California Real Estate & Prop 13

California’s Prop 13 sets limitations on taxation of all real estate and property in the State via limitations in both assessments and property tax rates. After a property purchase or new construction, the County Assessor enrolls a base year assessment. That base year assessment does not typically change unless a timely appeal is filed, called a base year appeal. In future years, the assessment may be increased over the prior year enrollment by a property tax inflation index factor which is set at the lesser of 2.0% or the California CPI. This sets a maximum assessment by law for every property in California.

Other than base year appeals which permanently change the assessment basis, including future years, there are adjustments which may be applied to an assessment for only a single year, known as Prop 8 appeals. A Prop 8 appeal does not change the maximum assessment basis for indexing of future year assessments. Therefore, in subsequent years, the assessment may return to where the it would have been if a Prop 8 reduction had not previously been granted, including the maximum 2% assessment inflation index. Most often, Prop 8 appeals are on the basis of a property’s individual market value being accepted as less than the indexed value due to local market conditions, or change in tenancy, or property condition.

The Assessors’ offices most typically enroll the maximum assessment indexed forward for each property annually. A taxpayer may file a formal property tax appeal by the filing deadline in the county, or first file an informal request for review. By this process, a taxpayer or agent may seek an assessment adjustment below the scheduled property tax enrollment either before the formal enrollment of the assessment for a given tax year, or after the new assessment is published for the year, or both. After an appeal has been filed by a taxpayer or agent, either on a formal or informal basis, the appeal may be resolved either by roll correction by the Assessor’s Office, or by a settlement (“stipulation”) signed by both applicant and Assessor’s representative, or by written decision from the Assessment Appeals Board.