Santa Cruz Municipal Code Part 3 Real Property Transfer Tax

This part is adopted pursuant to the authority contained in Part 6.7 (commencing with Section 11901) of Division 2 of the Revenue and Taxation Code of the State of California, and pursuant to the authority of Article IV of the Charter of the city of Santa Cruz and other authority held as a chartered city. The tax imposed hereunder is for the purpose of raising revenue to support implementation of the city of Santa Cruz Workforce Housing Affordability Act of 2025, as set forth in Part 1, and is in addition to the tax imposed by Chapter 3.32, Real Property Transfer Tax.

(Ord. 2025-29 § 4, 2025).

(a) Commencing July 1, 2026, there is hereby imposed a tax on each deed, instrument, or writing, or any other document or change in control and ownership of legal entities, by which any lands, interests in lands, tenements, or other interests in real property located in the city of Santa Cruz is or are granted, assigned, transferred, or otherwise conveyed to or vested in the purchaser or purchasers, or any other person or persons, by his or her or their direction. The amount of the tax shall be based on the value of consideration or property conveyed (including the value of any lien or encumbrance remaining thereon at the time of sale), and shall be calculated at the following rates:

(1) Nothing herein shall be construed as creating any new tax on the value of consideration for property paid that is less than one million eight hundred thousand dollars.

(2) The rate of the tax shall be one-half of one percent (five dollars for each one thousand dollars or fractional part thereof) for the value of consideration for property paid in excess of one million eight hundred thousand dollars but less than two million five hundred thousand dollars.

(3) The rate of the tax shall be one percent (ten dollars for each one thousand dollars or fractional part thereof) for the value of the consideration for property conveyed in excess of two million five hundred thousand dollars but less than three million five hundred thousand dollars.

(4) The rate of the tax shall be one and one-half percent (fifteen dollars for each one thousand dollars or fractional part thereof) for the value of the consideration for property conveyed in excess of three million five hundred dollars but less than four million five hundred thousand dollars.

(5) The rate of the tax shall be two percent (twenty dollars for each one thousand dollars or fractional part thereof) for the value of the consideration for property conveyed in excess of four million five hundred thousand dollars; provided, however, that the maximum amount of tax paid on any taxable transaction shall not exceed two hundred thousand dollars.

(b) Except as otherwise set forth herein, this tax shall apply regardless of the method by which the transfer is accomplished or the relationship of the parties to the transfer.

(c) Commencing July 1, 2027, and annually thereafter during the life of the Act, the tax thresholds for consideration of the value of property conveyed as established by subsections (a)(1) through (a)(5) shall be adjusted annually by the change in percentage of the cost of living for the prior year, measured from the most recent prior quarterly report for California Consumer Price Index for All Urban Consumers (CPI-U) for All Items as published by the California Department of Industrial Relations (“CPI-U”), and the cap established by subsection (a)(5) shall be adjusted by the change in CPI-U, or three percent, whichever is less.

(Ord. 2025-29 § 4, 2025).

As used in this part:

“Change in control and ownership of legal entities” means any direct or indirect acquisition or transfer of ownership interest or control in a legal entity that constitutes a change in ownership or transfer of the real property of the entity under California Revenue and Taxation Code Section 64.

“Person” and “persons” mean any natural person, receiver, administrator, executor, assignee, trustee in bankruptcy, trust, estate, firm, co-partnership, joint venture, club, company, joint stock company, business trust, limited liability company, municipal corporation, political subdivision of the state of California, domestic or foreign corporation, association, syndicate, society, or any group of individuals acting as a unit, whether mutual, cooperative, fraternal, nonprofit, or otherwise, and the United States or any instrumentality thereof, and any natural person, who as an individual or with a spouse owns fifty-one percent or more of the capital stock of a corporation obligated to file a declaration and pay tax pursuant to this part; and in addition, is a person with the power to control the fiscal decision-making process by which the corporation allocates funds to creditors in preference to its tax obligations under the provisions of this part. A person as defined herein, who is also an officer or director of a corporation obligated to file declarations and pay tax pursuant to this part, shall be presumed to be a person with the power to control the fiscal decision-making process. Whenever the term “person” is used in any clause prescribing and imposing a penalty, the term as applied to association shall mean the owners or part owners thereof, and as applied to corporations, the officers thereof.

