Is a nonprofit public benefit corporation that a California city housing authority created exempt from the documentary transfer tax when it acquires real property?
Plain-English summary
When real property changes hands in California, the county (and sometimes the city within it) can charge a documentary transfer tax under the Documentary Transfer Tax Act. The standard rate is $0.55 per $500 of consideration, with cities sometimes adding their own piece. Section 11922 carves out a government-entity exemption: any deed to which "the United States or any agency or instrumentality thereof, any state or territory, or political subdivision thereof, is a party shall be exempt . . . when the exempt agency is acquiring title."
Santa Barbara County Counsel Michael Ghizzoni asked the AG whether that exemption reaches a nonprofit public benefit corporation that a city housing authority created and operates as an instrumentality. Health & Safety Code section 34350(g) authorizes housing authorities to "make and execute contracts and other instruments necessary or convenient to the exercise of any of the powers granted," and California housing authorities commonly use this authority to set up nonprofit corporations to handle specific affordable-housing transactions.
The AG concluded the exemption applies. Two prior AG opinions had read section 11922 expansively. A 1971 opinion (54 Ops.Cal.Atty.Gen. 218) said the obvious purpose was to exempt all government-entity deeds. A 1973 opinion (56 Ops.Cal.Atty.Gen. 79) used the catch-all phrase "exempt agency is acquiring title" to extend the exemption to county water districts, even though they technically might not fit the dictionary definition of "political subdivision." The pattern is to apply section 11922 inclusively, treating any entity that is a government agency for the underlying transaction as exempt.
A housing authority itself is unambiguously a government entity: Health & Safety Code section 34201 calls it "a corporate and politic public body, exercising public and essential governmental functions." When the authority acts directly, it gets the exemption. The AG saw "no material difference" when the authority instead routes the property acquisition through a nonprofit instrumentality created under section 34350(g). The nonprofit is exercising the powers of the housing authority for housing-authority purposes; substance over form, it is the agency.
The opinion is consequential for affordable-housing development. Many California affordable-housing transactions go through nonprofit corporations affiliated with public housing authorities (LLCs and limited partnerships also feature, but those raise different exemption questions). This opinion confirms that the section 11922 exemption follows the public-purpose function rather than getting hung up on the corporate form.
Currency note
This opinion was issued in 2019. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Common questions
Q: What is the documentary transfer tax?
A: A tax most California counties impose on real-property transfers, codified in the Documentary Transfer Tax Act (Revenue & Taxation Code section 11901 et seq.). The standard rate is $0.55 per $500 of consideration. Cities can layer their own piece. The tax is typically paid at the time of recording.
Q: What is a "housing authority"?
A: A public body created under the California Housing Authorities Law to provide affordable housing within a city, county, or area. Section 34201 of the Health & Safety Code calls it "a corporate and politic public body" that performs "public and essential governmental functions." Housing authorities can own, develop, manage, and finance housing.
Q: Why do housing authorities create nonprofit corporations?
A: For practical reasons. A nonprofit can issue tax-exempt bonds, receive specific grants, hold property in particular legal forms preferred by lenders or investors, and partner with private developers under structures the housing authority itself could not use directly. Section 34350(g) is the statutory hook.
Q: Does this opinion apply to LLCs or limited partnerships affiliated with housing authorities?
A: The opinion addresses nonprofit public benefit corporations specifically. LLCs and LPs raise additional questions because they may have private investors with non-governmental interests. The reasoning (substance over form when the entity is the housing authority's instrumentality) is suggestive but does not directly resolve those cases.
Q: What happens at the recorder's window?
A: The grantee typically claims the exemption on the deed and on the cover sheet, citing section 11922. The county recorder verifies that the claim is supported (usually by a declaration or by the entity's status), and the deed records without the tax. Audits later may revisit borderline cases. This opinion provides authority a recorder can rely on for the housing-authority-nonprofit pattern.
Background and statutory framework
The Documentary Transfer Tax Act, Revenue & Taxation Code sections 11901-11935, lets counties and cities tax real property transfers. Section 11911(a) authorizes a county to tax up to $0.55 per $500 of consideration; section 11911(b) allows a city within such a county to add up to half that rate.
