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CjED:PC:WR:ms
Council Meeting 5/27/86
Santa Monica, California
TO: The Mayor and City council
FROM: City staff
SUBJECT: Annual Report on Compliance with California Revenue
and Taxation Code Section 17299 Regarding Rental
Housing Code Enforcement
INTRODUCTION
The purpose of this report is to present the Building and Safety
Division's rental housing code enforcement activities as required
by California Revenue and Taxation Code section 17299 and
recommend that City Council accept and file this required report.
BACKGROUND
Section 17299 of the California Revenue and Tax Code outlines a
procedure under which regulatory agencies may report to the
Franchise Tax Board owners of substandard rental housing who do
not make necessary repairs to bring the property into compliance
with health, safety and building codes within a specified period
of time. The Franchise Tax Board is required to deny income tax
deductions to owners of these properties until the regulatory
agency determines that the substandard housing has been brought
to a condition of compliance. The statute also requires that a
report be filed by each regulatory agency with its local
legislature by July 1 of each year, advising of the status of
enforcement activities initiated under this program during the
prior calendar year. This is the third annual report filed
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(0-\ \
MAY 2 '1 1986
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.
regarding Santa Monica's housing code enforcement activities for
the period covered by this statute.
Analysis
The Building and safety Division staff has reviewed the City's
records of rental housing code complaints and enforcement
activities during 1985. A summary of Santa Monica's rental
housing enforcement activities is presented in Table 1 for the
period 1979-1985. A total of 832 complaints or referrals
regarding housing code violations were received by the City staff
during this seven year periodi subsequent inspections resulted in
a total of 36 properties being cited as having substandard units.
All citations issued through calendar year 1984 have been cleared
without the need to invoke the provisions of section 17299.
In calendar year 1985, eight properties were cited for
substandard or illegal units. All but three of the eight
complaint items have been resolved by the Building and Safety
Division or the City Attorney's Office. The outstanding three
cases have been referred to the City Attorney's office and are
pending resolution and action under Revenue and Taxation Code
Section 17299. Since the required date of compliance of these
three cases falls in calendar year 1986, activity under this
statute for calendar year 1985 is shown as zero on Table 1.
BUDGET/FINANCIAL IMPACT
There is no financial impact related to the filing of this
report.
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RECOMMENDATION
It is the staff's recommendation that the City Council receive
and file the report included in Table 1 as the calendar year 1985
report required by Revenue and Taxation Code section 17299.
Prepared by: W.D. Rome, Building Officer
Attachments: California Revenue & Taxation Code section 17299
Table 1 - Summary of Rental Housing Code
Enforcement Activities, 1979-1985
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S 17299. Interest, taxes, depreclahon or lUTlortl1.atlon paid or in-
curred In taxable ) ear Volth respect to rental income
from substandard housing
(a) !': otvmr.s~ndmg any other pronslODs 1.1] thiS part to Lh,e contra"'.,
ir. thE' case of a ta.\.pa~ er \l,ho de!wes rental mcome from subs~ndard
hous:r.g located m thu; staU:, no deduc:lOD s:-,,,l1 be aUowed for mt.erest,
taxes. depreCIation, or amOnlz~tlOI1 pa'd or mcurred In the taxable year
WIth respect to such subsUi.ndard hOUSJI't;, excef)t as pro\'1ded u. subc.\'1-
510fi (c)
(b) Substandard housmg means hOUSl~g whIch (l) has b€en det.eI'Mmed
by a state or local go\'ernrl'ent regGlatc,r} a.gency to \-,olate sr.ate la'" or
local codes deah'1g ""1th health. safet), or buIlcmg, and (2) after wnaen
notice of '''lolatJo~ by the regulaUJry ab"ency, speclf:ymg the apphcab111::y
of tius sect:on, has not been brought to a conc.It1on of corr.pl:ance wltht:::.
