July 9, 2020 California "split roll" property tax measure qualifies for November 2020 ballot California Proposition 15 (formerly Ballot Measure 19-0008A1) has qualified to appear on the statewide general election ballot on November 3, 2020. If passed, Proposition 15 would amend Article XIIIA of the California constitution (Proposition 13)1 by requiring local assessors to value most commercial and industrial real property at fair market value on a regular cycle, which will likely result in increased property taxes for properties that have not transacted in recent years. Adopted by California voters in 1978, Proposition 13 established an event-based system of real property assessment under which all real property in California is assigned a "base year" value that reflects fair market value at the time of purchase or new construction. Increases on this "base year value" are limited to no more than 2% annually, absent a subsequent change in ownership or new construction. This maximum annual increase typically falls below historical rates of appreciation for real property in California, so assessed values often lie significantly below market value, especially when property has been held for many years by the same owners. Proposition 15 is commonly known as a "split roll" initiative because it proposes different assessment systems based on property type. If approved by California's voters, Proposition 15 will subject commercial and industrial real property to cyclical reassessments to market value while retaining Proposition 13 protections for other real property (primarily residential real property). Initial reassessments will be phased in over a period of at least two years, beginning with the 2022–2023 fiscal year. Affected owners will be obligated to pay taxes based on new assessed values only after the assessor has completed the reassessment. After the initial reassessment, Proposition 15 requires cyclical market value reassessments to occur at least every three years. Implications Under the initiative and referendum rules of California's constitution, only a majority of the voters must approve Proposition 15 for it to become law. If passed, Proposition 15 is expected to generate between $8 billion and $12.5 billion in revenue for California local governments annually. The most significant direct impact would be felt by commercial and industrial real property owners with older "base year" values given the amount of appreciation that is not reflected in current assessed values. While it is too early to gauge whether Proposition 15 will be approved by voters, taxpayers with commercial and industrial real property in California should monitor its progress as approval could result in significant future local property tax increases for owned or leased real property in California. ———————————————
——————————————— | |||||||||
| |||||||||
