Part 10 — NOTIFICATION OF FRANCHISE TAX BOARD OF SUBSTANDARD CONDITIONS OF RENTAL

The City of San José intends to utilize the provisions of California Revenue and Taxation Code Section 24436.5 in order to encourage the elimination of substandard conditions in rental housing. Said section provides for the disallowance for state income tax purposes of interest, depreciation, taxes or amortization

deductions which are derived from ownership of rental housing which is not in compliance with the health, safety or building standard set by city ordinance or state law. These provisions may be initiated by any enforcement officer of the city in accordance with the procedures set forth in this part.

(Ord. 21974.)

Enforcement officer, as used in this part, shall mean any city employee with the duty to enforce city codes or state laws dealing with health, safety, fire or building standards.

(Ord. 21974.)

A.

Whenever an enforcement officer determines that a property which is used for rental housing is in a condition of noncompliance with any city code or state law relating to health, safety or building standards, said officer may initiate the franchise tax board notification procedure by forwarding a report of noncompliance to the city manager. Said report shall specify all violations and include information about the number of tenants or rental units involved.

B.

Upon determining to utilize the provisions of this chapter, the city manager may request a coordinated inspection of the property by all departments with code enforcement responsibility. Each such department shall report any conditions of noncompliance to the city manager.

(Ord. 21974.)

A.

The city manager may cause a tax warning notice to be issued to the owner of any rental housing property which has been found by any enforcement officer to have conditions of noncompliance.

B.

The tax warning notice shall state the city manager's intention to report the conditions of noncompliance to the franchise tax board pursuant to the provisions of California Revenue and Taxation Code Section 24436.5 if full compliance with city codes and state laws is not achieved within six months of the date of the tax warning notice.

C.

The city manager may, on the basis of a violator's good faith efforts to correct a condition of noncompliance or for other good cause shown, extend the date of notification of noncompliance to the franchise tax board. Any such extension must be in writing and specify an alternate notification date.

(Ord. 21974.)

In the event the period specified in Section 17.20.1080 expires without full compliance, the city manager may cause a notice of noncompliance to be sent by certified mail to the violator stating the city's intention to notify the franchise tax board of the condition of noncompliance unless the property is brought to a condition of full compliance within ten days of the date of the notice of noncompliance or an appeal is filed with the city manager pursuant to Section 17.20.1120.

(Ord. 21974.)

The director of neighborhood preservation may notify the franchise tax board of a rental property owner's noncompliance ten days after the date of the notice of noncompliance to the owner, unless the rental property has been placed in a condition of full compliance and such condition of compliance has been verified pursuant to Section 17.20.1110 or unless an appeal has been filed pursuant to Section 17.20.1120.

If an appeal has been filed and denied by the San José appeals hearing board, the director of neighborhood preservation may notify the franchise tax board of the appellant's noncompliance upon notification by the secretary of the San José appeals hearing board of the board's action on appeal.

(Ords. 21974, 23287.)

Upon correction of all conditions of noncompliance, the property owner shall request that the city manager arrange verification inspections by appropriate code enforcement officers who will report their finding to the city manager.

If the property is found to be in full compliance by all inspecting departments, and the city manager has previously notified the franchise tax board of noncompliance pursuant to Section 17.20.1100, the city manager shall cause a notice of compliance to be sent to the property owner and the franchise tax board.

(Ord. 21974.)

The issuance of a notice of noncompliance or the failure to issue a notice of compliance under this part may be appealed by the owner of the property to the San José appeals hearing board by filing written notice of appeal with the director of neighborhood preservation within ten days of the action for which the appeal is taken. When a notice of appeal has been received by the director of neighborhood preservation for filing:

A.

The director of neighborhood preservation shall, within ten days after receipt of the notice of appeal, file the notice of appeal with the secretary of the board.

B.

The secretary of the board shall set the date for hearing and determination by the board which date shall not be less than ten days nor more than sixty days after the date on which the copy of the notice of appeal was filed by the director of neighborhood preservation with the secretary of the board.

