GAINES GAZETTE Special Edition January 2021

This special edition of my newsletter is dedicated to providing you with the latest information regarding Proposition 19. Parts of the measure go into effect as early as February 16, 2021 – just a few short weeks from now. If you are planning to transfer property to a child or grandchild, please be aware of the very different landscape that awaits after that date.   Over the past several months, my colleagues and I at the Board of Equalization have heard from thousands of Californians who are confused and concerned about the implications of this property tax measure. Rest assured, the Board is working closely with the California Assessors’ Association and the Legislature to get as much clarification on the measure as possible. The Board has also issued a Letter to Assessors with preliminary guidance.   Please continue to visit my website for updates, as additional legislation will provide further clarification. For assistance or questions, please contact the Property Tax Department by phone at 1-916-274-3350 or by email.

Impact of Proposition 19 on Property Taxes

In November, Californians passed Proposition 19 with 51 percent of the vote. Many of my constituents have asked what this complex measure does and how will it impact property taxes.  Let’s start with some background. In 1986, California voters passed Proposition 58, which added a property tax exclusion on inherited properties transferred or sold between parents and children. The exclusion is good for the principal residence (no value limit) and up to $1 million in property value for other real property (i.e., rental property, commercial property). In 1996, voters passed Proposition 193, which essentially created the same exclusion for inherited properties passed from grandparents to grandchildren. Regrettably, both propositions, which were considered extensions of Proposition 13, have been largely eliminated under Proposition 19.  The measure does offer a few benefits. It allows eligible homeowners to transfer their Proposition 13 base year assessment values to any county in the state to a higher-priced home, paying increased property taxes only on the difference between the sales price and the new purchase price, assuming those prices were the fair market value. Proposition 19 also increases the number of times – from one to three – persons age 55 and older and disabled homeowners can use this transfer exclusion.  Unfortunately, in this mixed bag of a measure, the bad outweighs the good. For instance, beginning February 16, 2021, parents and grandparents will no longer be able to transfer property to their children or grandchildren without triggering a likely increase in property tax liability, unless that property is used as a primary residence by the transferee.  This means that individuals whose parents and grandparents worked their whole lives to pay off a home so they could leave something to their children or grandchildren may have to sell the home to pay taxes. It means that thousands of dollars a year will be taken away from families who are not wealthy but may have one small rental they could inherit from their parents. It means that when multiple children inherit a home, at least one of them must live there to get the exclusion.  Proposition 19 will hit 40,000 to 60,000 families each year with higher property taxes and, according to the Legislative Analyst’s Office, will mean hundreds of millions of dollars a year coming out of taxpayer pocketbooks.

Implementation Planning

I want to highlight the tight deadlines associated with Proposition 19 and share what the BOE is doing to make sure the measure is implemented in a transparent and fair manner.   As mentioned above, beginning February 16, 2021, parents and grandparents will be prohibited from transferring property to their children or grandchildren without triggering an increase in property tax liability, unless the property is a family farm, or was the parent/grandparent's principal residence and will continue to be used as the child or grandchild's principal residence.   Beginning April 1, 2021, Proposition 19 allows eligible homeowners to transfer their Proposition 13 base year assessment to a higher-priced home anywhere in the state, paying increased property taxes only on the difference between the sales price and the new purchase price, assuming those prices are at fair market value.   Before Proposition 19 takes effect, several issues must be addressed to ensure proper implementation. As it stands, many questions remain including the following:   –What constitutes a “family farm?”   –What will happen if a person inherits a residence but is unable to move in within the required time frame due to litigation over issues related to matters such as inheritance, incarceration, probate, or military deployment?   –What value should a County Assessor place on the assessment roll if a beneficiary moves out of the inherited property after using it as a principal residence for several years?   During recent Board meetings, we have held lengthy discussions on Proposition 19’s vague and inconsistent provisions and asked staff to continue working with the California Assessors’ Association to develop recommendations for implementation legislation that will address these issues and concerns.   In addition to legislative recommendations, staff is updating the Assessors’ Handbook and examining which Property Tax Rules and forms need to be amended, created, or repealed with respect to Proposition 19. However, many of those updates will depend on what legislative changes are approved.

Comparison Charts

BOE staff has created comparison charts so taxpayers can easily see current law and examples of how the new law would affect passed-down properties, pending its enactment.   For further information, please refer to the guidance issued by BOE staff, which can be found on my website.

At Your Service

As a Board Member, my number one priority is to advocate for taxpayers. I believe hardworking Californians deserve to have someone working on their behalf to streamline and promote efficiency in state government.   Should you need assistance with tax-related problems or have questions, visit my website for information on how to contact my office or email me directly anytime.

Mark Your Calendar!

Monthly Board Meetings: February 11, 2021 via Teleconference and February 23-24, 2021 via Teleconference Sign Up to receive Announcement of Public Meeting Agenda

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