“Real property” and “realty” mean real property as defined by and under the laws of the state of California.

(Ord. 2025-29 § 4, 2025).

Any persons who make a transfer which is subject to the tax imposed under Section 3.34.160, and any persons to whom such a transfer is made, shall be jointly and severally liable for payment of the tax imposed under Section 3.34.160.

(Ord. 2025-29 § 4, 2025).

Pursuant to California Revenue and Taxation Code Section 11921, any tax imposed pursuant to this part shall not apply to any instrument in writing given to secure a debt. Nothing in this part shall be deemed to exclude the amount of any such indebtedness from being included in the value of consideration in connection with any conveyance which is not made solely to secure an obligation or a debt.

(Ord. 2025-29 § 4, 2025).

Pursuant to California Revenue and Taxation Code Section 11922, 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.

(Ord. 2025-29 § 4, 2025).

Pursuant to California Revenue and Taxation Code Section 11923, any tax imposed pursuant to this part shall not apply to the making, delivering, or filing of conveyances to make effective any plan of reorganization or adjustment that is any of the following:

(a) Confirmed under the Federal Bankruptcy Code, as amended.

(b) Approved in an equity receivership proceeding in a court involving a railroad corporation, as defined in 11 U.S.C. Section 101, as amended.

(c) Approved in an equity receivership proceeding in a court involving a corporation, as defined in 11 U.S.C. Section 101, as amended.

(d) Whereby a mere change in identity, form, or place of organization is effected.

Subsections (a) through (d), inclusive, of this section shall only apply if the making, delivery, or filing of instruments of transfer or conveyance occurs within five years from the date of such confirmation, approval, or change.

(Ord. 2025-29 § 4, 2025).

Pursuant to California Revenue and Taxation Code Section 11924 any tax imposed pursuant to this part shall not apply to the making or delivery of conveyances to make effective any order of the Securities and Exchange Commission, as defined in Section 1083(a) of the Internal Revenue Code of 1954; but only if:

(a) The order of the Securities and Exchange Commission in obedience to which such conveyance is made is necessary or appropriate to effectuate the provisions of 15 U.S.C. Section 79k, relating to the Public Utility Holding Company Act of 1935;

(b) Such order specifies the property which is ordered to be conveyed; and

(c) Such conveyance is made in obedience to such order.

(Ord. 2025-29 § 4, 2025).

(a) Pursuant to California Revenue and Taxation Code Section 11925, in the case of any realty held by a partnership or other entity treated as a partnership for federal income tax purposes, no levy shall be imposed pursuant to this part by reason of any transfer of an interest in the partnership or other entity or otherwise, if both of the following occur:

(1) The partnership or other entity treated as a partnership is considered a continuing partnership within the meaning of Section 708 of the Internal Revenue Code of 1986.

(2) The continuing partnership or other entity treated as a partnership continues to hold the realty concerned.

(b) If there is a termination of any partnership or other entity treated as a partnership for federal income tax purposes, within the meaning of Section 708 of the Internal Revenue Code of 1986, for purposes of this part, the partnership or other entity shall be treated as having executed an instrument whereby there was conveyed, for fair market value (including the value of any lien or encumbrance remaining thereon), all realty held by the partnership or other entity at the time of the termination.

(c) Not more than one tax shall be imposed pursuant to this part by reason of a termination described in subsection (b), and any transfer pursuant thereto, with respect to the realty held by a partnership or other entity treated as a partnership at the time of the termination.

(d) No levy shall be imposed pursuant to this part by reason of any transfer between an individual or individuals and a legal entity or between legal entities that results solely in a change in the method of holding title to the realty and in which proportional ownership interests in the realty, whether represented by stock, membership interest, partnership interest, co-tenancy interest, or otherwise, directly or indirectly, remain the same immediately after the transfer.

(Ord. 2025-29 § 4, 2025).

