SR-407-000-04 (6)
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C/ED:B&S:WR
Clty/CounCll Meetlng:
.
L/CJ'7-- 000-0 ~nta Inca, Callfornla
6/11/85 Aprll 3D, 1985
TO:
Mayor and Clty CounCl1
/- -II
~ 11 J98S
FROM: Clty Staff
SUBJECT: Annual Report on Cowpllance wlth Callfornla
Revenue and Taxatlon Code Sectlon 17299
Regardlng Rental Houslng Code Enforcement
INTRODUCTION
The purpose of thlS report lS to present the BU11d1ng and Safety
Dlv1slon's rental hous1ng code enforcewent act1v1tles as requ1red
by Callfornla Revenue & Taxat10n Code Seetlon 19299 and recon~end
that Clty Counell accept and flle thlS requlred report.
BACKGROUND
Sectlon 17299 of the Callfornla Revenue and Tax Code outllnes
a procedure under WhlCh regulatory agenC1es May report, to the
Franchlse Tax Board, owners of substandard rental houslng who
do not make necessary repalrs to brlng the property into cornpllanee
wlth health, safety and bUlldlng codes wlthln a speclfled perlod
of tlme. The Franchlse Tax Board 1S requlred to deny lnco~e tax
ded~ctlonsto owners of these propertles unt1l the regulatory agency
deterwlnes that the substandard hous1ng has been brought to a condlt1on
of corr-pl1ance. The statute also requlres that a report be flied by
each regulatory agency wlth ltS local leglslature by July 1 of each
year, advlslng of the status of enforcement act1vlt1es lnltlated
under thlS prograro durlng the prlor calendar year. ThlS 1S the second
annual report flIed regardlng Santa Monlca's hous1ng code
enforcement act1v1tles, for the perlod covered by th1S statute.
ANALYSIS
The BUlldlng and Safety Divlslon staff has revlewed the city's
records of rental houslng code complalnts and enforcement actlvltles
durlng 1984. A summary of Santa Monlca rental housing enforcement J'
actlvltles 15 presented In Table 1 for for the period 1979-1984. ~~
A total of 636 complalnts or referrals regard~ng hous~ng code JUN11 ,~S
vlolatlons were recelved by the Clty staff; and inspectlons resulted
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~n a total of 28 un~ts be~ng cited as substandard dur~ng th~s6 year
per~od. All of the 636 compla~nt ~tems were or are be~ng
resolved by the BUlld~ng and Safety D~v~s~on where necessary
wlth the ass~stanee of the C~ty Attorney's Offlce. The average
tlme for achlevlng compl~ance on these cornplalnts was one to
three months. Because of the satlsfactory resolutlon of these
lte~s, no formal act~on under Revenue and Taxatlon Code Seetlon
17299 was necessary or lDltlatea. Therefore, all ltems of the
requlTed state report on act~vltles under thlS statute ln Santa
Monlca are shown as zeros on Table 1.
BUDGET/FINANCIAL IMPACT
There lS no flnanclal lmpaet related to the fillng of
thlS report.
RECO~~1EKDATION
It lS the staffls reeo~~endatlon that the C~ty Councll recelve
and flle the report lncluded ~n Table 1 as the calendar year
report requlred by Revenue and Taxat~on Code Sect~on 17299
for 1984.
Prepared by: W.D. Rome, Bu~ldlng Offlcer
Attachments: Callforn~a Revenue & Taxat~on Code Section 17299
Table 1- Summary of Rental Hous~ng Code
Enforcement Act~vlties, 1979-1984
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~ 17299. Interest, taxes, depreciation or amortIzation paid or in.
curred 1n taxable :) ear ""Ith respeet to rental income
from substandard housmg
(a) K ot\l.'lthstandmg any other prOVIsIOns m thiS part to the contrary,
in the case of a taxpayer who denves rental mcome from subnandard
housmg located m thiS state, no dedaction shall be allowed for mterest.
