On November 3, 2020, California voters approved Proposition 19, concerning property tax transfers, exemptions, and revenue for wildfire agencies and counties amendment. This act will: 1) allow eligible homeowners to transfer their tax assessments anywhere within the state and allow tax assessments to be transferred to a more expensive home with an upward adjustment, 2) increase the number of times that persons over 55 years old or with severe disabilities can transfer their tax assessments from one to three, and 3) require that inherited homes that are not used as principal residences, such as second homes or rentals, be reassessed at market value when transferred. This blog will aim to answer some frequently asked questions and provide other important info regarding Proposition 19.
Q: Is Proposition 19 retroactive and would it cause property transfers that have already received the benefit of Proposition 60/90 to be reassessed?
A: The Proposition 19 operative date for the base year value transfer provisions is April 1, 2021. It is not expected that base year value transfers that have already been processed under Propositions 60/90 and Proposition 110 will be affected.
Q: If I use my one-time base year value transfer under Proposition 60/90, can I transfer that base year value three more times under Proposition 19?
A: It is anticipated that three transfers under Proposition 19 will be allowed regardless of whether a property owner transferred a base year value in the past under Propositions 60/90 and Proposition 110.
Q: Under Proposition 19, can I transfer my base year value to a home of any value?
A: Yes; however, if the full cash value of the replacement home is greater than the full cash value of the original home, the difference in full cash values will be added to the transferred factored base year value. For example, an original home was sold and had a full cash value of $400,000 and a factored base year value of $100,000 at time of sale. If a replacement home is purchased for a full cash value of $600,000, the difference of $200,000 ($600,000 – $400,000) is added to the factored base year value of $100,000. Thus, the replacement home will have a new base year value of $300,000 ($100,000 + $200,000).
Q: Is Proposition 19 retroactive to disasters that occurred in 2020?
A: Proposition 19 is effective on and after April 1, 2021, and also requires that a replacement primary residence is purchased or newly constructed as a person’s principal residence within two years of the sale of the original primary residence. Proposition 19 is not dependent on the date of disaster.
Q: To qualify for the base year value transfer, does the homeowner have to fall into all 3 categories (1) age 55 or over and (2) disabled and (3) a victim of a disaster (all three)?
A: No, under Proposition 19, a homeowner may qualify for the base year value transfer under any one of the three categories listed; they do not need to meet all three categories in order to qualify.
Q: Is Proposition 19 retroactive and would it cause property transfers that have already received the benefit of Proposition 58 (Parent-Child Exclusion) to be reassessed?
A: No, Proposition 19 is clear that Proposition 58 applies to transfers that occur on or before February 15, 2021, and that Proposition 19 applies to transfers that occur on or after February 16, 2021.
Q: If a family home is gifted to two children, do both children have to reside in the family home as their primary residence in order to receive the parent-child exclusion?
A: The intent of the Legislature was to allow the exclusion as long as the parent’s family home becomes the family home of at least one of the children.
Q: Under Proposition 19, if I inherit my parent’s family home and move into it and establish it as my principal residence, must I live continually in the home to receive the parent-child exclusion? What happens if I move somewhere else?
A: At least one eligible transferee must continually live in the property as his or her family home for the property to maintain the exclusion. Thus if the property is no longer your family home, it will receive a new taxable value. The new taxable value will be the fair market value of the home on the date you inherited it, adjusted each year for the inflation factor.
Q: Does Proposition 19 apply to a transfer of a rental home?
A: No, Proposition 19 limits the parent-child exclusion to a transfer of a family home that is the principal residence of the transferor and becomes the principal residence of the transferee.
Q: Will I lose the parent-child exclusion if the value of the family home is greater than $1 million dollars?
A: The value limit under Proposition 19 is the sum of the factored base year value plus $1 million. If the market value exceeds this limit, partial relief is available. The amount exceeding the excluded amount will be added to the factored base year value. For example, a family home has a factored base year value (FBYV) of $300,000 and a fair market value of $1,500,000. The excluded amount under Proposition 19 is $300,000 + $1,000,000 = $1,300,000. The difference, $1,500,000 – $1,300,000 = $200,000. Thus, the adjusted base year value is $500,000 (FBYV $300,000 + difference of $200,000).