Source: https://www.aptcnet.com/property-tax-resources/national-property-tax-updates/california-property-tax-updates
Timestamp: 2019-04-20 08:24:50+00:00

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Recent amendments to California’s Property Tax Rules will encourage fairness in local property tax equalization hearings. The taxpayer-friendly amendments, which were approved by the State Board of Equalization (SBE) in mid-December, are exemplified by the addition of the following language at the beginning of Rule 302 relating to the function of local assessment appeals boards: “To ensure that all applicants are afforded due process and given the opportunity for a timely and meaningful hearing.” A similar amendment was made to Rule 305.2, which now prohibits assessment appeals boards from dismissing taxpayer appeals when the applicant has not responded to an assessor’s information request. Likewise, Rule 323 was revised to limit hearing continuances to 90 days in most instances, thereby insuring that hearings are not unnecessarily delayed. APTC’s California Member, Cris K. O’Neall, helped to draft the Rule changes, and he played a significant role in getting the amendments approved by the SBE. The Property Tax Rule amendments will take effect in early 2019.
Proponents of a voter initiative measure to take Proposition 13 protections away from commercial property owners have decided to put the measure off until the November 2020 election. The proposed measure would require all commercial properties to be re-assessed at current market value at least one time every three years, thereby creating a “split roll” with commercial properties being assessed differently from residential properties. Under current law, Proposition 13 sets the value of commercial properties at their purchase price (or cost of construction), and the values are trended upward by a maximum of 2% in each subsequent year. The proposed initiative measure would not change the way in which residential properties are assessed – those properties would remain under Proposition 13. The planned initiative is opposed by many California county assessors as it would significantly increase the workload of assessor’s offices due to the annual reassessment requirement for commercial properties. Taxpayer organizations are expected to organize in opposition to the initiative measure next year.
The season for filing assessment appeal applications on 2018 property tax assessments opens on July 2. In most of California’s 58 counties, taxpayers have until November 30 to file their appeals. In ten counties, however, appeals must be filed by September 17. Those counties include San Francisco, Alameda, Santa Clara, San Luis Obispo and Ventura, as well as five smaller and less populous counties. Applications must be postmarked by these due dates in order to be valid. Assessment appeal applications are available on the websites for the county assessment appeals board or, for smaller counties, the county board of supervisors’ website. The appeal applications can be filled-in on-line and, in some cases, the applications can even be submitted electronically. Note also that many counties now require that a filing fee be paid when an assessment appeal application is submitted.
In June, California voters will be asked to approve Proposition 72 which would exclude rainwater capture systems from property taxation. Proposition 72 addresses one of California’s most significant ongoing issues, inadequate water supplies caused by droughts. If approved, Proposition 72 would exclude from the definition of re-assessable “new construction” facilities designed to “capture, retain and store rain water flowing off a building rooftop or other manmade aboveground hard surface for subsequent onsite use.” The property tax exclusion would apply to rainwater capture facilities which are newly-constructed on or after January 1, 2019. In addition, the exemption would only apply to the initial purchaser who purchased a new building from an owner-builder who did not already receive the rainwater capture facility exclusion. The exclusion would be obtained by filing a claim with the local property tax assessor.
The California League of Women Voters has filed an initiative designed to undo certain protections afforded commercial property owners under California’s Proposition 13. The initiative would modify California’s Constitution by taking away Prop. 13’s two percent (2%) cap on value increases, instead requiring that all commercial properties be assessed at full market value every year. The full market value standard would be phased in over a period of three years. If approved by California’s voters during the November 2018 election, the initiative’s supporters say it would increase taxes on commercial properties by $11.4 billion every year. The initiative is not directed at residential properties, and it would not impact properties used for agricultural purposes on land zoned for such purposes. The initiative also excludes commercial properties with market values under $2 million. The League of Women Voters’ filing permits the organization to start gathering signatures to qualify the initiative to appear on the November 2018 ballot.Paste or type article here.