SIX months after the date of the notIce or the tl1~e prescnbed In the
notlce, '" hlchever period IS later, or on whIch gO::Jd fal~h efforts for
compllance h3ve not bei!n corrF.lenced, as det€nmned by tt,e reg'.:.latory
agenc}' The regulatory agency maL for good cause sho"'~, extend the
compliance date prescribed In a VIOlatIOn notlce
(c) When the penod specifIed In subdmslOn (b) has expu'ed \l.'1thout
comphance. the regulatory agency shall mal] to the taxpayer a notice of
noncoMpliance The notice of noncompliance shall be III such form Bnd
shall mclude such mfornatlOn as may be prescnbed by the Franchse
Tax Board shall be n>alled b) certIfIed 1"%1] W the taxpayer at hIS last
knov. n address, and shall ad,'lse the t.axpa~ er (l) of an mtEnt to noufy ~
the franchIse Tax Board of such noncomplIance wlthm 10 days unless an
appeal IS fIled, (2) .... here an appeal ma\.' be filed. and (3) a general
desc:"lpt:lon of the tax consequences of such fllmg With the F'raT"Chlse Tax
Board Appeals shall be made to the sane bod) and 1D the same manner
435
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~ 17299 PERSONAL n;COME TAX
DIV 2
as appeals from other actions of the regulatory agency If no appeallS
made v,.,thm 10 da)'s or after dlsposltlOn of the app€al1f the ~gulat.Ory
agency 15 sustamed, the regulatory agency shall noufy the mnchLSe
Tax Board of such noncomplIance ?.; 0 deductIon shaD be al10wed for the
Jtems pro\Ided III subdIVISion (a) from the date of the notlce of noncomph-
anee untll the date the regulat.ory agency detenmnes that the subs:.and-
ard housmg has been brought to a cond~tlon of comphance The regula-
tory agency shall mal] to the Fra.11chlse Tax Board and the taxpayer a
notIce of comphance, whIch notIce shall be In such form and mc1ude such
informatlon as may be prescnbed b:l- the FranchL5e Tax Board In the
event the penod of noncomphance does not cover an entIre ta..xable year,
the deductlons shall be demed at the rate of one-twelfth for each ft:.1l
month dunng the penod of noncomphance.
If the property is owned by more than one owner or if recorded tltle is
in the name of a flcttJO:lS ov.ller, the notice requIrements pro\lded In
subdIViSIOn (b) and thiS subdl\'1S100 shall be satIsfied for each mn:er If
the nouces are mal1ed to one owner or to the fIctItIOUs name ov.ner at the
address aDpeanng on the lates~ ava;]able propert) tax blll Howe\er,
notIces made pursuar,t to Vas subdlnslOn shall not reheve the regulatory
agency from furmshmg ta),.payer IdeT1t:flC3non lr.fonna~:on requ:.red to
Jr;jplernent thlS sectlOn to the Franchise Ta:>.. Board
(dl For t.''1e purposes of th:.5 sectJOn, a notIce of noncorrp];a"lce shall
not b€ m:;,:Jed b) the reguiato!') agency to the Franch]se Ta). Board ]f
(1) The rental housmg was rendered substandard solely by reason of
ear'~hqua;'e, flood or other natural G.lsast.e.. except v.nere such COnC.'tlon
remains for more than three) ears aft€:' the dlsastH,
(2) The owner of the rental hOUSI:1g has secured fmancmg to bnr.g
such hcusmg mto cor--,p\~ance ......Ith L~ose \av.. s or ewes which ha\e b€en
VlO]at.ed, causmg such housmg to be claSSifIed as substandard, and has
commenced repairs or other work necessary tD bnng such housmg mto
compliance, or
(3) The ov..ner of reJ'lta! housing.... hlch IS not wlthm the rnea"ll~ g of
housmg accommodatlon as defmed by subdj\,S'On (d) of Seetlor:. 35S05 of
the He<ilth and Safet)' Code has Btk'mp~ed to
(A) Secun: fmanc[;)g' to bnl'g such hOUSlr.[, Into cOTl'phanee With those
la....s or cod~s v. hich ha\e been V1otakd, t:aUS1'1g such hous~;l.g to be
clasSified as substandard, and
(B) Such fmanclng ]s demed solely because such hOUSing IS located In a
neIghborhood or geogr.lphlc..~ area m v. h1ch flr,anclai mstltutlOns do not
provlde fmancmg for rehabilitatIOn of any such housmg
(e) The pronslOns of thIS sectlOn do not apply to deductlOns from
mcome dem'ed from property rendered substandard solely by reason of
a change In apphcable state or loc.:>.! hOUSing standards ur.less such
....101at.J0ns cause substantlal danger to ilie OCCUDant.s of such prapert}, as
determmed by the regulator) ab"enc)' whIch has S€r\ ed notIce of \'lOlatlon
pursuant to subdJ\'lslOn (b)
436
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ITE'IS ~OT DEDVcrIBLE ~ 17299
Pan 10
en The oVrller of rental housmg found to be in noncompb.ance shall.
upon total or partIal dlvestlt'..:re of mterest in such property, unmed:ately
not1f~ the regulatory agency of the name and address of the person or
persons to whom the property has been sold or othennse transferred
and the date of the sale or transference
(g) By July 1st of each year, the regulatory agency shall report to the
app:-opnate legIslatIve body of Its Junsdlcuon all of the folloWlr.g infor-
mation, for the precedl:lg calendar year, regardmg its actJ"ties to secure
code enforcement, which shall be public mformatJon'
(1) The num~r of Wl1tten notices of yiolabon ISsued for substandard
dwe1imgs under subdmslOn (b)
(2) The number of \'101atlOn5 complied v.,th "",'Lltm the penod pre-
scr.b€d m 5ubdlY1SlOn (b)
(3) The number of notIces of noncomplIance issued pursuant to subdj.
