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Posted by on Dec 9, 2012 in Prop 13 | 4 comments | Print Print

Prop 13 and Corporations

Hat tip to DOB for sending this article written by Willie Brown from sfgate.com:

It’s good to see lawmakers moving to fix one of Proposition 13′s biggest inequities – the tax break that treats corporations differently from homeowners.  That break is one of the most unfair parts of the state’s tax code. And I should know – I helped write it.

After voters approved Prop. 13 in 1978, capping property taxes for landowners, we had to sit down in the Legislature and figure out how to implement it. One of the biggest questions was how and when properties could be reassessed. We decided that should happen whenever a property was “transferred.”

When you sold your home, it was transferred to someone else. The home was reassessed, and the taxes for the buyer were increased accordingly.

What we did not realize was that corporations don’t actually transfer property – they transfer the stock in the company that owns the property.

And Prop. 13 didn’t apply to stock.

The result is that corporate property that existed in 1978 is still being taxed based on 1978 assessments – even property that has changed hands time and again.

That means a disproportionate burden of California’s property taxes is falling on homeowners.

The remedy, as suggested by Assemblyman Tom Ammiano, D-San Francisco, would be to change the definition of a transfer. With Democrats now controlling two-thirds of both the Assembly and state Senate, they could do that without having to worry about no-tax Republicans.

But they’ll have to be very clever at how they go about it – and having someone like Ammiano carry the ball may not be the way to do it.

The problem is that any effort to “repeal” Prop. 13, no matter how reasonable, still has lawmakers quaking in their shoes. What the Democrats need to do is basically make a racehorse look like a donkey.

If I were in charge, I’d come up with a bill redefining that single word, “transfer.” And I wouldn’t have Ammiano or anyone else with a long history of supporting tax hikes carry the bill – I’d pick the most conservative Democrat I could find and have him do the job.

4 Comments

  1. I think I am in favor of changing the corporate loophole. Seems like the attornies found a way to dodge reassessment via the stock transfer. Maybe they should rewrite it to include a certain threshold of the stock being transferred?

  2. As someone that worked in this field for over 20 years, I will tell you the is the biggest and brightest red herring to swim by in a long while. Very few transfers of corporate property occur that do not meet the Rev and Tax code definition of reappraisable corporate change in control. For example, I can’t tell you how many times gas stations, grocery stores, department stores amd similar properties were revalued in the 1980′s through the 2000′s.

    The underlying objective is to get as close to a split roll as possible and still keep the Prop 13 shell. What these folks want is everything owned or occupied under long term leases to be reappraised at market value every time more than 50 percent of the stock changes hands. That’s once every year or two for publically traded companies. Furthermore, they would have the State Board of Equalization have all corporate owners and long term lessees report stock ownership changes. Since they can’t even keep up with the current workload, I’d like to see them handle that.

    Given the gullibility of the California voter these days, if they package and sell the idea effectively, they might get their way.

  3. Willie’s strategy to bust open the Prop 13 vault was most interesting. The angles used by today’s legislators to dismantle Prop 13 will make the difference.

    After another 10-20 years, there won’t be enough old people left who bought for 1/10th of today’s value that it will matter as much.

    Plus, nobody likes to protest either.

  4. With all the parcel taxes and special assessments, if you divided my property tax bill by 1 percent, the number would about 83 percent of current FMV, and I bought 23 years ago. If you took the value up to FMV and tacked on all the extras to the 1 percent base rate, I’d be paying closer to 1.3 percent percent of FMV in property taxes. It’s not East Coast taxes, but a lot of folks, especially the over 50 crowd, would probably have to sell. Let loose of the 1 percent base rate (and you know the politicians will try), and a lot of folks overall will no longer be able to afford their houses. Howard Jarvis is probably twirling in his grave.

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