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Posted by on Apr 16, 2012 in Mello-Roos | 7 comments | Print Print

Mello-Roos Is Deductible Now

Hat tip to profhoff for sending this in, from the

On the eve of tax-filing deadline, the Franchise Tax Board abandoned its campaign to get California property owners not to deduct a portion of their real estate taxes.

“We have removed material from our website that limits the deductibility of real property taxes to taxes imposed on an ad valorem basis,” the tax board said in a notice posted Friday on its website:

The news comes at a vexing time for taxpayers. Since the personal income tax filing deadline is Tuesday, taxpayers do not have much time to correct their returns if they followed the FTB’s advice and did not deduct school parcel taxes and eligible Mello-Roos assessments. “Amended returns should be filed if the originals already have been filed or cannot be corrected in time,” the California Taxpayers Association says in a report at

In December, the tax board wrote to the IRS asking it to clarify its position.

In a letter dated Feb. 6, an IRS associate chief counsel said the Internal Revenue code does not explicitly say real estate taxes must be ad valorem to be deductible. It says taxes that are not ad valorem could be deductible “if they are levied for the general public welfare by a proper taxing authority at a like rate on owners of all properties in the taxing authority’s jurisdiction, and if the assessments are not for local benefits (unless for maintenance or interest charges).”

Although the letter was dated Feb. 6 and posted on the IRS website in March, the tax board says it never received it.

“We saw it on April 5,” when a legislative analyst ran across it on, a news service for tax professionals, says Denise Azimi, a spokeswoman for the tax board. Azimi confirms the letter was a response to the tax board, even though its name has been redacted.

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  1. Our esteemed California tax board, very nice….

  2. The timing of that change was a real asshole move. Not that it affects me personally, but I call it as I see it.

  3. Forgot to add, thanks Jim for publicizing this! If it wasn’t for this blog, I would never have known. It seems like this could be a pretty big deal for those affected.

  4. Holy cow!

    The FTB truly is craptastic.

    Gotta love the great state of California.


  5. Only for last year. How about this year? Is Mello-Roos deductibile for this year, which is next year’s filing.

  6. My take is that what’s changed is the IRS’s interpretation of the law, not the law itself, so this would apply to every year.

  7. Different flavor, but just more cheese. They have no choice but to keep feeding the mice.


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