taxes, depreCiatiOn, or amOrtlz...tlon paId or incurred m the taXable year
'wlth respect to such substandard housmg, except as provIded m subdr'r1-
SIOn (cl
(b) Substandard housing means housmg which (l) has been determmed
by a state or local government regulaUlry agency to Vlola~ state laVi or
local codes dealmg vnth health, safety, or bulldmg, and (2) after wTItten
notIce of VIOlatIOn by the regulatoJ"j agenc), speclfymg the apphcablhty
of thiS sectlOn, has not been brought to a COnCJtlOn of complIance wlthm
8lX months after the date of the notIce or the tIme prescnbed ID the
notice, Vi hlchever period lS later, or on whIch good faIth efforts for
comphance have not been commenced, as determmed by the regulatory
agency The regulatory agency may, for good. cause shown, extend the
comphance date prescnbed In a vlOlatlOn nouce
(c) When the penod speCified In subdiVISion (b) has expIred WIthout
compliance, the regulatory agency shall mall to the taxpayer a noUce of
noncomphance The notIce of noncomphance shall be In such form and
shaH mclude such mformatlOn as may be prescnted by the Franchlse
Tax Board, shall be maIled by certified mall to the taxpayer at his last
known address, and shall adnse the taxpayer (1) of an intent to noufy..
the Franchise Tax Board of 8uch noncompliance '.nthm 10 days unless an
appeal IS filed, (2) where an appeal may be filed, and (3) a general
descrlptlon of the tax consequences of such fIlmg With the franchIse Tax
Board Appeals shall be made to the same bod.} and ID the same manner
435
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Ii 17299 PERSO~AL DiCOME TAX
Dlv.2
as appeals from other actions of the regulatory agency If no appeal is
made vr'lthm 10 days or after disposItIOn of the appealu the regula.tory
agency is sustained, the regulatory agency shall nou!y the FranchlSe
Tax Board of such noncompliance No deduction shall be allowed for the
items pro\1ded m subdl\'ision (a) from the date of the notice of noncompll.
ance until the date the regulatory agency determmes that the substAnd-
ard housmg has been brought to a condition of comphance The regula-
tory agency shall mall to the Franchise Tax Board and the taxpaJ'er a
notice of comphance, which notice shall be In such fonn and mclude such
informatlon as may be prescnbed by the FranchISe Tax Board In the
event the penod of noncomphance does not covel' an entire taxable year,
the deductions shall be denied at the rate of one-twelfth for each full
month dunng the penod of noncompliance.
If the property is oVr-ned by more than one ov.'l1er or If recorded tltle is
in the name of a flctJuous owner, the notice reqUIrements pro\'1ded In
subdlVlSl0n (b) and tillS subdl\'lSIOn shaH he satisfied for each owner If
the notices are mailed to one Owner or to the flctltlOUS name owner at the
address appeanng on the latest avallable property tax bill However,
notices made pursuant to tillS subdl\"lslOn shall not reheve the regulatory
agency from furmshmg taxpayer Identlflcanon rnformatlOn requU'ed to
unplement thiS section to the Franchise Tax Board
(d) For the purposes of thiS sectIOn, a notice of noncorr.phance shaH
not be mailed by the reguld.t.ory agenc)' to the Franchise Tax Board If
(1) The rental housmg was rendered substandard solely by reason of
earthquake, flood or other natunl dlSaster except where such COndltlOn
remams for more than three years after the dlsast.er,
(2) The Owner of the rental housing has secured financing to bl"lTlg
such housmg mto comphance \\lth those laws or codes whIch have been
'Tlolated, causmg such housmg to be claSSifIed as substandard, and has
commenced repairs or other work necessary to bnng such housmg mto
comphance, or
(31 The o'wner of rental housmg whIch is not linthm the meamng of
housmg accommodation as defmed by subdmslOn (d) of Sectlon 35805 of
the Health and Safety Code has attempted to.
