California Prop. 13

Proposition 13

On June 6, 1978, California voters overwhelmingly approved Proposition 13, a property tax limitation initiative. This amendment to California’s Constitution was the taxpayers’ collective response to dramatic increases in property taxes and a growing state revenue surplus of nearly $5 billion. Proposition 13 rolled back most local real property, or real estate, assessments to 1975 market value levels, limited the property tax rate to 1 percent plus the rate necessary to fund local voter-approved bonded indebtedness, and limited future property tax increases.

After Proposition 13, county property tax revenues dropped from $10.3 billion in 1977-78 to $5.04 billion in 1978-79. As a result, many local governments were in fiscal crisis. Keeping local governments in operation the first two years following Proposition 13 required legislative “bailouts” to offset property tax revenue losses. A first-year stopgap measure costing $4.17 billion in state surplus funds was necessary to directly aid local governments. A second-year bailout, a long-term fiscal relief plan, cost the state $4.85 billion.

Prior to 1978, real property was appraised cyclically, with no more than a five-year interval between reassessments. 

Since property values were systematically reviewed and updated, assessed values were usually kept at or near  current market value levels. In contrast, under Proposition 13, properties are reassessed to current market value only upon a change in ownership or completion of new construction (called the base year value). In addition, Proposition 13 generally limits annual increases in the base year value of real property to no more than 2 percent, except when property changes ownership or undergoes new construction. Essentially, Proposition 13 converted the market value-based property tax system to an acquisition value-based system.

Disparities in Assessed Value

Under Proposition 13, similar properties can have substantially different assessed values based solely on the dates the properties were purchased. Disparities result wherever significant appreciation in property values has occurred over time. Longtime property owners, whose assessed values generally may not be increased more than 2 percent per year, tend to have markedly lower tax liability than recent purchasers, whose assessed values tend to approximate market levels.

Local Property Tax Roll

The assessed value determined and enrolled by the county assessor is multiplied by the appropriate tax rate to form the basis of the current year’s tax bill. The tax rate is 1 percent plus (1) the amount necessary to make annual payments due on general obligation bonds or other indebtedness incurred prior to July 1, 1978; (2) any bonded indebtedness for the acquisition or improvement of real property approved by a two-thirds majority of voters on or after July 1, 1978; and (3) effective January 1, 2001, certain bonded indebtedness for school facilities approved by 55 percent of the voters. The collection of these taxes and their allocation to the appropriate taxing jurisdictions are functions of the county tax collector and the county auditor, respectively. Like the county assessor, these officials are governed by state law.

The Appeal Process—local equalization

The assessor must reassess real property to current market value whenever there is a change in ownership or completed new construction. In addition, the assessor may change the assessed value of a property to recognize a decrease in value, to correct an error, or to enroll an escaped assessment (one overlooked previously). Except for changes in assessment due to annual adjustments for inflation, assessors must notify property owners whenever their assessments of real property are increased. The notifications are sent on or before the date the assessment roll is completed, generally July 1. Personal property is reassessed annually. Notification of personal property 

assessments is not required.
 

Appeal Rights

Property owners can appeal the value of the property appearing on the regular assessment roll by filing an application for changed assessment during the regular assessment filing period with the clerk of the board of supervisors (sitting as a local board of equalization) or assessment appeals board. The regular assessment filing period is July 2 through either September 15 or November 30, depending on whether the assessor has elected to mail assessment notices to all taxpayers on the secured roll. A listing of assessment appeal filing deadlines by county is posted on the BOE’s website at www.boe.ca.gov/proptaxes/pdf/filingperiods.pdf. Assessments made outside the regular assessment period (supplemental assessments and escape assessments) must be appealed within 60 days after the date the notice of change in assessment is mailed. An exception exists in Los Angeles County and in any other county where the board of supervisors has adopted an alternative resolution. In these counties such assessments may be appealed within 60 days of the date of mailing printed on the tax bill or the postmark date, whichever is later. For disaster relief assessment appeals, a claim must be filed within six months of the reassessment notice.Homeowners desiring a more complete guide to the appeal process may obtain a copy of the BOE’s publication 30, Residential Property Assessment Appeals. This guide may also be found on the BOE’s website at www.boe.ca.gov/proptaxes/asmappeal.htm.

Informal Discussion with Assessor

Often, a taxpayer’s first step in challenging an assessment is simply to discuss the matter informally with the  assessor’s office. The taxpayer should request an explanation of how the assessment was determined and inform the assessor of any facts that may affect the value of the property.

Administrative Hearing

The first formal level of appeal is to the board of supervisors, sitting as a county board of equalization, or to the assessment appeals board if the county has created one. Taxpayers may obtain applications for changed assessment from the clerk of the board or the county assessor’s office. Some counties use hearing officers for certain appeals. The hearing before the board is an administrative hearing. The property owner can choose to be represented by a lawyer. As a general rule, the property owner has the burden of proving that the assessor has improperly valued 

the property. However, when the property is an owner-occupied, single-family dwelling which is the principle residence of the taxpayer, the burden falls on the assessor to prove that the property was valued correctly. If the taxpayer wants a written explanation of the board’s or hearing officer’s decision, the taxpayer should request  a “Findings of Fact” before the beginning of the hearing. Findings and a transcript are usually necessary when a taxpayer seeks judicial review of an adverse decision.

Further information on the actual hearing process may be found in the BOE’s Assessment Appeals Manual. This manual provides information and instruction to local boards on assessment appeals practices and procedures. The BOE has also created a new video that explains and describes the appeals process. The manual, video, and other information regarding assessment appeals may be found on the BOE’s website at www.boe.ca.gov/proptaxes/asmappeal.htm.

Court Appeal

If the county board denies the appeal, the taxpayer may file an action in superior court, but only under certain circumstances. Generally, the court will hear a case only for the following reasons: arbitrariness, lack of due process, abuse of discretion, failure to follow standards prescribed by law (for example, using an erroneous method of valuation), or other questions of law. The court will not receive new evidence of value; it will only review the record of the hearing before the county board. If it finds that the county board’s decision is supported by credible evidence, it will uphold the board’s decision.

Taxpayers must exhaust their administrative remedies before seeking relief in court. This includes filing an application for changed assessment with the appeals board and a claim for refund of taxes with the appropriate county official(s). An action against a county must be filed in superior court within six months after the county denies the claim for refund. However, if the county fails to act on the claim for refund for more than six months, the taxpayer may consider the claim rejected and file legal action without waiting for the county to act.