In late June, the California Supreme Court ruled that the state’s documentary transfer tax statute included real property transfers resulting from changes in ownership of legal entities. Prior to the Court’s decision (926 North Ardmore Avenue LLC v. County of Los Angeles, June 29, 2017), transfer tax was assessed by counties and cities only if a deed or similar transfer document was recorded with the county recorder. While a small group of counties and cities had previously adopted ordinances to permit collection of transfer tax on legal entity transfers (when no deed or transfer document is recorded), most local jurisdictions did not have such laws in place. The Supreme Court’s recent decision removes the need for California counties and cities to adopt ordinances in order to collect transfer tax on legal entity changes of ownership, and it is anticipated that counties and cities will soon start assessing transfer tax on unrecorded ownership changes. Many questions remain regarding the implementation of the Court’s decision, however, including whether it is retroactive and, if so, the applicable limitations period. In addition, guidelines for challenging legal entity transfer tax assessments need to be established.
The season for filing assessment appeal applications on 2017 property tax assessments opens on July 3. In most of California’s 58 counties, taxpayers have until November 30 to file their appeals. In ten counties, however, appeals must be filed by September 15. Those counties include San Francisco, Alameda, Santa Clara, San Luis Obispo and Ventura, as well as five smaller and less populous counties. Applications must be postmarked by these due dates in order to be valid. Assessment appeal applications are available on the websites for the county assessment appeals board or, for smaller counties, the county board of supervisors’ website. The appeal applications can be filled-in on-line and, in some cases, the applications can even be submitted electronically. Note also that many counties now require that a filing fee be provided when an assessment appeal application is submitted.
The California Legislature has introduced a bill (SB 447 - Nielsen) that would permit two or more counties to create multi-county assessment appeals boards to adjudicate property tax assessment appeals. These multi-county boards would handle property tax appeals in counties where the county board of supervisors serves as the assessment appeals board, which is the current situation in seventeen California counties. In California’s other counties, the county board of supervisors appoints an assessment appeals board which adjudicates property tax appeals for that county. California’s Constitution contains a provision allowing for the creation of multi-county assessment appeals boards, but the provision has never been utilized. For the most part, the multi-county boards would operate under the same rules as single-county assessment appeals boards. However, members of multi-county boards would not have to meet the more stringent eligibility requirements that are imposed on assessment appeals boards in more populous metropolitan counties.
The California State Board of Equalization (SBE) has changed its guidance regarding when the base year value for new construction is established under Proposition 13. Previously, the SBE advised that new construction did not receive a base year value until the construction project was completed. However, the SBE now advises assessors and taxpayers that base year values for multi-year new construction projects are established on January 1st of each year. This guidance follows from the recent decision by the California Court of Appeal in Elis v. County of Calaveras. The SBE also said that once a construction project is completed, the new construction receives a final base year value as of the date the construction is completed.
The season for filing property tax assessment appeals in California opens on July 2. For most counties, assessment appeals have to be filed by November 30, 2016. However, in nine counties, including the metropolitan counties of Alameda, San Francisco, Santa Clara and Ventura, assessment appeals will be due on September 15, 2016. Orange County has returned to the November 30 deadline. Counties may require that appeal applications be filed by the September 15th deadline if they provide taxpayers with notice of their current year values in August. In addition, many California’s counties charge a fee for filing an assessment appeal application. The fees range from around $30 up to $1,000 in Santa Barbara County. California law prevents counties from charging for appeal application forms, but does not prohibit charging a fee for filing assessment appeals. Also, many counties charge fees (sometimes very significant fees) to prepare written decisions (findings) for appeal hearings.
During 2015 the California Legislature passed several bills impacting property tax assessments. Most of the legislation will become effective January 1, 2016. Here are some of the bills that the Governor signed. Change In Ownership Analyst Certification - AB 1534 permits county boards of supervisors to impose certification and training requirements on county assessor employees who make property tax change in ownership decisions. Valuation of Properties Subject to Greenway Easements - AB 1251 requires assessors to consider the impact of greenway easements in property valuations. Low-Income Housing Land Use Restrictions - AB 668 requires assessors to consider recorded contracts with nonprofit corporations which have received a welfare exemption for properties intended to be sold to low-income families who participate in a special no-interest loan program, where the contracts include a restriction on the use of the land for at least 30 years to owner-occupied housing available at affordable housing cost. Revocable Transfer on Death (TOD) Deeds - AB 139 created revocable TOD deeds for transferring residential properties without probate. TOD deeds do not cause a property tax change of ownership until the death of the owner. Pipelines - SB 803 extends the codified valuation methodology for pipelines until 2021.