(A) SecurE" fmancmg to bnng such hom,Ir.~ mto comphance With those
laws or codeS which hs\€ been vwlatcd, causmg such housmg to be
clasSifIed as substandard, and
(B) Such fmancmg IS demed solely because such housmg is located In a
neighborhood or geographIcal area In whlch fmanclal mstltutJons do not
prOVide fma.ncmg for rehablhtatlOn of any such housmg
(e) The proViSIons of thl!:. secUon do not apply to deductIons from
mcome denved from property rendered. substandard solely by reason of
a change 1n apphca.ble state or local housmg standards unless such
\101atlOn8 cause substantial dan~er to the occupants of such property. as
determmed by the regulatol) agency WhlCh has served nonce of vlOlatlOn
pursuant to subdl\'lslOn (b)
436
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ITEMS NOT DEDUCTIBLE ~ 17299
Part 10
(f) The owner of rental housmg found to be in noncompbance shall,
upon total or partial dlvestJture of mterest in such property, immedu;.tely
notlf~' the regulatory agencj' of the name and address of the person or
persons to whom the propert)' has been sold or otherwISe transferred
and the date of the sale or transference
(g) By July 1st of each year, the regulatory agency shall report to the
appropnate 'eglslauve bocly of 1ts lunsdlcUon all of the foUowmg infor-
matIOn, for the precedmg calendar year, regardmg Its actlnues to secure
code enforcement. which shall be public mformatlOn.
(1) The number of vlntten notices of vlOlauon issued for substandard
dwelhngs under subdiVIsion (b)
(2) The number of vIolatlons comphed with withm the penod pre-
scnbed m subdmSlOn (b)
(3) The number of nouces of noncompliance issued pursuant to subdl-
VlSlOn (c)
(4) The number of appeals from those notices pursuant to subdlVlslon
(c)
(5) The number of successful appeals by ov.-tlers
(6) The number of Dotlces of noncompliance maMa to the FranchlSe
Ta>.. Board pursuant to subdiVIsion (c)
(7) The number of cases m which a Douce of noncompll.ance was not
sent pursuant to the prOYlSlOn of subdJ\"IS10n (d)
(8) The number of extenslOns for compliance granted pursuant to
subdlYISlOn (b) and the mean average length of such extenslOns
(9) The _mean average length of brne from t.~e issuance of a nouce of
VIolatIOn to the maIling of a notlce of noncomphance to the Franchise Tax
Board where such notice is actually sent to the FranchIse Tax Board
nO) The number of cases ",here comphance 18 achIeved after a nonce
of noncomplIance has been mailed to the FranchIse Tax Board
(11) The number of instances of dIsallowance of tax dedUCtlons by the
Franchise Tax Board resulting from referrals made by the regulatory
agenCj ThiS mfonnatlon may be flled 10 a supplemental report In
~...,-\..:t:dmg years as It becomes 8\'allable
(Added b) SLats 1974. c 238, P 443, ~ I, eff May 10. 1974 Amended b\-
SLats 1978, C 1286, P 4196, ~ I, eff Sept 25. 1978, SUits 19j9, C 292, P 1080,
~ 20, eff Jul) 24, 1979, Stats 1980, C 4.26, P 860, ~ 4 )
Hlltoneal Noll!
Seeuon 5 of Su.u 1974. C 238, p 443, 1, 1975. and Section 2 of thLS ~t shall apoh
amended b} Stau 197B. c. 1286, P 4201, to Income years ",bleh begm Oil or after ..
~ 5, prondes Januar; 1, 1975"
'Thl~ act prondes for a tax le\] ,,-.t.llln The 1978 amendment Inserted "6p>eelf),1l1
the meallmg' of Artlcle I\ of the ConsU[u. the apphcablhty of uns ~n' Jr Item (21
Uon and shall go Into Immedl..te effect of l!iubd (bl, transfen-ed '.or" from end of
However Se<:t.lOn 1 or thIS aC't ~hall api'l\ to par (11 to end of par ~21 of suM tdl
taxable je&TS begmnlllg 011 or afl.e. JanulUj Inserted par (21 of l!iubd (d), redel>,~ted
43i
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fi 17299
fomer par (2} to be par (3\ of ImbO (d\ .nd
inserted "whlch IS not "1thm the meamng
of housmg &Cromrnodatlon as defmed b}
aubdlVlSlOll (d\ of Secuon 3580f> of the
Healtil and Safet.. Code" III mtroductory
clause of subd (dK3). re~rote subpar (8)
of par (3} of sub<! (4) which pM!' to tius
amendment read "Such fmanclng IS not
avaIlable because such housl1lg U! lOCAted m
&n &rea in wluch lel\den; hlLve L ~hcy of
not makmg ioans for rehablln:.atlOn of &"1)'
It:nIctures 1C such area", and added 8ub4s
If) a.nd (gl
The 1979 &mendment inserted the second
paragraph m 81.lbd (c)
Pro~"1SlOns of Stats 1979. t 292, requl,"mg
the use of tu tables appl)" to the compllta-
bon of wes for taxa.ble years beglr.tJlng on
pr after Jail 1, 1979, see HlSwnc.ai l\ote
llnder Ii 17048
~tJons 3. .f; of Stats 19i8, c 1286. P
C2(I1. amended b.. Stat!; 1979, C 292. P
1090. ~ 4Q.vro,~de
"See 3 On September 1. 1979. and on
Sept.err.ber 1 of eac~ year thereafter, the
ControUer shali tnuu;fe" fmrr- tlle General
Fund to the Local Agen('} COOl.' Er[oree-
ment and P.ehabl\]taUon fund, whIch is
hereby cnated an 8-TIloun' equal Ul the net
amount coltect.ed dunng tIle preced'1g fls
cal Veal' due to the ao~ilcatlO'1 of Sectlor.s
17299 and 244365 of thi: Re\enue and Tax.
