Propositions 13, 60 & 90


Proposition 8 Temporary Assessment Relief, More Information

 

A Proposition 8 reduction is a form of assessment relief. It may be applied when a property's assessed value exceeds the current market value.  In May all property owners receive notification of their assessed value.  An informal Proposition 8 request submitted to the Assessor is separate from a formal assessment appeal filed with the independent Assessment Appeals Board.  In 2008 the Assessor's Office has proactively provided over 41,000 properties with temporary Proposition 8 reductions in assessed value. 

 

The current year filing period for Proposition 8 relief ended September 15.

 

Proposition 8, passed in November 1978, amended Proposition 13 to reflect declines in value. As a result, Revenue & Taxation Code Section 51 requires the Assessor to annually enroll either a property's Proposition 13 factored base year value, or its Market Value as of January 1, (taking into account any factors causing a decline in value), whichever is less.

Prop 8 reductions in value are TEMPORARY reductions which recognize the fact that the current market value of a property has fallen below its current (Prop 13) assessed value. Once a Prop 8 value has been enrolled, a property's value must be annually reappraised to determine whether its then current market value is less than its Prop 13 factored base year value.

When and if the market value of the previously reduced assessment (Prop 8) increases above its Prop 13 factored base year value, the Assessor will once again enroll its Prop 13 factored base year value. Prop 8 values can change from year to year as the market fluctuates up and down, but in no case may a value higher than a property's Prop 13 factored base year value be enrolled.

If you think your property is being taxed on a value that is higher than its current market value, submit a Prop 8 temporary relief form or contact the Assessor's Office, and ask for a review form. Assessment Review Requests should be submitted to the Assessor's Office by June 15, and no later than September 15, of the current assessment year.

Important Points

  • The Assessor can only consider the market value of your property as of the lien date (January 1st).
  • The market value of your property will be determined by analyzing sales of comparable properties in the area.
  • Properties with characteristics similar to yours must have sold for less than your current assessed value.
  • Supplemental Assessments will not be revised due to Proposition 8 reviews.

*Base year value/inflationary factor: The value established as of the date of acquisition and/or completion of new construction. This value is adjusted each year by an inflationary factor. The inflationary factor is the lesser of 2% or the California Consumer Price Index (CCPI) rate.

An Example of how it works:


Let's say you bought a home several years ago for $100,000. The Assessor determined that the purchase price was the fair market value, so the new base year value of the property was set at $100,000.

Over the next year, real estate values increased by 10% and you could sell your home for $110,000. That's good, you acquired $10,000 in equity. Even though the market value increased by 10%, the factored base year value could only increase 2% to $102,000, because of the limits set by Prop. 13. The Assessor compares the market value to the factored base year value, and enrolls the lesser of the two. The assessed value is $102,000.

The real estate market continued to grow, and property values in Santa Clara increased another 10% the following year. Last year you could have sold your home for $110,000, this year you could sell it for $11,000 more, or $121,000. But your Prop. 13 factored base year value was considerably less. Last year's value of $102,000 plus 2% gives you a new factored base year value of $104,040. The Assessor again compares the two values, and enrolls the lowest one. This year's assessed value is $104,040.

You can see in this example, after 2 years the difference between the market value and the assessed value is $16,960! Proposition 13 protected you from unpredictable increases in property taxes because the assessed value was based on factored base year value, not market value.

But what happens if the market value goes down? Proposition 8 allows the Assessor to temporarily reduce the assessed value of property if the market value is lower than the factored base year value. This is exactly what happened a few years ago to many property owners in Santa Clara. As a result the Assessor temporarily reduced the assessed value of over 100,000 parcels.

Let's go back to our example and say the market dropped 20%, and you could only sell your home for $96,800. At the same time, the last factored base year value of $104,040 is increased by 2% to $106,120. The Assessor compares the two values and sees that the market value is lower. The property receives a temporary reduction because of Prop. 8, and the assessed value drops from $104,040 to $96,800.

When the real estate market rebounds, market values of many properties are once again higher than their factored base year values. As a result, the Assessor is returning many parcels to the value limits set by Prop. 13. That means that if you received a temporary reduction in the past, you could see what looks like a greater than 2% increase in the assessed value this year.

Here's what's happening; the temporary relief that Prop. 8 gave you due to the depressed real estate market is now over and the assessed value is returning to the limits set by Prop. 13. In many cases, the assessed value is still much lower than the current market value of the property.

Back to our example, suppose the market jumps 30% in one year and you could sell your home for $125,840. The factored base year value is increased by 2% from $106,120 to $108,242. Now the factored base year value is lower than the market value, so the Assessor enrolls an assessed value of $108,242. Your assessed value goes up from $96,800 last year to $108,242 this year. You are again receiving the benefits of Prop. 13, and your assessed value is $17,598 lower than the market value.

Can the Assessor increase your assessed value more than 2% in one year? Yes, your assessed value can go up more than 2% in one year if you received a temporary (Prop. 8) reduction in the previous year, but it cannot go higher than the factored base year value which is limited to increases of no more than 2% per year.