The number of proposed ballot measures to limit the tax protections provided by California Proposition 13 is increasing. The most recent proposal would add a surcharge of 0.3% to 0.8% to the existing 1% tax rate to properties with assessed values over $3 million, and would last for twenty years (through the 2036-2037 fiscal year). The surcharge would apply to both residential and commercial properties, and is expected to raise over $6 billion annually. Revenue obtained from the surcharge would fund state spending on a refundable Earned Income Tax Credit, career technical education, and other programs targeted at low-income Californians. The general tax levy under Proposition 13 is currently limited to 1% of assessed value, although special assessments sometimes increase the total tax rate to 1.2% or more. The proposed surcharges would be in addition to the current tax rates. The surcharge proposal would change the California Constitution, and would require approval by two-thirds of voters. The proposal will appear on the November 2016 ballot.
The season for filing property tax assessment appeals in California opens on July 2nd. For most counties, assessment appeals have to be filed by November 30, 2015. However, in nine counties, including the metropolitan counties of Alameda, San Francisco, Santa Clara and Ventura, assessment appeals will be due on September 15, 2011. One significant change for 2015 - Orange County returns to the November 30th deadline. Counties may require that appeal applications be filed by the September 15th deadline if they provide taxpayers with notice of their current year values in August. Also note that many of California’s counties charge a fee for filing an assessment appeal applications ranging from $26 up to $1,000, although most counties will charge $30 for filing an appeal.
In January the California Supreme Court decided to hear an appeal challenging the expansion of California’s documentary transfer tax (DTT) to include real estate transfers which are not occasioned by the recordation of a grant deed. In 926 North Ardmore v. County of Los Angeles, the lower court had ruled that California’s DTT should also be assessed on transfers caused by a change in control of a legal entity holding real property, even when there is no deed recorded and the legal entity continued to exist following the transfer. Previously, only a handful of California counties and cities had passed ordinances to permit assessment of DTT in the “change in control” situation. The lower court’s decision expanded the reach of DTT liability to all 58 California counties and many cities which already assess DTT when a grant deed is recorded. In resolving the case, the Supreme Court will have to wrestle with the nature of “change in ownership” under California’s Proposition 13. The case is currently in the briefing stage, and will probably be decided next year.
A decision issued by California’s Court of Appeal may extend documentary transfer tax (DTT) liability to transfers of real property resulting from changes in ownership of legal entities. In 926 North Ardmore Avenue, LLC v. County of Los Angeles (No. B248536), the court denied a taxpayer’s claim for refund of DTT that the County had collected based on a change of ownership occasioned by a transfer of interests in a legal entity that owned real property. The County had billed the taxpayer for DTT even though the County’s ordinance only permitted collection of DTT upon recordation of a deed, and not for changes in ownership caused by legal entities ownership transfers. (The only jurisdictions in California with ordinances that permit collection of DTT for legal entity ownership transfers are Santa Clara County, Monterey County, Riverside County, the City and County of San Francisco, the City of Oakland and the City of Albany). The appellate court reasoned that because a recent change in the law gave county clerks access to property tax change in ownership data collected by county assessors, it followed that Los Angeles County was permitted to collect DTT in this situation. A petition for review and requests to de-certify the Court of Appeal’s decision are currently pending before the California Supreme Court.
A decision issued by the California Court of Appeal last month may be a "game changer" for hotel owners and operators. After many years of litigation, there now appears to be a definitive ruling on whether the "Rushmore approach" may be used to value hotel properties in California. SHC Half Moon Bay v. County of San Mateo (A137218), May 22, 2014. The Rushmore approach is a technique employed by appraisers to remove the value of intangible assets and rights that are used in conjunction with hotels such as workforce and hotel management and franchise agreements. In its decision, the Court of Appeal specifically held that "the deduction of the management and franchise fee from the hotel's projected revenue stream pursuant to the income approach did not – as required by California law – identify and exclude intangible assets" such as workforce and other intangibles. The court also said that the taxing authority had not explained how the deduction of the management and franchise fee captured the value of the intangible property.