atlon Code as estimated b. the Depa"tment
or Fmance ar.d a.ppropnllted annual!: (rom
the General Fund ior pUTpQ;;es spt-elfled In
.
PERSO~AL mCO}fE TAX
DI't'.2
thIS seetwn On Oetober 1 of 1979, Uld
each October 1 of each YeM thereafter, the
Controller shall dl.stnbute the amounts In
the fund. 'll;hl(:h lli Ml'eh) conor.uou51) ap-
propnated for IlUcl1 purpose. to each CIt)-.,
count}, &lid city &lid rounty m proportion to
the amounts Ul the fund ha\-'Ulg a source
from each such entH} , as estlrr.ate<l bj' the
Department of Fmance Each entJQ recelV-
mg amoun~ pursuant to tlus ~UOn shall
uullZe 6uch amount!; for any or all the fol.
lowmg purposes
"(a) To defray eostS IIIcurred III the en-
fon:ement of k.ca.1 holJ.SU\!; code proVl610M.
"(h) To fund housmg rehabIlitatIOn pro-
grams for pel"Sons &nd fa.mll\e!. of low a.nd
moderate Income, as defmed 111 Section
50093 of the Health and Safety Code,
"(c) To prevent or mu:amu.e displacement
of tenants and homeowners as a result of
local code enforcement a.cU\'lQeS
"See 4 On or before Jut) 1, 1980. and
On or before Juh 1 of e:och ~ven.numbered
calendar year the--eafter, the Leg--.,latne
AI'.t~I!st shall prepare a.nd proVIde to tt,e
Leg1siature. III "'TItleD reJlQrt on the effett
of t.l:le appllcatJo'l of ~bons 17299 ard
24436 5 of the Re\enue and Taxation Code.
tofetl">i!T ....th eommeDLS and re<:om:r.er.cll.
tJons tl
The 19130 amendment substltuted "SUbdl
VISIon (bJ' for "Bub<:!n-:slOr. ia)" If, Bubds
(g~]) a'ld (21, and .6Ub5tJtuted a penod for
", and' at the end of liUW {gliH."i)
Cross Rtferenee&
Bank U1corporaoors taxes !lee ~ 244.36 5
Housmg IICCommodatJon, defmed. set' He:;,]th and Safety Code Iii 3550f>
Taxatlor $>1035
C.l 5 TlUa~on Iii 1099
LibraI') Rderence8
~ 17299.1. Abandonment or tax recoupment fees paid, nonde-
ductlblht)
In computmg taxable mcome no deduction shall he alJov.ed for (a}
abandonment fees paJd under SectIOn 5106) or 51093 of the GO\,'ernment
Code or (b~ tax recoupment fees paId under Section 51142 of the
Government Code ,
(Added by Stats 19i4. C 1003, P 2161. ~ 6 Amellded by Stats 19i5. c 22~. p
60€ ~ 15, StatE. 1976, C 176. P 324, ~ 122, eff May 24.19,6, Star,.;; 1977, C 853,
P 2575, ~ 19, eff SepL 17, 1977)
438