Wednesday, February 2, 2011

California Propositions Impacting Property Assessed Values and Taxes

CA property taxes 

California Law by Proposition Impacting Assessed Values and Property taxes

 Proposition 13  -  Established limitations on increases in assessed value and set the maximum general property tax rate at 1 percent of assessed value.  Passed during 1978, this established the base year value concept for property tax assessments.  Under Proposition 13, the 1975-1976 fiscal year serves as the original base year used in determining the assessment for real property.  CA proposition 13After that, annual increases to the base year value are limited to the inflation rate, as measured by the California Consumer Price Index, or two percent, whichever is less.  A new base year value, however, is established whenever a property, or portion thereof, has had a change in ownership or has been newly constructed.  Under Proposition 13, the property tax rate is fixed at one percent of assessed value plus amounts required to repay any assessment bonds approved by the voters.  Reference: Section 2 of Article XIII A of the California Constitution.

Proposition 3   -  Base Year Value Transfer for Property Taken by Governmental Action.  This provides transfer of a property's adjusted base year value to a replacement property when a property has been taken by eminent domain proceedings, acquisition by a public entity, or governmental action resulting in a judgment of inverse condemnation. Specific requirements must be met.  Reference: Section 2(d) of Article XIII A of the California Constitution and section 68 of the Revenue and Taxation Code.  

CA proposition 8Proposition 8  -  Reduction in Assessed Value Due to a Decline in Value.  This requires the county assessor to annually enroll either a property's adjusted base year value (Proposition 13 value) or its current market value, whichever is less.  When the current market value replaces the higher Proposition 13 value on the assessor's roll, that lower value is commonly referred to as a "Prop 8" value.  Although the annual increase for a Prop 13 value is limited to no more than two percent, the same restriction does not apply to values adjusted under Prop 8.  The market value of a Prop 8 property is reviewed annually as of January 1.  Current market value must be enrolled as long as the Prop 8 value still falls below the Prop 13 value.  Therefore, any subsequent increase or decrease in market value is enrolled regardless of any percentage increase or decrease.  When the current market value of a Prop 8 property exceeds its Prop 13 value (adjusted for inflation), the county assessor reinstates the Prop 13 value.  Reference: Section 2(b) of Article XIII A of the California Constitution and section 51 of the Revenue and Taxation Code.

Propositions 58 and 193  -  Reassessment Exclusion for Real Property Transfers Between Parents and Children.  This provides for an exclusion from reassessment real property transfers between parents and children.  Proposition 193 expands this tax relief to include certain transfers from grandparents to their grandchildren (transfers from grandchildren to grandparents are not eligible). Specific requirements must be met.  Reference: Section 2(h) of Article XIII A of the California Constitution and section 63.1 of the Revenue and Taxation Code.  

Propositions 60 and 90  -  Allows persons 55 years of age and older replacement dwelling benefit, transferring adjusted base year value with current home to replacement dwelling.   Certain requirements must be met.  CA proposition 60In general, if you or your spouse is age 55 or older, you or your spouse may buy or construct a new home of equal or lesser value than your existing home and transfer the adjusted base year value of your existing home to your new home if certain requirements are met. This is a one-time-only benefit. Thus, once you have filed and received this tax relief, neither you nor your spouse (if your spouse is a record owner of the replacement dwelling) can ever be granted this benefit again. The only exception is if you or your spouse becomes disabled after receiving this tax relief for age. Reference: Section 2(a) of Article XIII A of the California Constitution and section 69.5 of the Revenue and Taxation Code.

Proposition 60 relates to transfers of base year values between properties located within the same county.  Proposition 90 relates to possible transfers of base year values from an original property in one county to a replacement property in another county within California.  For a transfer to be eligible under Proposition 90, the county in which the replacement property is located must have adopted an ordinance that allows such transfers.  Currently, the following eight counties have passed ordinances authorizing these intercounty transfers:

  • Alameda
  • Los Angeles
  • San Diego
  • Santa Clara
  • El Dorado
  • Orange
  • San Mateo
  • Ventura

This list of counties for Prop 90 transfer of property tax basis might change, so contact your local county assessor's office to check if your county has passed such an ordinance. 

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Source: California State Board of Equalization and its guide on property taxes.  This is for information only and not the providing of tax or legal services.  If you have a question about your property taxes in California, you should contact your local county assessor or an attorney.

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