Real Property Assessments – Prop 13
In 1978, California voters passed Proposition 13, which substantially reduced property tax rates. As a result, the maximum levy cannot exceed 1% of a property’s assessed value (plus bonded indebtedness and direct assessment taxes). Increases in assessed value are limited to 2% annually. Only four events can cause a reappraisal:
1. A change in ownership;
2. Completed new construction;
3. New construction partially completed on the lien date (January 1); or
4. A decline-in-value (see Market Value Decline – Prop. 8).
Change in Ownership Appraisals
When a publicly recorded transfer occurs, the Assessor receives a copy of the deed and determines whether a reappraisal is required under State law. The date of reappraisal is generally the recording date of the deed that transfers ownership. However, the reappraisal of property acquired by inheritance from an estate or living trust occurs as of the date of death of the property owner, not as of the date of distribution to the beneficiary. If required, an appraisal is made to determine the new market value of the property.
Upon notification of the new assessment, the property owner has the right to appeal the value if he/she does not agree with it. The transfer of property between husband and wife, and registered domestic partners does not cause a reappraisal for property tax purposes. This includes transfers resulting from death, divorce, or termination of domestic partnership. Also, the addition of joint tenants, whether related or not, does not result in a reappraisal. In most cases, transfers by irrevocable trusts are reappraisable. There are several exclusions available for certain qualified situations. Please see the section titled “Tax Savings Programs”.
New Construction Appraisals
Copies of building permits are also sent to the Assessor. New buildings, additions, and other structures require an appraisal. Structural repairs and/or replacement are not appraisable in most situations.
The value of new construction is added to the existing improvement assessed value. The new assessed value will not change except for the annual inflation adjustment of up to 2%. As with all newly assessed values, the property owner has the right to appeal the value.
Supplemental Assessments – SB 813
State law requires the Assessor to reappraise property upon change in ownership or completion of new construction. The supplemental assessment reflects the difference between the new value and the old value. The Auditor Controller calculates the supplemental property tax, and prorates it, based upon the number of months remaining in the fiscal year in which the event occurred. The fiscal year runs from July 1 through June 30.
A change in ownership or new construction completion which occurs between January 1 and May 31 results in two supplemental assessments and two supplemental tax bills. The first supplemental bill is for the remainder of the fiscal year in which the event occurred. The second supplemental bill is for the subsequent fiscal year.
Notices of Assessed Value Change are mailed to property owners before supplemental tax bills are issued. Remember that supplemental tax bills are in addition to the regular annual tax bills. Supplemental bills go directly to the property owner, and not to an impound account -where one might exist.