\'15IOn (c).
(4) The nUi!',b€r of appeals from those notices pursuant to subdJVlSlon
(c)
(5) The number of successful appeals b) ov,'11erS
(5) The number of not!ces of nonco-nphancemaIledtotheF:anch:.se
T2.:\ Board pursuant to su~dmslon (c)
(7) The number of cases In which a notIce of noncomphance was not
sere pu!'S'..:.ant to the prOYISlOn of SUbCU\-IS10" (d)
(8) Tf e number of €xtenslOns for comphaJ1ce granted pU~l:.ant to
sub:il\lSWn (b) and the mea:-- average lergth of such ext.enSlOns
(9) Tile mean average length of urne from L~e issuance of a notice of
\'1o:a tJOn to the mallmg of a notice of noncomphince to the Fnr-c\-llse Tax
Board v. here such notIce 15 actuall} sent to the FranchIse Ta...\. Board
(10) The number of cases v. here compliance IS a.chleved after .a nouce
of nonco'"'1pllance has been mailed to the FranchIse Tax Board
(11) The number of instances of dlsa]]ov. ance of tax deductlOr.S by the
FranchIse Tax Board resu\tlng from referrals r:13ce by tiJe rebU!;~c:-y
agt-~,cy ThIS mfomauon P1a) be flied in a supplemental report m
:>",,-,-.,.~dmg years as It becomes available
(Added b} Sta.t.s 19:4, C 2JS, P 443, ~ I, eff !-.fay 10. 1974 Aoner>ded by
S':2:.5 19';'8. C 1286, P 41~6, ~ 1, eff Sept 28, 19.8, Stats 1979, C 29~, P 1080,
~ 20, eff Jul} 24, 1979, Stats 1980, C 426, P S6i), ~ 4 I
HI8t{)nelll Sote
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Seelio'l 5 of St.at.s 1974, c: 238, P 443. I, 1975 I'l'ld St>c:Jon 2 of L~15 lil't sbll lip;}\
a:-;ended b) Stoats 1978, Co lZP.6. p 4201, to lnl'Ol'1e vears .... hll'h kl:1..'1 0, or after
~ 5. prO\ Ides Janualj 1. 19,5 " ~
'''n.,~ al't pl"O\')des for a ta),. lev) ....1:)-.1.'1 The 1978 a"1lelldmenlll'~erted "spe'l'lf) I~i!"
t.lje rr;ear,ln~ of Aro.Jcie IV of the Cor.slltu the llppli~blllt\' of lhs 6{"("'..J0'l' rr. Item l.!J
uo., and sha'l go IToto Imr'lNlat.e effeel of subd (b), o-ansferred or" from end of
Ho"'.ever Se<::lJOn ] o! uus act ~'.,all ap.,h to par (l) to end of pdr (21 o! 6UW IC'
tAxaole )ean. be~rmr'b on or afte- JanulU] I11sened par 121 of !iuW [d), re::i,,~'r.alt'd
437
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fi 17299
former par (2) to be par (31 of .6llbd Id) and
msen.ed "whIch IS not ''''It.hl~, tJ-.e rnear,lr,g
of housmg BccommooatJon lIS defll't'd b)
lubdl\L5.10!:. (di of &cuon 35805 of the
Healu-, &1\d Safe..... Code" In mtrodu\:t.ory
clause of 5ubd (dJo.'31, re\l,rote .subpar (B)
of p.u (3) of aubd (dl which prior to thIS
amendment read "Suc1-j fl.'lancJ1Ig 15 not
....'a'table beause auch housu;g IS locate-d In
JJl L"i'8 In ~..hlch J.enders ha\e a polICY of
Dot ma.kmg loans for rehab,~.t.a.tlon of a.n~
.tructures III such a.rea", lIlId &ddl'd 5ubds
(f) and (g}
The 19'i'9 amendment lllSerted the Be'COnd
pan.graph In aubd (c)
PronSlons of St.ats 1979, e 292, l'eOU:rilH!'