(Ords. 21974, 23287.)

The appeal shall be granted if the board finds:

A.

The rental building does not violate city codes or state laws dealing with health safety or building standards; or

B.

The director of neighborhood preservation is not authorized to send the notice of noncompliance to the franchise tax board under the terms of this part.

(Ords. 21974, 23287.)

A.

Within a reasonable time after the board has concluded its hearing, it shall, by resolution set forth its findings and decision. The decision of the board shall be final, except as set forth in Subsection B below. The secretary of the board shall notify the director of neighborhood preservation of the decision and shall mail a copy of the decision to the appellant at the address shown for such purpose on the notice of appeal.

B.

For all relocation appeals to the board arising under California Health and Safety Code Section 33417.5 and Government Code Section 7266, the board shall transmit its findings and recommendations to the redevelopment agency board. The redevelopment agency board shall make a final decision on the findings and recommendations of the appeals hearing board.

(Ords. 21974, 23287.)

Notice

requirements stated in this part shall be satisfied by mailing to the address of the property owner or owners as they appear on the latest available tax roll of the county assessor. If the property is owned by more than one owner, the notice requirements will be satisfied by mailing to one of the listed owners.

(Ord. 21974.)

A notice of noncompliance will not be mailed pursuant to Section 17.20.1090 if, upon evidence provided by the property owner, the city manager makes one of the following findings:

A.

The rental housing was rendered substandard solely by reason of earthquake, flood or other natural disaster and such condition has not existed for more than three years since the disaster; or

B.

The owner of the housing has secured financing and commenced necessary repairs to bring such housing into compliance; or

C.

The owner of rental housing has attempted to secure financing to bring such housing into compliance with state laws and city codes, and

Such financing has been denied solely because such housing is located in a neighborhood in which financial institutions do not provide financing for housing rehabilitation; and

The rental housing is neither an owner-occupied residence of less than five dwelling units nor is a nonowner-occupied residence of less than five dwelling units where the owner thereof has applied for a secured home improvement loan to improve this property from a financial institution.

D.

The rental housing is rendered substandard solely by the reason of a change in applicable state or local housing standards and such violations do not cause substantial danger to the occupants of such property, as determined by the city manager.

(Ord. 21974.)

The owner of rental housing found to be in noncompliance shall, upon total or partial divestiture of interest in such property, immediately notify the city manager of the name and address of the person or persons to whom the property has been sold or otherwise transferred and the date of the sale or transference.

(Ord. 21974.)

On or before July 1 of each year, the city manager will report to the city council the following information, for the preceding calendar year, regarding the activities to secure code enforcement, which will be public

information:

A.

The number of written tax warning notices issued for substandard dwellings under this part.

B.

The number of violations for which compliance was obtained within the period prescribed in Section 17.20.1080.

C.

The number of notices of noncompliance issued pursuant to this part.

D.

The number of appeals from those notices pursuant to this part.

E.

The number of successful appeals of owners.

F.

The number of notices of noncompliance mailed to the franchise tax board pursuant to this part.

G.

The number of cases in which a notice of noncompliance was not sent pursuant to the provision of Section 17.20.1160.

H.

The number of extensions for compliance granted and the mean average length of such extensions.

I.

The mean average length of time from the issuance of a tax warning notice to the mailing of a notice of noncompliance to the franchise tax board where such notice is actually sent to the franchise tax board.

J.

The number of cases where compliance is achieved after a notice of noncompliance has been mailed to the franchise tax board.

K.

The number of instances of disallowance of tax deductions by the franchise tax board resulting from referrals made by the city. This information may be filed in a supplemental report in succeeding years as it becomes available.

(Ord. 21974.)

No action taken under the provisions of this part shall preclude, delay or excuse code compliance requirements of the city. This part shall supplement and be in addition to all other remedies provided by other regulatory laws, codes or ordinances.

(Ord. 21974.)