Few laws, if any, have had a bigger impact on a state’s taxing authority than California’s Proposition 13 (Prop 13). Famously passed in 1978 amidst a housing market boom, Prop 13 was intended to protect taxpayers from dramatic rises in their annual property tax bills by limiting the ad valorem taxes on real property to 1 percent of the full cash value of the property at acquisition, with a 2 percent annual cap on assessment increases.
Perhaps the most friction-laden aspect of Prop 13 is the ‘‘change in ownership’’ requirement. Prop 13 permits local assessors to reassess tax based on current fair market value only when a change in ownership occurs. Because of the strict limitations on annual ad valorem tax increases, this reassessment trigger has become a focal point for controversy, as it presents assessors with their primary opportunity to reset a property’s value to its current fair market value.
In an article originally published in Bloomberg BNA’s Weekly State Tax Report, Clark Calhoun and Charles Wakefield discuss recent legislative efforts to alter Prop 13’s change in ownership rules and explain why such attempts are misguided.
To read the full article, click here.