Newsom signs law keeping detention facilities out of California's charity property tax exemption
Senate Bill 420, signed Sept. 29, says property operated as a jail or detention center does not serve the charitable purposes the welfare exemption requires. It takes effect Jan. 1, 2027.
Sacramento. Property operated as a jail or detention center will not count as charitable under California's welfare exemption from property tax, under a bill Gov. Gavin Newsom signed on Sept. 29. Like other bills from the regular session, it takes effect Jan. 1, 2027.
Senate Bill 420, by Sen. Steve Padilla, a Democrat from San Diego, had been on the governor's desk since Sept. 4. It was one of 21 bills on immigration enforcement and detention that he signed the same day.
What the law says
The welfare exemption frees from property tax the property of nonprofit organizations used exclusively for religious, hospital, scientific or charitable purposes. The new Section 214.12 of the Revenue and Taxation Code says those purposes do not include property, or any portion of it, operated as a detention facility.
The term comes from Section 9500 of the Penal Code: any facility where people are incarcerated or involuntarily confined to serve a court's sentence or while awaiting a trial, hearing or other judicial or administrative proceeding. The text is not limited to privately run facilities, although Mr. Padilla's office described the bill as aimed at detention centers run for profit. The law declares itself a statement of existing law, not a change, and it does not touch the exemption for any other use of nonprofit property.
The case behind it
Mr. Padilla's office said the Brawley Community Foundation, a nonprofit that owns an immigration detention center in Imperial County, avoided at least $6 million in property taxes through the exemption, citing a KPBS investigation. The State Board of Equalization estimated the bill would bring about $721,000 a year in added property tax, Bloomberg Law reported. Neither the governor's office nor the senator's office said how assessors will treat that property once the law takes effect.
The California Association of Nonprofits was among the bill's supporters.
“Though operating as legal businesses, for-profit detention centers are in no way public charities.”
Another bill in the package, Assembly Bill 1633, by Assemblymember Matt Haney, a Democrat from San Francisco, taxes private detention operators 25 percent of their California gross income from July 1, 2028; it is aimed at the operators, not at nonprofits.
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