Pursuant to California Revenue and Taxation Code Section 11926, any tax imposed pursuant to this part shall not apply with respect to any deed, instrument, or writing to a beneficiary or mortgagee, which is taken from the mortgagor or trustor as a result of or in lieu of foreclosure; provided, that such tax shall apply to the extent that the consideration exceeds the unpaid debt, including accrued interest and cost of foreclosure. Consideration, unpaid debt amount, and identification of grantee as beneficiary or mortgagee shall be noted on said deed, instrument, or writing or stated in an affidavit or declaration under penalty of perjury for tax purposes.

(Ord. 2025-29 § 4, 2025).

Any tax imposed pursuant to this part shall not apply to transfers of real property where said real property is encumbered by a recorded and enforceable covenant executed in favor of the city restricting the ownership and occupancy of said real property, for a period of no less than thirty years following the date of transfer, to “persons and families of low or moderate income” as defined in California Health and Safety Code Section 50093.

(Ord. 2025-29 § 4, 2025).

(a) Pursuant to California Revenue and Taxation Code Section 11927, any tax imposed pursuant to this part shall not apply with respect to any deed, instrument, or other writing which purports to transfer, divide, or allocate community, quasi-community, or quasi-marital property assets between spouses for the purpose of effecting a division of community, quasi-community, or quasi-marital property which is required by a judgment decreeing a dissolution of the marriage or legal separation, by a judgment of nullity, or by any other judgment or order rendered pursuant to the Family Code, or by a written agreement between the spouses, executed in contemplation of any such judgment or order, whether or not the written agreement is incorporated as part of any of those judgments or orders.

(b) In order to qualify for the exemption provided in subsection (a), the deed, instrument, or other writing shall include a written recital, signed by either spouse, stating that the deed, instrument, or other writing is entitled to the exemption.

(Ord. 2025-29 § 4, 2025).

Pursuant to California Revenue and Taxation Code Section 11928, any tax imposed pursuant to this part shall not apply with respect to any deed, instrument, or other writing by which realty is conveyed by the state of California, any political subdivision thereof, or agency or instrumentality of either thereof, pursuant to an agreement whereby the purchaser agrees to immediately reconvey the realty to the exempt agency.

(Ord. 2025-29 § 4, 2025).

Pursuant to California Revenue and Taxation Code Section 11929, any tax imposed pursuant to this part shall not apply with respect to any deed, instrument, or other writing by which the state of California, any political subdivision thereof, or agency or instrumentality of either thereof, conveys to a nonprofit corporation realty the acquisition, construction, or improvement of which was financed or refinanced by obligations issued by the nonprofit corporation on behalf of a governmental unit, within the meaning of 26 CFR Section 1.103-1(b).

(Ord. 2025-29 § 4, 2025).

Pursuant to California Revenue and Taxation Code Section 11930, any tax imposed pursuant to this part shall not apply to any deed, instrument, or other writing which purports to grant, assign, transfer, convey, divide, allocate, or vest lands, tenements, or realty, or any interest therein, if by reason of such inter vivos gift or by reason of the death of any person, such lands, tenements, realty, or interests therein are transferred outright to, or in trust for the benefit of, any person or entity.

(Ord. 2025-29 § 4, 2025).

The director of finance (hereinafter referred to in this part as “tax administrator”) shall collect the tax imposed under this part and shall otherwise administer this part. The tax administrator may make such rules and regulations, not inconsistent with this part, as he or she may deem reasonably necessary or desirable to administer this part, as well as necessary forms and receipts.

(Ord. 2025-29 § 4, 2025).

