The Attorney General concluded the charge that cities and counties are required to collect from all applicants for building permits pursuant to Health and Safety Code section 18931.6 are regulatory fees, not taxes. (Attorney General Opinion, No. 09-903, December 27, 2011.)
The Attorney General specifically noted that Proposition 26, the so called Supermajority Vote to Pass New Taxes and Fees Act, which was passed by the voters on the November 2010 ballot, now defines “tax” as “any levy, charge, or exaction of any kind imposed by the State,” except as otherwise provided. Proposition 26, however, pertains to taxes adopted after January 1, 2010, and is, therefore, not applicable to section 18931.6.
The California Building Standards Law requires the California Building Standards Commission (“Commission”) to review and, if necessary, approve building standards that state agencies have adopted or approved. The Commission must also adopt and publish buildings standards to be used in situations where no state agency has the authority or expertise to propose standards. This includes “green building standards,” that will “improve public health, safety and general welfare by enhancing the design and construction of buildings through the use of building concepts having a reduced negative impact or positive environmental impact and encouraging sustainable construction practices.” The city or county that collects the fee may retain up to ten percent of the fee to pay for code enforcement education and administrative costs. The reminder of the money collected must be transmitted to the Commission to be placed in the Building Standards Administration Special Revolving Fund.
The question presented to the Attorney General was “whether the charges assessed by section 18931.6 are ‘fees,’ or whether they are ‘taxes’ levied in contravention of Proposition 13’s two-thirds majority voting requirement.”
Attorney General Opinion
The Attorney General concluded the charges collected under section 18931.6 are valid regulatory fees and do not constitute an unlawful tax in contravention of Proposition 13. California voters added article XIII A, which is more commonly known as Proposition 13, to the state Constitution in 1978. Proposition 13 contains real property tax rate and assessment limitations as well as restrictions on state and local taxes.
Proposition 13 provides that any changes in state taxes which are enacted for the purpose of increasing revenue “must be imposed by an Act passed by not less than two-thirds of all members . . . of the Legislature, except that no new ad valorem taxes on real property, or sales or transaction taxes on the sales of real property may be imposed.” As for local entities, Proposition 13 provides that “Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district, may impose special taxes on such district, except ad valorem taxes on real property or a transaction tax or sales tax on the sale of real property within such City, County or special district.”
The Attorney General concluded the charges under section 18931.6 are regulatory fees, not taxes. The term “tax” does not have a fixed meaning and the distinction between a fee and a tax is often blurred. However, there are three types of permissible fees that may be enacted without being subjected to Proposition 13’s two-thirds voting requirement. The first is a special assessment, which is an assessment based on the value of the benefits that are conferred on a property. The second is a development fee, which is “exacted in return for permits or other governmental privileges.” The third is a regulatory fee, which is imposed under a government’s police power.
The Attorney General concluded the section 18931.6 charges are regulatory fees. The charges are “not dependent on government-conferred benefits or privileges.” The charges “defray the effects” of development and building construction. The charges underwrite building standards, including green building standards, which is an area the Legislature has determined is a matter of public concern. The charges are used to cover the cost of developing, adopting and implementing the building standards. Also, the amount of charges may be reduced if they generate excess revenues. Based on all of these factors, the Attorney General concluded the charges are fees, not taxes.
If you have any questions concerning the content of this Legal Alert, please contact the following from our office, or the attorney with whom you normally consult.
Jeffrey L. Massey | 916.321.4500
Jon E. Goetz | 805.786.4302