Nov 27 2012

OPINION: School Parcel Tax May Fail Deductibility Test

Editor’s Note:  “Like-rate” generally refers to a flat charge,  for instance $100 per parcel.  Legal counsel to the Piedmont school district has advised that, to the extent the school levy is tiered or graduated (based on square footage or otherwise), the levy risks being considered an ad velorem tax, which is illegal and subject to challenge by any taxpayer as unconstitutional.  (See School Board discussion of the tax levy of October 10, 2012.)

Resident Urges School Board to Reconsider Tax Basis-

Dear School Board Members:

I strongly urge your reconsideration of the basis for the new parcel tax you are recommending for the March 2013 special election.  We are all working toward the goal of continued adequate, equitable and defensible school funding.

Equity and tax deductibility are of primary concerns to me, and, I believe, most of the Piedmont voters.  The November 18th issue of the Piedmont Civic Association highlighted a matter of increasing concern:  that ongoing tax deductibility of parcel taxes that are NOT based on “a like rate on owners of all properties in the taxing authority’s jurisdiction,” as outlined in a recent IRS opinion letter is questionableWhat you are proposing stands a good chance of failing the “like rate” test and could result in Piedmont residents receiving a “Notice of Additional Tax Due.”  Furthermore, the PCA article pointed out that “an aggressive stance by the FTB could not only impact the deductibility of Piedmont’s proposed 8-year school parcel tax of $2,000 to $3,500, but other city parcel taxes that are also based on parcel size.”

A like rate will ensure equity for all Piedmont homeowners, i.e., the same amount per square foot of property or habitable space.  It will stand a strong chance of passing future FTB or IRS tests.

A parcel tax is based on the characteristics of the parcel and, as such, permits differing rates for residential and commercial parcels.

A Local Classrooms Funding Authority parcel tax (Measure CL) was approved on the November 6th  ballot for voters in Los Angeles County in the Lawndale, Hawthorne, Wiseburn, Lennox and Centinela Valley school districts.  Measure CL levied a parcel tax of 2¢/square foot for residential property, and 7.5¢/square foot for other types of property.

The West Contra Costa Unified School District has a parcel tax rate of 7.2 cents per square foot, which was extended until 2018 by the voters (Measure G) in the November 6th election by a vote of 75% to 25%.

Both of these school funding sources have seen the wisdom and advantage of using a “like rate” per square foot form of parcel tax.  Piedmont needs to consider the same approach in order to ensure equity irrespective of property size, and ongoing tax deductibility of this and future parcel taxes.

Thank you,

Jim McCrea, Piedmont Resident


One Response to “OPINION: School Parcel Tax May Fail Deductibility Test”

  1. Since there is a need for education taxes and State higher education tuition keeps going up, where is the education money from the CA lottery going?

    Is there a report with accountability for this education money?

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