The tax imposed under this part is due and payable at the time the deed, instrument, or writing effecting a transfer subject to the tax is delivered, and is delinquent if unpaid ninety days later. In cases where a transfer is effected but not recorded with the county recorder within ninety days of the date on which the deed, instrument, or writing was delivered, all statutes of limitations regarding liability for the tax imposed by this part shall be tolled until the city has actual knowledge of the transfer, at which time the tax on the unrecorded transfer shall relate back to the date on which the deed, instrument, or writing was delivered. Penalties and interest shall be deemed to have begun accruing on the date the deed, instrument, or writing was delivered, and shall be the joint and several liability of the persons referred to in Section 3.34.090. If the tax is not paid prior to becoming delinquent, a delinquency penalty of ten percent of the amount of the tax due shall accrue. In the event only a portion of the tax is unpaid prior to becoming delinquent, the penalty shall only accrue as to the unpaid portion. An additional penalty of fifteen percent of the amount of tax due shall accrue if the tax remains unpaid on the ninetieth day following the date of the original delinquency. Interest shall accrue at the rate of one percent per month or fraction thereof, on the amount of the tax, inclusive of penalties, from the date the tax becomes delinquent to the date of payment. Interest and penalties shall become part of the tax. An administrative charge and a release of lien filing fee equal to the amount charged by the Santa Cruz County recorder’s office shall be added to the amount owed for each property approved for a tax lien by the city council.

(Ord. 2025-29 § 4, 2025).

The tax imposed by this part shall be paid to the tax administrator by the persons referred to in Section 3.34.090. The tax administrator shall have the authority as part of any rules and regulations promulgated by them as authorized herein to require that the payment shall be accompanied by a declaration of the amount of tax due signed by the person paying the tax or by their duly authorized agent. The declaration shall include a statement that the value of the consideration on which the tax due was computed includes all indebtedness secured by liens, deeds of trust, or other encumbrances remaining or placed on the property transferred at the time of transfer, and also includes all special assessments on the property which a purchaser or transferee agrees to pay or which remains a lien on the property at the time of transfer. The declaration shall identify the deed, instrument, or writing effecting the transfer for which the tax is being paid. The tax administrator may require delivery to them of a copy of such deed, instrument, or writing whenever he or she deems such to be reasonably necessary to adequately identify such writing or to administer the provisions of this part. The tax administrator may rely on the declaration as to the amount of the tax due; provided, that he or she has no reason to believe that the full amount of the tax due is not shown on the declaration.

Whenever the tax administrator has reason to believe that the full amount of tax due is not shown on the declaration or has not been paid, they may, by notice served upon any person liable for the tax, require them to furnish a true copy of their records relevant to the value of the consideration or fair market value of the property transferred. Such notice may be served at any time within three years after recordation of the deed, instrument, or writing which transfers such property.

(Ord. 2025-29 § 4, 2025).

If on the basis of such information as the tax administrator receives pursuant to Section 3.34.190, or on the basis of such other relevant information that comes into the tax administrator’s possession, it is determined that the amount of tax due as set forth in the declaration, or as paid, is insufficient, the tax administrator may recompute the tax due on the basis of such information.

If the declaration referenced in Section 3.34.190 is not submitted, the tax administrator may make an estimate of the value of the consideration for the property conveyed and determine the amount of tax to be paid on the basis of any information in the tax administrator’s possession or that may come into their possession.

One or more deficiency determinations may be made of the amount due with respect to any transfer.

(Ord. 2025-29 § 4, 2025).

The tax administrator shall give written notice to a person liable for payment of the tax imposed under this part of the determination made under Section 3.34.200. Such notice shall be given within three years after the recordation of the deed, instrument, or writing effecting the transfer on which the tax deficiency determination was made.

(Ord. 2025-29 § 4, 2025).

Any notice required to be given by the tax administrator under this part may be served personally or by mail. If service is made by mail, it shall be made by depositing the notice in the United States mail, in a sealed envelope with postage paid, addressed to the person on whom it is to be served at the address as it appears in the records of the city or as ascertained by the tax administrator. The service is complete at the time of the deposit of the notice in the United States mail, without extension of time for any reason.

(Ord. 2025-29 § 4, 2025).

Any person against whom a determination is made under this part or any person directly interested may petition the tax administrator for a redetermination within sixty days after service upon the person of notice thereof. If a petition for redetermination is not filed in writing with the tax administrator, city of Santa Cruz, 809 Center Street, Santa Cruz, California 95060, within the sixty-day period, the determination becomes final at the expiration of the period.

(Ord. 2025-29 § 4, 2025).

If a petition for redetermination is filed within the sixty-day period, the tax administrator shall reconsider the determination and, if the person has so requested in their petition, shall grant the person an oral hearing, and shall give them ten days’ notice of the time and place of the hearing. The tax administrator may designate one or more deputies for the purpose of conducting hearings and may continue a hearing from time to time as may be necessary.

