California Code of Regulations › Title 18 - Public Revenues › Division 1 - State Board of Equalization-Property Tax (California Department of Tax and Fee Administration - Timber Yield Tax, See Chapter 11) › Chapter 1 - Valuation Principles and Procedures › Section 6 - The Reproduction and Replacement Cost Approaches to Value

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) The
				reproduction or replacement cost approach to value is used in conjunction with
				other value approaches and is preferred when neither reliable sales data
				(including sales of fractional interests) nor reliable income data are
				available and when the income from the property is not so regulated as to make
				such cost irrelevant. It is particularly appropriate for construction work in
				progress and for other property that has experienced relatively little physical
				deterioration, is not misplaced, is neither over- nor underimproved, and is not
				affected by other forms of depreciation or obsolescence.
(b) The reproduction cost of a reproducible
				property may be estimated either by (1) adjusting the property's original cost
				for price level changes and for abnormalities, if any, or (2) applying current
				prices to the property's labor and material components, with appropriate
				additions for entrepreneurial services, interest on borrowed or owner-supplied
				funds, and other costs typically incurred in bringing the property to a
				finished state (or to a lesser state if unfinished on the lien date). Estimates
				made under (2) above may be made by using square-foot, cubic-foot, or other
				unit costs; a summation of the in-place costs of all components; a quantity
				survey of all material, labor, and other cost elements; or a combination of
				these methods.
(c) The original
				cost of reproducible property shall be adjusted, in the aggregate or by groups,
				for price level changes since original construction by multiplying the cost
				incurred in a given year by an appropriate price index factor. When detailed
				investment records are unavailable for earlier years or when only a small
				percentage of the total investment is involved, the investments in such years
				may be lumped and factored to present price levels by means of an index number
				that represents the assessor's best judgment of the weighted average price
				change. If the property was not new when acquired by its present owner and its
				original cost is unknown, its acquisition cost may be substituted for original
				cost in the foregoing calculations.
(d) The replacement cost of a reproducible
				property may be estimated as indicated in (b) (2) of this section by applying
				current prices to the labor and material components of a substitute property
				capable of yielding the same services and amenities, with appropriate additions
				as specified in subsection (b) (2).
(e) Reproduction or replacement cost shall be
				reduced by the amount that such cost is estimated to exceed the current value
				of the reproducible property by reason of physical deterioration, misplacement,
				over- or underimprovement, and other forms of depreciation or obsolescence. The
				percentage that the remainder represents of the reproduction or replacement
				cost is the property's percent good.
(f) When the allowance made pursuant to
				paragraph (e) exceeds the amount included in the depreciation tables used by
				the assessor, the reasons therefor shall be noted in the appraisal record for
				the property and the amount thereof shall be ascertainable from the
				record.
1. New section
				  filed 9-7-67; effective thirtieth day thereafter (Register 67, No.
				  36).
2. Amendment of subsection (f) filed 2-24-70; effective
				  thirtieth day thereafter (Register 70, No. 9).
3. Amendment of
				  subsections (b) and (d) filed 2-22-71; effective thirtieth day thereafter
				  (Register 71, No. 9).
4. Repealer of subsection (f) and renumbering
				  of subsections (g) and (h) to subsections (f) and (g) filed 2-18-77 as an
				  emergency; effective upon filing (Register 77, No. 8).
5. Change
				  without regulatory effect amending subsections (b) and (d) and repealing
				  subsection (g) filed 12-19-97 pursuant to section
				  100, title 1, California Code of
				  Regulations (Register 97, No. 51).