Two California senators and the state’s 58 county assessors are seeking clarification on the implementation of a new property tax measure, and they’re hoping to delay a provision that makes it more costly for children to inherit some homes from their parents.
Proposition 19, narrowly approved by voters in November, took effect Feb.16. It allows California homeowners who are over the age of 55, disabled or victims of natural disasters to transfer their existing property tax base to a replacement home in the state, even if the new home is more expensive.
But tucked inside the bill is a provision that repealed Prop. 58, a 1986 constitutional amendment that said parents could transfer ownership of any home to their children without a change to the property tax bill.
Under Prop. 19, properties that are not farms or the principal home of the child within a year would be reassessed at current market value when the title changes hands. That would also apply to a child who chooses to keep the property as a second home, vacation home or rental property.
Any of those scenarios would likely hike property taxes by thousands of dollars when a home is transferred from parents to children, or in some cases, from grandparents to grandchildren.
Prop. 19 was backed by the California Association of Realtors, which supported the measure with $35.7 million. The industry group, which benefits from home sales, saw a barrier for older residents who either wanted to downsize or move but wouldn’t because they were locked into a low tax rate on their longtime homes.
Senate Bill 668, authored by Sen. Patricia Bates, R-Laguna Nigel in partnership with the Howard Jarvis Taxpayers Association, would delay implementation of the property inheritance provision until Feb. 16, 2023.
A two-year delay, Bates said, would give the state time to assess the issues. Families would also have additional time to seek professional advice on how a property transfer might affect potential tax liabilities.
“While Prop. 19 is now law, the measure is silent on some issues regarding implementation,” Bates said in a statement, adding that it’s not always possible for family members to quickly relocate — particularly amid the COVID-19 pandemic.
The bill is awaiting referral to a Senate policy committee.
Sen. Robert M. Hertzberg, D-Van Nuys, hopes to bring clarity to Prop. 19 through Senate Bill 539, which he introduced last month.
County assessors, the legislation says, “need explicit authority” to administer the new law, and property owners need clarity to make informed estate planning decisions.
The bill is set for a hearing in the Senate Appropriations Committee on Monday.
Los Angeles County Assessor Jeffrey Prang said his office has no clear guidance on how to implement portions of Prop. 19, a measure he says was “hastily written at the end of the legislative session with confusing and conflicting language.”
“We spent the Christmas holiday combing through the measure to come up with an inventory of the deficiencies,” he said.
The California Assessors’ Association and Board of Equalization crafted a detailed legislative package with proposed changes to Prop. 19 on a variety of issues, including what properties are eligible for transfer, who is eligible and what the application process is. The package has failed to gain traction.
Prang offered an example of how Prop. 19 can be confusing.
“Suppose you are going to inherit your mother’s house and that property tax base as well,” he said. “What happens if she develops Alzheimer’s and is living in a memory-care facility? Under Prop. 19, you would not qualify to inherit that property because that would not be her primary residence.”
The situation would be equally unwieldy if multiple siblings inherited a home, Prang said.
“The law says that must become your primary residence,” he said. “That means they would all have to move into the house, which is absurd.”
Prang expressed his frustration in a letter sent last month to the Los Angeles County Board of Supervisors.
“Assessors are likely to interpret some portions of Proposition 19 differently from county to county,” he wrote, adding that legislative action taken may later “invalidate, supersede, modify intermittently, or retroactively contradict those interpretations.”
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