In mid-August the California Supreme Court affirmed the property tax exemption for intangible assets and rights that appears in the state's constitution and statutes (Elk Hills Power LLC v. State Bd. of Equalization, August 12, 2013). The case involved the assessment of emission reduction credits (ERCs) which all parties agreed were an intangible asset. The question presented was whether the State Board of Equalization (SBE) could assess the value of ERCs with the value of the taxpayer's power plant because the ERCs were necessary to the construction and operation of the plant. The Supreme Court held that the SBE could not include the fair market value of the ERCs in the cost approach value of the power plant, although it could recognize the ERCs' existence in order to value the plant at its highest and best use. The Court also considered whether the ERCs' value should be deducted from the SBE's income approach valuation of the power plant, but concluded that no specific income stream could be assigned to the ERCs and so their value could not be deducted in applying the income approach. Finally, the Court identified two categories of intangibles, business enterprise intangibles and government regulatory intangibles, and found that the latter category would not qualify for exemption in some circumstances.
All persons who appear before the Los Angeles County Assessment Appeals Board or have contact with the Los Angeles County Assessor's Office, Tax Collector's Office or Auditor-Controller's Office must register and pay an annual fee of $250 starting July 1. Los Angeles County's new "tax agent" registration program covers in-house company tax representatives, accountants, attorneys and enrolled agents, but excludes officers, partners and certain owners of legal entities. Registrants must follow an 11-point "code of ethics" and report all political contributions made to any public official in Los Angeles County (tax agents are already prohibited from contributing to assessor election campaigns). Persons who fail to comply with the registration program will be fined and their names listed on the County's website. More information about the tax agent registration program may be found at bos.co.la.ca.us/Services/AssessmentAppeals/TaxAgentRegistration.aspx. The California Legislature is also considering tax agent registration in Assembly Bill 1151 (Ting). The proposed legislation, which would apply state-wide, omits some of the requirements in the Los Angeles County program. The Legislature will consider AB 1151 during the 2014 legislative session.
Los Angeles County is considering a tax agent registration program that will require persons who appear before the Assessment Appeals Board or have contact with the Assessor's Office, Tax Collector's Office or Auditor-Controller's Office to register as "tax agents" and pay an annual fee of $250. The program will cover in-house company tax representatives, attorneys and enrolled agents. Registrants would have to follow an 11-point "code of ethics" and report all political contributions made to any public official in Los Angeles County. Persons who fail to comply with the registration program would be fined and their names would be listed on the County's website. The proposed tax agent registration ordinance is posted at http://file.lacounty.gov/bos/sup docs/73946.pdf. The California Legislature recently introduced a bill with provisions similar to the proposed Los Angeles County ordinance (AB 1151, Ting).
In the next several months, the California State Board of Equalization (SBE) will likely approve for publication Section 410 of the Assessors' Handbook, entitled "Assessment of Newly Constructed Property." This new section of the Assessors' Handbook addresses issues relating to new construction under Proposition 13. In particular, Section 410 better explains new construction terminology and provides helpful examples to illustrate those terms, defines when new construction is started and completed, and describes how assessors learn about new construction. The publication also considers new construction valuation procedures, including how "construction-in-progress" should be handled. Finally, Section 410 provides a comprehensive discussion of new construction exclusions, and explains the interplay between new construction and certain types of base year value transfers. A draft of Section 410 is available at boe.ca.gov/proptaxes/pdf/AH410_ThirdDraft.pdf.
