California Property Taxes

THE ASSESSMENT PROCESS

Annual Assessments
Annually, whoever owns taxable property on January 1 (the lien date) becomes liable for a tax calculated at 1 percent of the “taxable” value of the property. Article XIII A of the California Constitution (Proposition 13) also permits adding to the 1 percent tax rate a rate needed to pay interest and redemption charges for voter-approved indebtedness. Such additional rates will vary from area to area within a county.

Change in Ownership and New Construction
The assessed value for most property taxed under Article XIII A is the prior year’s assessed value adjusted for inflation up to 2 percent. However, if there has been a change in ownership or completed new construction, the new assessed value will be the market value of the property as of the date that if changed ownership or was newly constructed. That property will also be assessed on the supplemental roll.

Supplemental Assessments
The supplemental roll provides a mechanism for placing reappraisals under article XIII A into immediate effect, rather than waiting for the next January 1 lien date. A prorated assessment (the supplemental assessment) reflects the increase or decrease in assessed value that results from the reappraisal. It covers the portion of the fiscal year that remains after the date of change in ownership or completed new construction. The supplemental assessment statutes apply to any property subject to article XIII A that has undergone a change in ownership or completed new construction since July 1, 1983.

For changes in ownership or completed new construction occurring between January 1 and May 31, two supplemental assessments are issued. The first covers the portion of the current fiscal year remaining after the date of the event; the second covers the entire next fiscal year. An increase in assessment will result in a supplemental tax bill. A decrease in assessment will result in a refund.

Supplemental assessments do not affect exemptions for which the assessee is otherwise eligible. If granted, the exemption is applied to the amount of the supplemental assessment.

PROPERTY TAX EXEMPTIONS

The state Constitution provides for a variety of full and partial exemptions. The Legislature has unlimited authority to provide for exemption of any kind of personal property, but it cannot exempt real property without specific authority provided by the Constitution.

Following is a brief discussion of some of the major property tax exemptions in California. Please note that issues regarding many of these exemptions are complex; the assessor’s office should be consulted for detailed requirements regarding exemptions.

Personal Effects
Household furniture, hobby equipment, and other personal effects are exempt. This exemption does not include vehicles, aircraft, or boats with a value over $400. It also does not include any property used for a trade or business. No filing is required.

Intangible Personal Property
All forms of intangible personal property are exempt. Examples of intangible personal property include cash, bank accounts, mortgages, and stock certificates. No filing is required.

Homeowners’ Exemption
The Constitution requires a $7,000 reduction of taxable value for qualifying owner-occupied homes. The state reimburses local agencies for the loss in property tax revenue. The homeowner must make a simple one-time filing with the county assessor for the exemption.

Business Inventory
Personal property held for sale or lease in the ordinary course of business is exempt. “Business inventory” includes merchandise held for sale or lease, animals used in the production of food or fiber, and incidental supplies passed on to the customer. The exemption does not include property in use on the lien date (except animals) or ordinary supplies. No filing is required, but the assessor may audit the taxpayer to verify whether the property qualifies.

Low-Value Property Tax Exemption
A county board of supervisors is authorized to exempt from property taxes real property with a base year value and personal property with a full value so low that, if not exempt, the total taxes, special assessments, and applicable subventions on the property would amount to less than the cost of assessing and collecting them. The value threshold is $5,000 or less. However, the value threshold is increased to $50,000 for possessory interests that are for a temporary and transitory use in a publicly owned convention center, cultural facility, or fairground.

Church Exemption
Land, buildings, and personal property used exclusively for religious worship are exempt. The exemption does not include excess property or property used for purposes other than religious worship. This exemption requires an annual filing.

Welfare Exemption
The welfare exemption includes property owned, irrevocably dedicated to, and used for religious, hospital, scientific, and/or charitable purposes. The Board makes a one-time determination regarding whether an organization is eligible for the exemption. Each year, the county assessor determines whether the property is being used for exempt purposes.

Disabled Veterans’ Exemption
Current law provides a basic exemption of $100,000 on the principal place of residence for veterans with specified disabilities or for unmarried surviving spouses of deceased disabled veterans. A one-time filing is required. This exemption may be raised to $150,000 if the applicant meets the income limit of $40,000. Annual filing is required for the $150,000 exemption. The income limit and both the exemption amounts are adjusted annually for inflation.