Your situation may be different, and the Assessor's staff is ready to help you understand the assessed value of your property. If you have any questions, or think that the market value of your home is lower than the new assessed value on the value notice mailed in May, contact the Assessor's Office.

For More Information Please Contact:

Assessor Real Property - General Questions, Property valuations and Propositions 3, 8, 60, 90
70 West Hedding St., East Wing
5th Floor
San Jose, CA 95110
Phone: 408-299-5300
Email: RP@asr.sccgov.org
Fax: 408-298-9439

Related Link


How Proposition 13 Works

 

Frequently new homeowners will ask why they are paying twice as much (or far more) in property taxes than their neighbor. The answer is Proposition 13. Passed by the voters in June, 1978, Proposition 13 is an amendment to the California Constitution that limits the assessment and taxation of property in California. It restricts both the tax rate and the rate of increase allowed in assessing real property as follows:

  • The property tax cannot exceed 1 % of a property's taxable value, plus bonds approved by the voters, service fees, improvement bonds, and special assessments.
  • A property's original base value is its 1975-76 market value. A new base year value is established by reappraisal, whenever there is a change in ownership or new construction. Except for change in ownership or new construction, the increase in the assessed value of a property is limited to no more than 2% per year.
  • Business Personal property, boats, airplanes and certain restricted properties are subject to annual reappraisal and assessment.
  • In the case of real property, the adjusted (factored) base year value is the upper limit of value for property tax purposes.

Historically, the market value of real property has increased at a significantly greater rate than the assessed value, which is limited to no more than 2% per year, unless there is a change in ownership or new construction.

The result has been a widening disparity between the market value and assessed value of property in Santa ClaraCounty. Long time property owners benefit from lower assessments while new, and frequently younger property owners, are adversely impacted by assessments that can be as much as ten times greater than the owner(s) of a similar property held for many years.

 

 

 

Proposition 60

 

Proposition 60 allows homeowners 55 years of age and older to transfer the base year value of their principal residence to a newly purchased residence in the same county, providing that certain requirements are met.

The requirements, in part, for this exclusion include the following:

  • The replacement residence must be purchased or newly constructed within two years (before or after) of the sale of the original residence. The purchase or new construction of the replacement dwelling must include the purchase of that portion of land on which the replacement dwelling will be situated.
  • The principle claimant or the claimant's spouse who resides with the claimant must be at least 55 years of age at the time the original residence was sold. The claimant must be an owner of record of both the original and replacement residences.
  • The sale of the original residence must qualify for reassessment under the provisions of California Revenue and Taxation Code Section 110.1.
  • The principle claimant must have been either:
    1. Receiving, or eligible for, a Homeowner's Exemption, or
    2. Receiving a Disabled Veteran's Exemption on the original and replacement residences.
  • The replacement residence must be equal to or lesser in value than the original residence. "Equal to or lesser in value" has been defined as: 100 percent of the market value of the original property as of its date of sale if the replacement dwelling is purchased before the original property is sold; 105 percent of the market value of the original property as of its date of sale if the replacement dwelling is purchased within one year after the original property is sold; or 110 percent of the market value of the original property as of its date of sale if the replacement dwelling is purchased between one and two years after the original property is sold.
  • Special rules apply to multi-unit dwellings and mobile homes.
  • Relief pursuant to Section 69.5 (Proposition 60 and 90) of the Revenue and Taxation Code can be granted only once, except for certain circumstances regarding severely and permanently disabled persons as defined in Revenue and Taxation Code Section 74.3.

Claims must be filed within three years of the date the replacement residence is purchased or newly constructed. You must complete the claim form and provide evidence and/or declare under penalty of perjury that you are at least 55 years of age. Application forms may be obtained by contacting the Real Property Division of the Santa Clara County Assessor's Office

 

Proposition 90

 

Proposition 90 allows a homeowner to transfer the base year value of their principal residence in one county to a newly purchased residence in another county providing that certain requirements are met. Only a limited number of counties are participating in Proposition 90.

Proposition 90 Requirements (Santa ClaraCounty):

  • The requirements for Proposition 90 in Santa ClaraCounty are the same as for Proposition 60 except for the following:  

1.  Effective date: November 9, 1988. 
2.  A processing fee of $200 is required. 

  • The effective dates and filing fees vary from county to county. Those property owners interested in transferring the base year value from their principal residence located in Santa ClaraCounty to a newly purchased residence in another county should call that county to make sure that the other county is participating in Proposition 90.
  • The following is a list of those counties which have approved Proposition 90 and will currently accept base year value transfers from other counties.

 

APPROVED

EFFECTIVE DATE

Alameda

November 9, 1988 

Los Angeles  

November 9, 1988  

Orange  

November 9, 1988  

San Diego  

November 9, 1988  

San Mateo  

November 9, 1988  

Santa Clara  

November 9, 1988  

Ventura  

May 4, 1992