US Tax Newsroom

 Tax News Update    Email this document    Print this document  

October 1, 2019

California "split roll" ballot initiative would reassess commercial and industrial real property at fair market value

Ballot Initiative 17-0055 (Measure), commonly referred to as a "split roll" measure, proposes amending the California constitution to eliminate property tax assessment protections under Proposition 13 for commercial and industrial real property while retaining them for residential real property.

Adopted in 1978, Proposition 13 amended the California Constitution and established an acquisition value system of assessment. Under that system, real property is assigned a "base year" value that reflects fair market value at the time of purchase or when new construction is completed. Assessment increases on this "base year value" are limited to no more than 2% annually, absent a subsequent change in ownership or new construction of the property. This maximum annual increase is significantly below historical rates of appreciation for real property in California, so assessed values typically fall below market value, especially when property has been held for many years.

The Measure proposes reassessment to fair market value for commercial and industrial real property, with continued reassessment to fair market value at least once every three years. Residential real property, including single family homes and apartment complexes, would continue to be protected from annual revaluation under Proposition 13 as it currently exists.

According to the non-partisan Legislative Analyst's Office, the Measure would increase property tax revenues statewide by $6 to $10 billion annually. Commercial and industrial real property with older "base year" values would be particularly affected given the amount of appreciation that is not reflected in current assessed values. The Measure would also give 60% of any additional revenue generated to local governments and 40% to school districts.

The Measure has been endorsed by the California Democratic Party, the Los Angeles Unified School District, the Mayor of Los Angeles, and other elected officials. Teachers and government employee unions are also strongly backing the Measure. The California Taxpayers Association and other business-oriented organizations oppose the Measure. The California Assessor's Association, as well as several individual county assessors, have publicly criticized it.

Measure scheduled for vote in November 2020

The Measure is scheduled for a statewide general election vote on November 3, 2020, and needs only a simple majority to become law. If passed, the changes could go into effect as early as the 2020 assessment year.

In August 2019, spilt-roll proponents filed a revised measure, Ballot Initiative 19-0008, to resolve drafting errors and gain broader voter support. The revisions aim to address criticism that it would be legally, administratively, and financially difficult to implement. If the requisite signatures are obtained by May 2020, this new version will qualify for the November 2020 ballot and will likely replace the current version of the Measure.


While it is too early to gauge whether this ballot initiative will be approved by voters, taxpayers with commercial and industrial real property in California should monitor this development, as approval could result in significant future property tax increases.

EY will monitor this development and issue additional Tax Alerts as warranted.


Contact Information
For additional information concerning this Alert, please contact:
State and Local Taxation Group
Tom Bernard(415) 894-8377
John Corum(949) 437-0673
Kristen Sharp(415) 894-4436

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 1996 – 2022, Ernst & Young LLP


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


EY US Tax News Update Master Agreement | EY Privacy Statement