or transfer of a real property interest conveyed if the combined transfer tax rate levied by local jurisdictions exceeds 1.5 percent of the consideration paid for or value of the real property interest conveyed.
(2) A local jurisdiction may collect a transfer tax levied on the sale or transfer of a real property interest conveyed if it stops collecting, reduces rates on, or eliminates transfer taxes so that the combined transfer tax rate levied is 1.5 percent or lower of the consideration paid for or value of the real property interest conveyed. The local jurisdiction shall first reduce or stop collecting the rates for all transfer taxes that are not general taxes.
(b) (1) Beginning on or after January 1, 2027, and except as provided in paragraph (2), if the combined transfer tax rate levied by a local jurisdiction includes a combined rate greater than 1.5 percent from general taxes that were in effect as of June, 30, 2026, the local jurisdiction shall not need to stop collecting a transfer tax, reduce rates, or eliminate transfer taxes to meet the limitations under subdivision (a) except for any transfer taxes that are not general taxes.
(2) The combined transfer taxes described in paragraph (1) shall not exceed the lesser of the combined transfer tax rate for those taxes that are general taxes in effect as of June 30, 2026, or 3 percent.
(3) Except as provided in subdivision (c), a local jurisdiction shall not collect any transfer taxes that are not general taxes if that would result in a combined transfer tax rate levied by local jurisdictions that exceeds 1.5 percent.
(c) (1) Beginning on or after January 1, 2027, the limitations under subdivisions (a) and (b) shall not apply to any transfer taxes on a single-family housing property when the consideration or value of the interest or property conveyed is five million four hundred thousand dollars ($5,400,000) or higher.
(2) The threshold in paragraph (1) shall be adjusted by inflation annually starting on June 30, 2028, using the California Consumer Price Index for all items as published by the Department of Industrial Relations.
(d) (1) A local jurisdiction shall not levy a transfer tax on the first sale of single-family housing property occurring within five years of one or more housing units on the real property being destroyed or made uninhabitable by a natural disaster.
(2) For the purposes of this subdivision, a property shall be deemed “single-family housing” if, immediately before being destroyed or becoming uninhabitable, the property was single-family housing.
(e) For the purposes of this section:
(1) “General tax” has the meaning defined in Section 1 of Article XIII C of the California Constitution.
(2) “Local jurisdiction” means a city, including a charter city, county, including a charter county, or city and county.
(3) “Natural disaster” means an earthquake, flood, fire, riot, storm, or other natural disaster that, on or after January 1, 2025, has been the subject of either a state of emergency proclamation issued by the Governor or a major disaster declaration approved by the President of the United States.
(4) (A) “Single-family housing” means residential property that contains a separately owned parcel of real property containing a primary single-family dwelling, including a detached or attached single-family residence or a condominium unit within a common interest development, whether or not the property contains one or more accessory dwelling units or junior accessory dwelling units.
(B) “Single-family housing” does not include multifamily rental property.
(5) “Transfer tax” means a documentary transfer tax or real property transfer tax imposed on each deed, instrument, or writing by which any lands, tenements, or other realty sold within the local jurisdiction shall be granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser or purchasers, or any other person or persons, by that person’s or their direction.
(f) This section shall not be construed to increase, or authorize the increase of, a transfer tax rate established pursuant to Section 11911.

SEC. 2.
The Legislature finds and declares that (1) the crisis of housing availability and affordability is a matter of statewide concern that requires a multifaceted, statewide approach, (2) studies have shown that high transfer taxes decrease real estate transfers and new development, as developers absorbing large transfer costs have less capital to purchase or construct new projects, (3) the effects of depressed real estate activity can have regional effects that extend beyond the borders of the imposing jurisdiction, reducing the supply of homes and reducing economic development and revenue generated for the state and localities, further underscoring why the growing use and impacts of transfer taxes are a matter of statewide concern, (4) transfer taxes have increased significantly in cities across California, and (5) addressing all of the foregoing is a matter of statewide concern and is not municipal affair as that term is used in Section 5 of Article XI of the California Constitution. Therefore, Section 1 of this act adding Section 11911.5 to the Revenue and Taxation Code applies to any city, including a charter city.

SEC. 3.
If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.