the use of t.1U tabies apph to the co'ilym.;i:'
bon of taxes for taxable years begll1n1n;:, on
or afLer Jan 1, 1979, s'* HlSt.onca.l !\ot..e
ll1lder ~ 17~S
Sections 3, " of Stats lS,,;"S e 1236 p
4201. amend~ bv Statb 1979. C 292 p
Ilf.K], ~ 40, pro..,d~
..~ 3 On &ptember 1, 1979, and on
Septe"7lb€r 1 01 ear'" ye.t?" t.~e?"ea.fleT. t}-.('
ControJler ShOll' [ran.sfer fro'T l.~e Gene:-al
F-und to t..':.e Loi:al A~e'1t> COO.. E~,force-
mer! a.nd Re}>ahlill.s.UG!' Fl.:nd, WlllCh IS
her-eb} cr-eB:..ed Il.~ ar--,ou'" e-quai to the net
am01.r;l collteeted dU!1ng uie p/'"ff'edl"i:" :J~
eal '..ea~ c.u~ w the llD~i":.a.GGr of Sect..;;ns
1,,;"~9 ti.'ld 24~3iJ 5 of tilE- Rf-'l'nllf- ;l."'1d T...,.
aUor, Code ~ estJrr.;;t.eC b\ thE- De\",;,.'tr;~nt
of Fl<,ance a~,d approp"13.tfod 1I<,r'.:ai'., fro'"!)
the G<!reral Fund for pUQO~E5 speel:iea In
.
PERSOXAL r.-;CO~rE TAX
DU'. 2
thIS I!ett)on On October 1 of 19i9, and
each Oetob.er 1 or each year t.....El'u.ft.er. the
C<lntrol1er shll chstnbr.;t,e the amounts III
the fund. .-hch IS hel'eh~ mnt;!',uoush. .p-
propnat.e(\ for !lU&. pU1j)O&e, to each my.
cou.nt}. and Clt)' and co:J.:Jty In 111'Qparuor. to
Ole llol'llOurot.'; In the fu~d ba.YlIll a lI(luree
from each suer er~~}. as estlmated b)' the
Department of Fma.."lce EAch e"l~t) recelV'
wg amounts pursuar.t to Uus secbol1 Bhall
uuhu &ueh 1.'TlOUDts for ~y or a.ll the ftjl.
loWlng purposes
"4a) 10 defray OOSt.6 inCurred lJ1 the en-
foreeme~t of local houslf,g code p"'OVlS~ons,
"(hI To fund bOUSlr-.g re!-..abllltauon pro-
grarrs for pen.OI'S and fa"lul!!s of lav. and
modeJ'llte mcome, as derIDed In &<:uon
500>13 of the He.alli, and Wet)' Code,
. (el To prevent or ffilI'lJT1.l1.t' dlsp1ll.Cf'ment
of tena,ts and hor';€'O'" nen L'i . re5.~]t of
local code enforcement a.c:o."tles
"Sec 4: On or ~(orE; Jl.:h I, 19~1) ard
on OT t>eiare JLih 1 of each ;"eD nU:'1bt>red
calendar ye<i.1' tJ-oe--ea ':..e?" Ule Lel'da:n e
Ar-al}H sh"ii prepare iond prm1de- to th..
Leg1si;;~r.;Te, a \IoT.:-ten Tet>'Jr. on tile eff~t
of L~e a~?II::atlOn (}~ Set:tJot,:; 1-;~9 ll....d
2':436 ;} of tf.~ P.e'enLie and T-.u:Jcn Cuce.
tLgE:J-~er ~'1th ~!'"f'imec~ a.rd rt"'Cor:.me r.Cid-P
UO[.s "
Tht' 19S0 aT"')e~c.~E"'"":~ s~bst;tuted uBubdl
~'lSiOn (hi' fer 6:.Jr>d'\1SJ.")' (a', 1T. 6;;~S
(g'~ l) ll."lrl {~l, IInd s\:~~tl\.U:.N II pe-,o.:: f0~
" a~d at tb end of 6Li~ \,glllOi
eros. References
Rank Illcarpol"atlol's ta.~es see ~ 24':36 5
HOUS1....g /i.CCom....,odatJo=:J., defined, ~~ Ht,,'th and Safe!) Code ~ 3.55\)5
TaxatIOn 01:>]035
C.J S Tur.t.lon S 1099
LlbMl.l'} Referencn
~ 17299.1. Abandonment or tax recoupment fees paid: nondt'o
ductlhlht)'
In computmg: taxable Income no deductIon shall he allov.ed for la)
abandonment fees paId under SectlOn 51061 or 51093 of the Government
Code or (b} tax recoupment fees paid under Section 5114.2 of tte
GO\ ernment Code ..
(Added b}- Stat!; 1974. C 1003, p_ 2161. ~ 6 Amendec b! St.ats 19i5, C 22~ p
60{) 9 ]5, Suts 19:6, C 176, P 32-1. ~ 122, ef{ Ma) 24,1976, S1..a,,-> 19';7, C 853,
P 2575. S 19. eft Sept.. 17, 1i17i l
438