Crops, Trees, and Vines
Growing crops are exempt. No filing is required. Grapevines are exempt for the first three years and orchard trees for the first four years after the season in which they are planted. Date palms under eight years of age are exempt. Standing timber is exempt but is taxed when harvested.

Other Examples of Exempt Properties
Listed below are some other types of properties that are fully or partially exempt. Some of the exemptions require filing, and there are restrictions on the use of the properties in some cases.

Aerospace museum personalty Historical aircraft Livestock (most) Burial plots Nonprofit colleges and schools Large vessels and low-value boats Free libraries and museums Art gallery displays.

OTHER PROPERTY TAX RELIEF MEASURES

The state Constitution provides for a variety of tax relief measures that the Legislature has implemented as California property tax relief programs. The issues and qualifications regarding these programs are complex, and claim forms must be filed to obtain the relief. The assessor’s office should be contacted for claim forms and detailed requirements regarding these programs.

New Construction Exclusion for Disabled Access
New construction may be excluded from reassessment if it consists of modifying an existing structure to make the structure more accessible to a physically disabled person. Claims for this exclusion must be filed with the county assessor.

Disaster Relief
The taxable value of properties that have been substantially damaged or destroyed by a disaster may be reassessed to reflect the damage if the county where the property is located has adopted a disaster relief ordinance. Claims for this relief must be filed with the county assessor within the time period specified in the ordinance or within one year from the date the property was damaged or destroyed by the disaster, whichever is later. The reduced value remains until the property is fully repaired, restored, or reconstructed. Then the factored base year value will be restored as long as it is substantially equivalent to the property prior to the damage or destruction. For property located in a county that has not adopted a disaster relief ordinance, a taxpayer may request from the county assessor a Proposition 8 reduction in value.

If the disaster occurs in an area proclaimed by the Governor to be in a state of emergency and the taxpayer chooses not to repair, restore, or reconstruct the damaged property:

•               The taxable value of property substantially damaged or destroyed may be transferred to comparable replacement property that is located within the same county and acquired or newly constructed within five years after the disaster. Claims for this exclusion are filed with the county assessor.

•               The taxable value of a principal residence substantially damaged or destroyed may be transferred to a qualified replacement residence located within another county, provided that the replacement residence is located in a county that has adopted an ordinance that allows such taxable value transfers. This is effective for disasters occurring on or after October 20, 1991. Contra Costa, Los Angeles, Modoc, Orange, San Francisco, Santa Clara, Solano, Sutter, and Ventura Counties have adopted ordinances accepting transfers of base year value under this program. Claims for this exclusion must be timely filed with the county assessor.

Eminent Domain
The taxable value of property may be transferred to a comparable replacement property if the person acquiring the real property has been displaced from property by eminent domain proceedings, by acquisition by a public entity, or by governmental action that resulted in a judgment of inverse condemnation. The replacement property does not have to be located in the same county as the taken property. Claims for this exclusion must be filed with the county assessor within four years of displacement.

Over 55 and Disabled Citizens Relief
People over the age of 55 or who are severely and permanently disabled may transfer the taxable value of their principal residence to a replacement property if it is of equal or lesser value, located within the same county, and purchased or newly constructed within two years of the sale of the original property. This tax relief is available only once in a lifetime. There is one exception to this one-time-only limit. If a claimant becomes physically and permanently disabled after transferring the taxable value under the age requirements (over 55), the claimant may transfer the taxable value a second time under the disability requirements if the move is related to the disability.

The taxable value may be transferred to a qualified replacement property located in the same county or to a qualified replacement property located within another county provided that the replacement property is located in a county that has adopted an ordinance to allow such transfers. Alameda, Los Angeles, Orange, San Diego, San Mateo, Santa Clara, and Ventura Counties have adopted ordinances allowing transfers under this program. Claims must be filed with the county assessor within three years of the purchase or completion of construction of the replacement property.

Parent-Child and Grandparent-Grandchild Exclusions
The purchase or transfer of a principal residence and the first $1 million of other real property between parents and children is not subject to reassessment. Claims for this exclusion must be filed with the county assessor within certain time limits. This exclusion also applies to transfers from grandparents to grandchildren when both qualifying parents are deceased, subject to certain limitations.

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