The Proposition 13 Tax Transfer Initiative will be on the ballot in November. If passed, it will give those 55 and older the ability to take their old property-tax basis with them, no matter (a) the new home’s market value; (b) the new home’s location in the state; or (c) the buyer’s number of moves. But the tax basis will be subject to a re-calculation, depending if the new home is more or less expensive.
The California Association of Realtors is also pursuing a legislative alternative that will eliminate intergenerational transfers of primary residences and other inherited property being used for income-producing purposes without reassessment.
The kids and grandkids have enjoyed taking over their elders’ homes – and their typically ultra-low tax basis that transferred. The state legislature could change that in August, which would bring in additional revenue to compensate for those seniors taking their old tax basis with them.
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The California Proposition 13 Tax Transfer Initiative has qualified to appear on the ballot in California as a combined initiated constitutional amendment and state statute on November 6, 2018.
|A “yes” vote supports amending Proposition 13 to allow homebuyers who are age 55 or older or severely disabled to transfer their tax assessments, with a possible adjustment, from their prior home to their new home, no matter (a) the new home’s market value; (b) the new home’s location in the state; or (c) the buyer’s number of moves.|
|A “no” vote opposes amending Proposition 13 to change how tax assessments are transferred between properties for homebuyers who are age 55 or older or severely disabled.|
On May 17, 2018, the secretary of state announced that enough signatures had been verified for the initiative to be placed on the ballot for the general election on November 6, 2018.
The measure would amend Proposition 13 to allow homebuyers who are age 55 or older or severely disabled to transfer the tax-assessed value from their prior home to their new home, no matter (a) the new home’s market value; (b) the new home’s location in the state; or (c) the number of moves. As of 2018, homebuyers over 55 years of age were eligible to transfer their tax assessments from their prior home to their new home if the new home’s market value is equal to or less than the prior home’s value and once in their lifetimes. Furthermore, counties, not the state, decide whether tax assessments can be transferred across county lines.
If the new home is a different value than the prior home, the initiative would allow for an adjusted value between the old and new values. If the new home has a higher market value then the prior home, the assessed value would be adjusted upward. If the new home has a lower market value then the prior home, the assessed value would be adjusted downward. The formulas for the adjustments would as follows:
Upward adjustment: (assessed value of their prior home) + [(the new home’s market value) – (the prior home’s market value)]
- Example: An individual sold her house for $500,000. The house had a tax-assessed value of $75,000. She bought a new house for $800,000. The tax-assessed value of the new house would be ($75,000) + [($800,000)-($500,000)] = $375,000.
Downward adjustment: (assessed value of their prior home) × [(the new home’s market value) ÷ (the prior home’s market value)]
- Example: An individual sold his house for $500,000. The house had a tax-assessed value of $75,000. He bought a new house for $300,000. The tax-assessed value of the new house would be ($75,000) × [($300,000) ÷ ($500,000)] = $45,000.
June 28, 2018
I want to give you an update on C.A.R.’s historic effort to address California’s unprecedented housing supply crisis, as well as how to increase homeownership opportunities for Californians. Known as the Property Tax Fairness Initiative, the initiative would remove the “moving penalty” for seniors 55 and older, the disabled, and victims of natural disasters, allowing them to carry their current Proposition 13-protected property tax assessment level to another home of any price, anywhere in the state, any number of times.
With your help, C.A.R. achieved its initial objective by gathering 1 million signatures – enough to qualify the initiative for the November 2018 General Election Ballot.
Last month, I informed you that C.A.R.’s Board of Directors, after careful deliberation, voted to proceed with the 2018 ballot measure while seeking a legislative alternative.
The legislative alternative contains the provisions of the Property Tax Fairness Initiative and would also eliminate intergenerational transfers of primary residences and other inherited property being used for income-producing purposes without reassessment.
Despite the fact that intergenerational transfers reforms will offset the estimated lost tax revenue, opposition continues to be strong and the legislative alternative will not be approved before the current June 28 deadline for C.A.R. to remove the initiative from the November ballot.
With that in mind, yesterday a group of decision makers, including C.A.R.’s Executive Committee, Regional Chairs, Committee Liaisons, and Key Committee members provided input to the Leadership Team, which decided to keep the current initiative on the November 2018 ballot and file a revised initiative with the Attorney General for preparation of title and summary for the November 2020 ballot.
This option will allow C.A.R. to pursue its objective on several fronts. C.A.R. Governmental Affairs staff met with the Attorney General’s Office and the Legislative Analyst’s Office to get revisions to the title and summary, as well as to the fiscal analysis, that will appear in this November’s General Election Voters Pamphlet; these will be released on July 24. And, while the current deadline for removing initiatives from the ballot is June 28, it is possible the legislative alternative – with an exception to the deadline included – could be approved when the legislature returns from its summer break in August.
The November 2020 ballot initiative will move portability forward while at the same time generating revenue for schools and local governments by: 1) requiring reassessment in connection with inter-generational transfers where heirs keep property for investment purposes; and 2) tightening up the reassessment law to address corporate property transfers where “creative” efforts are used to avoid reassessment.
C.A.R.’s resolve on this issue is firm. C.A.R. is committed to winning at the ballot box this November, achieving a legislative alternative, or winning in November 2020. REALTOR® investment of time and resources as part of this grassroots effort will benefit clients, homeownership, and California.
We are confident that we will ultimately be successful gaining voter approval of the Property Tax Fairness Initiative.
Thank you for all that you do for our industry. Working together, we are making a difference.
CALIFORNIA ASSOCIATION OF REALTORS®