Section 11922 contains the government-entity exemption. The text covers the United States and federal agencies/instrumentalities, any state or territory or political subdivision thereof, and concludes with a catch-all phrase: "shall be exempt . . . when the exempt agency is acquiring title." That catch-all is what the AG has consistently read as evidence that the exemption is meant to apply broadly to any government-acquiring transaction.
California housing authorities are creatures of the Housing Authorities Law (Health & Safety Code section 34200 et seq.). Section 34201 establishes their status: "corporate and politic public body, exercising public and essential governmental functions." Section 34350 enumerates their powers, including (g) the power to "make and execute contracts and other instruments necessary or convenient to the exercise of any of the powers granted." Housing-authority-created nonprofits draw their authority to exist from section 34350(g) and from the Nonprofit Public Benefit Corporation Law (Corporations Code).
The reasoning the AG used to reach its conclusion was basically a Rock Creek Water Dist. v. County of Calaveras analysis. Rock Creek held that statutory terms like "municipal corporation" can be read strictly or broadly, and the choice depends on legislative purpose. For section 11922, the purpose is to keep government-to-government property transfers tax-free. A nonprofit instrumentality of a housing authority, doing housing-authority work with housing-authority resources, is performing a government function and should fall within the exemption.
Citations and references
Statutes:
- California Revenue & Taxation Code section 11922 (DTT government exemption)
- California Revenue & Taxation Code section 11911 (DTT rate authorization)
- California Health & Safety Code section 34201 (housing authority as public body)
- California Health & Safety Code section 34350(g) (housing authority contract power)
Cases and prior opinions:
- Rock Creek Water Dist. v. County of Calaveras, 29 Cal.2d 7 (1946) (broad vs. strict construction of "municipal corporation")
- 54 Ops.Cal.Atty.Gen. 218 (1971) (DTT exemption purpose)
- 56 Ops.Cal.Atty.Gen. 79 (1973) (county water district exempt under section 11922)
- 85 Ops.Cal.Atty.Gen. 235 (2002) (Legislative Analyst description of broad application)
Source
- Landing page: https://oag.ca.gov/opinions/yearly-index
- Original PDF: https://oag.ca.gov/system/files/opinions/pdfs/18-501.pdf
Original opinion text
TO BE PUBLISHED IN THE OFFICIAL REPORTS
OFFICE OF THE ATTORNEY GENERAL
State of California
XAVIER BECERRA
Attorney General
OPINION
of
XAVIER BECERRA
Attorney General
ANYA M. BINSACCA
Deputy Attorney General
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No. 18-501
September 9, 2019
THE HONORABLE MICHAEL C. GHIZZONI, COUNTY COUNSEL, COUNTY
OF SANTA BARBARA, has requested an opinion on the following question:
Is a nonprofit public benefit corporation that is an instrumentality of a city housing
authority exempt from the documentary transfer tax?
CONCLUSION
Yes. A nonprofit public benefit corporation that is an instrumentality of a city
housing authority is exempt from the documentary transfer tax.
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ANALYSIS
The documentary transfer tax is a tax that may be imposed upon the transfer of
ownership of real property. The Documentary Transfer Tax Act1 allows cities and counties
to impose such a tax by ordinance.2
Revenue and Taxation Code section 11922, contained in the Transfer Tax Act,
exempts transactions involving particular government entities from the tax: “Any deed,
instrument or writing to which the United States or any agency or instrumentality thereof,
any state or territory, or political subdivision thereof, is a party shall be exempt from any
tax imposed pursuant to this part when the exempt agency is acquiring title.”3
We are informed that it is common for housing authorities in California to create
nonprofit public benefit corporations, asserting Health and Safety Code section 34350,
subdivision (g) as authority to do so.4 We have been asked for our opinion as to whether a
1
Rev. & Tax. Code, §§ 11901-11935.