The season for filing property tax assessment appeals in most California counties extends through November 30, 2012. However, in ten counties, including the metropolitan counties of Alameda, Orange, San Francisco, Santa Clara and Ventura, assessment appeals were due on September 15, 2012. Assessment appeals may be filed to challenge a property's assessed value as of January 1, 2012. Appeals can also be filed to challenge a reassessment caused by a change in ownership or new construction that occurred within the past four years. Many of California's counties now charge a fee for filing an assessment appeal application. The fees range from around $30 up to $1,000, with most counties charging $30 to file an appeal. Higher fees may be charged for appeals on commercial (as opposed to residential) properties. California law prevents counties from charging for appeal application forms, but does not prohibit charging a fee for filing assessment appeals.
The California Legislature has modified the property tax statutes for reporting changes of ownership of real property. For commercial properties, the maximum penalties for failure to report transfers of real property by recorded deed have been increased from $2,500 to $20,000. For residential properties, the maximum penalties for not reporting transfers has been increased from $2,500 to $5,000. The time for reporting changes of ownership has been increased as well. Transfers of real property occurring through the recording of a transfer deed must now be reported within ninety days of the transaction instead of forty-five days. And the time for reporting changes of ownership caused by one entity acquiring another entity that holds real property has likewise been increased to ninety days from forty-five days.
In July, the California State Board of Equalization (SBE) issued a draft of Assessors' Handbook Section 410, entitled "Assessment of Newly Constructed Property," in late July. Section 410 addresses a variety of topics related to "new construction" which, next to changes in ownership, is the primary driver for property re-assessment under California's Proposition 13. The draft handbook defines and provides examples of the terminology used to describe new construction. Chapter 3 of Section 410 reviews the methods for valuing new construction. And Chapters 5 and 6 give an overview of new construction exclusions and the handling of new construction when applying for base-year value transfers. The SBE will accept comments on Section 410 until September 30, 2011. The SBE's draft of Assessors' Handbook Section 410 can be viewed at www.boe.ca.gov/proptaxes/pdf/lta11025.pdf.
The season for filing property tax assessment appeals in California opens on July 2. For most counties, assessment appeals have to be filed by November 30, 2011. However, in nine counties, including the metropolitan counties of Alameda, Orange, San Francisco, Santa Clara and Ventura, assessment appeals will be due on September 15, 2011. Monterey, Sierra and Sutter counties returned to the November 30 deadline for 2011. Counties may require that appeal applications be filed by the September 15th deadline if they provide taxpayers with notice of their current year values in August. In addition, this year nearly half of California's counties will charge a fee for filing an assessment appeal application. The fees range from $26 in Mono County to 0 in Santa Barbara County, although most counties will charge $30 for filing an appeal. California law prevents counties from charging for appeal application forms, but does not prohibit charging a fee for filing assessment appeals.
In a case that may impact other states, a court has held that the California statute permitting property taxation of fractionally-owned aircraft is unlawful and unconstitutional. In November, the Orange County Superior Court ruled that California Revenue and Taxation Code sections 1160 through 1162 unlawfully imposed a property tax on the managers of fractionally-owned aircraft programs even though the managers did not own, control or possess the aircraft that they were managing. The Superior Court found that the owners of the fractionally-owned aircraft exerted "far greater control" over the aircraft than the program managers did. The Court also ruled that the statute's retroactive taxation provisions were unconstitutional because the statute imposed a wholly new tax that created a harsh and oppressive burden on managers of fractionally-owned aircraft programs. The taxing authorities are expected to appeal the Superior Court's decision.
When the 2010 season for filing property tax assessment appeals opened on July 2nd, two more California counties joined the ranks of counties requiring assessment appeals to be filed by September 15, 2010 instead of November 30, 2010. This year the following counties set September 15th as the deadline for filing Applications for Changed Assessment: Alameda, Inyo, Kings, Monterey, Orange, Placer, San Francisco, San Luis Obispo, Santa Clara, Sierra, Sutter and Ventura. Counties may require that appeal applications be filed by the September 15th deadline if they provide taxpayers with notice of their current year values in August. In addition, this year nearly one quarter of California counties will start charging fees ranging from $26 to $60 for filing appeal applications.