(Ord. 2025-29 § 4, 2025).

The tax administrator may decrease or increase the amount of the determination before it becomes final, but the amount may be increased only if a claim for the increase is asserted by the tax administrator at or before the hearing.

(Ord. 2025-29 § 4, 2025).

The order or decision of the tax administrator upon a petition for redetermination becomes final thirty days after service of notice thereof upon the petitioner or at the time of hearing of redetermination. There is no appeal of the tax administrator’s decision on a petition for redetermination to the city manager or city council. Writs challenging the tax administrator’s decision must be filed with the appropriate court within ninety days of the final date of such redetermination. (California Code of Civil Procedure Section 1094.6.)

(Ord. 2025-29 § 4, 2025).

The amount of any tax, penalty, and interest imposed under the provisions of this part shall be deemed a debt owed to the city. Any person owing money to the city under the provisions of this part shall be liable in an action brought in the name of the city for the recovery of such amount. In such action a reasonable attorney’s fee shall be awarded the prevailing plaintiff. The provisions of this section shall not be deemed a limitation upon the right of the city to bring any other action, whether criminal, legal, or equitable, based upon the failure to pay the tax, penalty, or interest imposed by this part or the failure to comply with any of the provisions hereof.

(Ord. 2025-29 § 4, 2025).

Whenever the amount of any tax, penalty, or interest has been overpaid, or paid more than once, or has been erroneously collected or received by the city under this part, it may be refunded as provided in this section; provided, that a written claim stating under penalty of perjury the specific grounds on which the refund is claimed is filed with the tax administrator within one year of the date of payment. The claim shall be submitted on forms furnished by the tax administrator. The tax administrator may make such refund if satisfied that the claimant is entitled to the refund under the provisions of this part. No refund shall be paid under the provisions of this section unless the claimant establishes their right thereto by written records showing entitlement thereto.

(Ord. 2025-29 § 4, 2025).

The amount of tax, penalty, and interest imposed under the provisions of this part is assessed against the property upon the transfer of which the tax is imposed and, if not paid when due, such tax shall constitute an assessment against such property and shall be a lien on the property for the amount thereof, which lien shall continue until the amount thereof including all penalties and interest is paid, or until it is discharged of record. Any person owing money to the city under the provisions of this part shall be liable to an action brought in the name of the city for the recovery of such amount.

(Ord. 2025-29 § 4, 2025).

The tax administrator shall file with the city manager a written notice of those persons on whom the city will file liens. Upon the receipt of such notice, the city manager shall present the same to the city council, and the city council shall forthwith, by resolution, fix a time and place for a public hearing on such notice.

The tax administrator shall cause a copy of such resolution and notice to be served upon the persons referred to in this section not less than ten days prior to the time fixed for such hearing. Such service shall be made by mailing a copy of the resolution and notice to the transferor and transferee of property at their last known address. Service shall be deemed complete at the time of deposit in the United States mail.

(Ord. 2025-29 § 4, 2025).

If the city council authorizes the imposition of a lien following the hearing described in Section 3.34.330, any delinquent tax charges which remain unpaid by the transferor or transferee shall constitute a special assessment against said property, and shall be collected at such time as is established by the county assessor for inclusion in the next property tax assessment.

The tax administrator shall turn over to the county assessor for inclusion in the next property tax assessment the total sum of unpaid delinquent charges consisting of the delinquent transfer taxes, penalties, and interest at the rate of twelve percent per annum from the date of recordation to the date of lien.

Thereafter, said assessment may be collected at the same time and in the same manner as ordinary municipal taxes are collected, and shall be subject to the same penalties and the same procedure of sale as provided for delinquent, ordinary, municipal taxes. The assessment lien previously imposed upon the property is paramount to all other liens except for those of state, county, and municipal taxes with which it shall be upon parity. The lien shall continue until the assessment and all interest and charges due and payable thereon are paid. All taxes applicable to the levy, collection, and enforcement of municipal taxes shall be applicable to said special assessments.

(Ord. 2025-29 § 4, 2025).