2
Rev. & Tax. Code, § 11911, subds. (a), (b). These sections provide:
(a) The board of supervisors of any county or city and county, by an
ordinance adopted pursuant to this part, may impose, on each deed, instrument,
or writing by which any lands, tenements, or other realty sold within the county
shall be granted, assigned, transferred, or otherwise conveyed to, or vested in,
the purchaser or purchasers, or any other person or persons, by his or their
direction, when the consideration or value of the interest or property conveyed
(exclusive of the value of any lien or encumbrance remaining thereon at the time
of sale) exceeds one hundred dollars ($100) a tax at the rate of fifty-five cents
($0.55) for each five hundred dollars ($500) or fractional part thereof.
(b) The legislative body of any city which is within a county which has
imposed a tax pursuant to subdivision (a) may, by an ordinance adopted pursuant
to this part, impose, on each deed, instrument, or writing by which any lands,
tenements, or other realty sold within the city shall be granted, assigned,
transferred, or otherwise conveyed to, or vested in, the purchaser or purchasers,
or any other person or persons, by his or their direction, when the consideration
or value of the interest or property conveyed (exclusive of the value of any lien
or encumbrance remaining thereon at the time of sale) exceeds one hundred
dollars ($100), a tax at the rate of one-half the amount specified in subdivision
(a) for each five hundred dollars ($500) or fractional part thereof.
3
Rev. & Tax. Code, § 11922.
4
Health & Saf. Code, § 34350, subd. (g) (a housing authority has the power to “make
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nonprofit public benefit corporation created by a city housing authority is a “political
subdivision” of the state within the meaning of section 11922 (and thus exempt from the
documentary transfer tax). We conclude that it is.
We have previously examined whether a county water district was a political
subdivision of the state entitled to the exemption in section 11922.5 We observed that
various authorities “could be mechanically cited in favor or against the inclusion of county
water districts within the term ‘political subdivision,’” and so we opted instead to look to
evidence of section 11922’s purpose.6 To that end, we noted that the statute uses the term
“exempt agency” as a broad catch-all in its final phrase: “when the exempt agency is
acquiring title.” This sweeping usage indicated to us that the exemption was intended to
be applied inclusively: “[I]f the entity involved can be classified as a government agency,
it is exempt from the tax.”7 After also examining the legislative history, we concluded that
the use of “political subdivision” in section 11922 was meant to apply broadly rather than
restrictively, and that county water districts did qualify for the exemption.8
We reach the same conclusion here as to nonprofit public benefit corporations
created by housing authorities. A housing authority created under state law “constitutes a
corporate and politic public body, exercising public and essential governmental functions
and execute contracts and other instruments necessary or convenient to the exercise of any
of the powers granted . . .”).
5
56 Cal.Ops.Atty.Gen. 79 (1973).
56 Cal.Ops.Atty.Gen., supra, at p. 81, citing Rock Creek Water Dist. v. County of
Calaveras (1946) 29 Cal.2d 7, 9-10 (examining whether certain water districts were
“municipal corporations”; acknowledging that “municipal corporation” could be given a
“strict technical” meaning or a broader one; and employing tenet that “the objective sought
to be achieved by a statute as well as the evil to be prevented is of prime consideration in
its interpretation”).
6
7
56 Cal.Ops.Atty.Gen., supra, at p. 83.
56 Cal.Ops.Atty.Gen., supra, at pp. 82-84; see also 85 Ops.Cal.Atty.Gen. 235, 238
(2002) (Legislative Analyst described exemption as applying broadly); accord, 54
Ops.Cal.Atty.Gen. 218, 219 (1971) (“The obvious purpose of section 11922 is to require
the counties to exempt from their tax all deeds in which title to real property is transferred
to the ‘state’ or other governmental entities”).
8
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. . . .”9 Therefore a housing authority is a government agency, and thus exempt from the
documentary transfer tax under section 11922.10
We see no material difference arising from the circumstance that the taxable event—
filing a deed or other instrument of property transfer—is undertaken by the nonprofit public
benefit corporation created by the public agency, rather than by the housing agency itself.
When it exercises the powers of a public housing agency, a nonprofit created by the housing
agency is a “political subdivision” entitled to an exemption from the documentary transfer
tax.
Therefore we conclude that a nonprofit public benefit corporation that is an
instrumentality of a city housing authority is exempt from the documentary transfer tax.
9
Health & Saf. Code, § 34310.
10
See 56 Ops.Cal.Atty.Gen., supra, at p. 83.
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