California's Proposition 13 continues to play a significant role in the administration of the state's property tax system. Proposition 13 requires real property to be re-valued whenever a property changes ownership or is newly constructed. In order to assist assessors and taxpayers, the California State Board of Equalization is continuing its work on two Sections of the Assessors' Handbook which relate to these aspects of Proposition 13. A draft of Section 401, titled "Change in Ownership," was issued in late 2009, and an interested parties' meeting to discuss portions of the draft is anticipated during the first part of this year. In addition, Section 410 of the Assessors' Handbook, titled "Assessment of Newly Constructed Property," continues to be considered by the State Board of Equalization's Staff. Both of these publications will help to explain the many issues that assessors and taxpayers face in applying Proposition 13's requirements to property transfers and new construction.
2010 Proposition 13 Trend Factor Expected to Be Negative.
Under Proposition 13, which was adopted by California voters in 1978, property tax values are allowed to increase by no more than 2% annually. Next year, for the first time in Prop. 13's history, the annual property tax increase may be a decrease of perhaps as much as 1% due to a decline in the California Consumer Price Index to which the Prop. 13 value trend factor is tied. This decrease will result in across-the-board property tax reductions for all properties which are currently being assessed at their Prop. 13 value cap. The 2010 Prop. 13 value trend factor will be announced by the SBE in mid-December.
The Superior Court recently held that the Los Angeles County Assessor's technique for removing non-taxable intangible property from the value of an operating hotel business, in order to determine the assessed value of the hotel's real property, violated California law. The Assessor had urged the county Assessment Appeals Board to accept the "Rushmore appraisal technique" for removing a Hilton franchise, hotel management and workforce, and other intangible assets and rights from the business enterprise value of a full-service hotel. Although the Board followed the Assessor's suggestion, the court declined to do so. In its ruling, the court stated that the Assessor's "approach is improper" and that the "appraisal technique [used by the Assessor and adopted by the Board] violated California law." The court also said that the Assessor's valuation method "impermissibly subjected intangible assets to taxation." (EHP Glendale, LLC v. County of Los Angeles, LASC No. BC385925, Feb. 18, 2009).
Business Personal Property Audits No Longer "Mandatory"
On January 1, 2009, California's local assessors will no longer be required to conduct four-year audits of all taxpayers with over $400,000 of trade fixtures and business personal property. California Assembly Bill 550 (AB 550) removes the "mandatory audit" provision in Revenue and Taxation Code Section 469, and instead requires assessors to conduct "a significant number of audits." In enacting AB 550, the Legislature's intent was "to provide assessors with discretion in selecting which business taxpayers to audit, thereby adding an element of unpredictability to the audit process ... ." The California State Board of Equalization plans to modify Property Tax Rules 191, 192 and 193, all of which pertain to audits, to conform to AB 550's amendment of Section 469. The State Board of Equalization has requested interested parties to submit to it suggestions for revising Rules 191-193 (see SBE Letter to Assessors No. 2008/059).
In June 2008, the California State Board of Equalization issued "Guidelines on the Proper Handling of Confidential Information." Although they are only advisory, the guidelines will provide direction to assessors and taxpayers for the handing of confidential taxpayer information in the local property tax context. The guidelines bring together a variety of disparate information, including applicable legal authorities, on the issue of whether and when taxpayer-provided information held by a county assessor's office must be kept confidential. They also address the proper handling of confidential taxpayer information during equalization hearings before county assessment appeals boards. The State Board of Equalization issued the guidelines after receiving input from county assessors and taxpayer representatives. They can be found on the property tax page of the California State Board of Equalization's website at www.boe.ca.gov.
The period for filing appeal applications on 2007-08 California property tax assessments closes on November 30. All county assessment appeals boards or county boards of equalization will accept appeal applications through that date except for boards in the following counties, where the appeal filing season has already closed: Alameda, Inyo, Kings, Orange, San Francisco, San Luis Obispo, San Mateo, Santa Clara, Sierra and Sutter. Appeals may be filed on applications available from local boards. Some counties also make appeal applications available on their public internet websites. Applications sent on November 30 should be postmarked by the U.S. Postal Service to insure timeliness. During this regular filing period, taxpayers may also appeal base-year value reassessments caused by changes of ownership or resulting from completion of new construction, but only so long as the change of ownership or new construction completion occurred during the prior three years.

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