Initiative Ordinance - Business and Tax Regulations Code - Real Property Transfer Tax Foreclosure Exemption

FILE NO. 260692 (AMENDED IN COMMITTEE 7/15/2026), MOTION NO. M26-070

Motion ordering submitted to the voters at an election to be held on November 3, 2026, an Ordinance amending the Business and Tax Regulations Code to, beginning March 1, 2027, eliminate the real property transfer tax foreclosure exemption for the transfer of all properties other than the transfer of residential and mixed-use properties with fewer than five residential units, and to make other non-substantive clarifications to the real property transfer tax; and increasing the City's appropriations limit by the amount of real property transfer tax collected for four years from November 3, 2026.

MOVED, That the Board of Supervisors hereby submits the following ordinance to the voters of the City and County of San Francisco, at an election to be held on November 3, 2026.

Ordinance amending the Business and Tax Regulations Code to, beginning March 1, 2027, eliminate the real property transfer tax foreclosure exemption for the transfer of all properties other than the transfer of residential and mixed-use properties with fewer than five residential units, and to make other non-substantive clarifications to the real property transfer tax; and increasing the City's appropriations limit by the amount of real property transfer tax collected for four years from November 3, 2026.

NOTE: Unchanged Code text and uncodified text are in plain font. Additions to Codes are in single-underline italics Times New Roman font. Deletions to Codes are in strikethrough italics Times New Roman font. Asterisks (* * * *) indicate the omission of unchanged Code subsections or parts of tables.

Be it ordained by the People of the City and County of San Francisco:

Section 1.

Article 12-C of the Business and Tax Regulations Code is hereby amended by revising Sections 1101, 1108.2, and 1111, to read as follows:

SEC. 1101. SHORT TITLE.

This Article 12-C shall be known as the "Real Property Transfer Tax Ordinance." It 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.

SEC. 1108.2. EXEMPTION; DEEDS IN LIEU OF FORECLOSURE, ETC.

(a) Any tax imposed pursuant to this Ordinance Article 12-C shall not apply with respect to any deed, instrument, or writing to a beneficiary or mortgagee, which is taken from the mortgagor, trustor, or trustee, as a result of or in lieu of foreclosure of a qualified residential property as defined in subsection (b), or of interests in a legal entity directly or indirectly owning a qualified residential property, to the extent of any transfer tax otherwise due with respect to such qualified residential property; provided, that such tax shall apply to the extent that the consideration or value for the transfer of a qualified residential property, or the fair market value of the qualified residential property that experienced a change of ownership under California Revenue and Taxation Code Section 64 for the transfer of interests in a legal entity directly or indirectly owning a qualified residential property, exceeds the unpaid debt, including accrued interest and cost of foreclosure. Consideration, value, or fair market value, as applicable; the 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 for tax purposes.

(b) For purposes of subsection (a), a "qualified residential property" means a single-family residence, condominium, cooperative unit, single live/work unit, multifamily residential property with fewer than five residential units, or mixed-use property with fewer than five residential units and only a single floor of non-residential space. A qualified residential property shall not include a property with a unit or units designed for occupancy primarily by travelers, vacationers, or other transient occupants.

(c) Notwithstanding any other provision of this Article 12-C, the tax imposed with respect to any deed, instrument or writing to a beneficiary or mortgagee, which is taken from the mortgagor, trustor, or trustee, as a result of or in lieu of foreclosure, if such transfer is not subject to the exemption in subsection (a), shall be based on the fair market value of the interest or property conveyed (not excluding the value of any lien or encumbrances remaining thereon at the time of sale), or the fair market value of all real property that experienced a change in ownership under California Revenue and Taxation Code Section 64 as a result of the transfer, as applicable, and shall not be based on consideration.

SEC. 1111. RECORDING PAYMENT OF TAX; DEPOSIT OF TAX TO GENERAL FUND.

(a) Except as provided in any ballot measure amending this Article 12-C that the voters approve at the November 3, 2026 election, the tax this Article 12-C imposes is a general tax and tThe County Recorder shall collect the tax hereby imposed and deposit it in the same to the General Fund to be expended for any City purpose. The County Recorder shall not record any deed, instrument or writing subject to the tax imposed by this Article 12-C unless the tax is paid.

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Section 2. Scope of Ordinance.

In enacting this ordinance, the People of the City and County of San Francisco intend to amend only those words, phrases, paragraphs, subsections, sections, articles, numbers, punctuation marks, charts, diagrams, or any other constituent parts of the Municipal Code that are explicitly shown in this ordinance as additions or deletions, in accordance with the "Note" that appears under the official title of the ordinance.

Section 3. Appropriations Limit Increase.

Pursuant to California Constitution Article XIII B and applicable laws, for four years from November 3, 2026, the appropriations limit for the City shall be increased by the aggregate sum collected by the levy of the tax under Article 12-C of the Business and Tax Regulations Code as amended by this ordinance and any other ordinance amending Article 12-C of the Business and Tax Regulations Code that the voters approve at the November 3, 2026 election.

Section 4. Effective Date; Operative Dates.

(a) Effective Date. This ordinance shall become effective on the eleventh day after the date the official vote count is declared by the Board of Supervisors.

(b) Operative Dates. The amendments to Section 1108.2 of Business and Tax Regulations Code Article 12-C in this ordinance shall become operative on March 1, 2027, and shall apply to transfers occurring on or after that date. The amendments to Sections 1101 and 1111 of Business and Tax Regulations Code Article 12-C in this ordinance are declaratory of existing law and shall become operative immediately upon the effective date of this ordinance.

APPROVED AS TO FORM: DAVID CHIU, City Attorney

By: /s/ Carole F. Ruwart CAROLE F. RUWART Deputy City Attorney

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