Property Taxes
 Frequently Asked Questions – Proposition 8 / Decline in Value

 


 What is Proposition 8?  In 1978, California voters passed Proposition 8, a constitutional amendment to Article XIII A that allows a temporary reduction in assessed value when real property suffers a decline in value. A decline in value occurs when the current market value of real property is less than the  current assessed (taxable) factored base year value as of the lien date, January 1. Proposition 8 is codified by section 51(a)(2) of the Revenue and Taxation Code.  Real property may decline in market value from one lien date to the next lien date; however, it will not benefit from a lower assessment unless its market value falls below the current factored base year value. For example, if you purchase your property during a time when the real estate market falls dramatically, such as during the years 2005 through 2008, or if your property is substantially damaged due to a storm or fire that causes a reduction in your property’s value, it is likely that your property will benefit from a Proposition 8 reassessment. The decline in value is typically temporary and may be the result of changes in the real estate market, the neighborhood, or the property itself.

 

How does the proposition work?  When the market value of a property on the January 1 lien date falls below the factored base year value (assessed value), the assessor is obligated to review the property and enroll the lesser of the factored base year value or market value. The factored base year value of real property is the market value as established in 1975 or as established when the property last changed ownership or when the property was newly constructed.  A property that has been reassessed under Proposition 8 is then reviewed annually to determine its lien date value. The assessed value of a property with a Proposition 8 value in place may increase each lien date (January 1) by more than the standard two percent maximum allowed for properties assessed under Proposition 13; however, unless there is a change in ownership or new construction, a property’s assessed value can never increase above its factored Proposition 13 base year value after adjusting for the annual increase.  Example: A property previously assessed at $500,000 received a Proposition 8 reduction in value to $450,000 as of the lien date. By the next lien date, the property’s market value had increased five percent, or $22,500, and, thus, the assessor enrolled a value of $472,500 for that year. Because the current market value is less than its current factored base year value of $510,000 ($500,000 + 2% annual increase), increasing the assessed value by five percent is legal since the two percent limitation of Proposition 13 applies only to increases in the base year value. Here, since the current market value continues to be less than the factored base year value, an increase beyond the two percent limitation is appropriate. As the year progresses, property values rebound dramatically and the market value of the property is now $525,000. Because the current factored base year value for this year is $520,200 ($510,000 + 2%), which is lower than the current market value, the adjusted factored base year value would be reinstated and enrolled, and the annual increase will again be limited to two percent.

 

What steps do I take to have my property considered for Proposition 8 assessment?
  Due to the nature and severity of the market, most all county assessors are proactively reviewing assessed value to ascertain whether temporary reductions are warranted without having the taxpayer request a review. This review process is performed by the county assessor and is in addition to the formal appeal process with the county assessment appeals board that is available to taxpayers.  Some assessors have indicated on their websites that they are reviewing certain property types purchased between specific time periods (i.e. all single family homes and condominiums purchased during 2004 to 2008). To minimize the number of calls assessors' offices are receiving, you should first peruse your county assessor's website for their specific procedures and filing requirements for Proposition 8 reviews. On their websites, look for topics such as Reassessment Review, Decline in Value, Request for a Review, Proposition 8, Changes in Value, Property Tax (Savings) Programs, Tax Relief, Property Valuations, Real Property, Assessment Information, or Assessor Forms. Contact information and website links for each county is available via the following link: www.boe.ca.gov/proptaxes/assessors.htm.

 

Do properties other than single family residences qualify?  Yes. All real property qualifies, including orchards, commercial or industrial buildings, refineries, etc.

 

The assessed value of my property increased more than two percent this year. There was no change in ownership or new construction. Doesn’t Proposition 13 limit annual increases in value to two percent?  Yes, under Proposition 13, base year values may not be increased more than two percent per year. However, this two percent limitation applies only to increases in the base year value. Under section 51  When real estate values increase due to market conditions, the assessor must assess properties to either their original base year values, adjusted for inflation up to two percent, or to their current market values, whichever is lower. This may result in increases to Proposition 8 values in excess of two percent from one lien date to the next. For example, in a situation where a property’s value increased 10 percent since the prior lien date, but the value is still below the Proposition 13 adjusted base year value, the new increased Proposition 8 value will be enrolled. of the Revenue and Taxation Code, Proposition 8 values are not considered base year values, but are declines in value; thus a property assessed under Proposition 8 is not restricted to the maximum two percent increase. Once the market value increases and is equal to or greater than the factored base year value (adjusted annually for inflation), then the factored base year value is restored and the annual increase will again be limited to two percent.

Comparable Sales Information

 

What kind of information do I need to provide on the claim form?
  Whether or not your county assessor requests or requires it, you should provide the assessor with information that supports your opinion that the market value for your property is less than the assessed value. The best supporting documentation is information on sales of comparable properties in your neighborhood. You should select two comparable sales that sold as close to the January 1 lien date as possible, but no later than March 31.

 

What is a comparable sale?
  A property sold with features that are similar to your property is a comparable sale. Comparable sales information helps you analyze the value of your home. For example, a property similar in location, zoning, size, number of bedrooms and bathrooms, age, quality and condition to yours that sold in the "open" market is a comparable sale. However, not all of these factors must be the same as your property to be a comparable sale – "similar" does not mean "identical." An "open" market means the transaction must have been offered for sale under typical market conditions; thus, a sale to a relative or a sale under distress may or may not have been sold under open market conditions. If using such sales, further investigation is required to determine if any unusual or favorable conditions were involved.

 

Where can I find comparable sales information?

 

CALL ME, YOUR REAL ESTATE RESOURCE AND I WOULD BE HAPPY TO PROVIDE COMPS FOR YOUR HOME.

 

Why must I provide information on comparable sales? I don't know anything about appraising or the real estate market. Isn't it the assessor's job to determine if my property’s current market value is lower than the current assessed value?  Often the county assessor will automatically enroll a Proposition 8 value without the owners’ request; however, it is ultimately the property owners' responsibility to apply for the decline in value reassessment if they think their property has decreased in value.  The assessor's office constantly monitors market conditions and, when practical, lowers assessed values on a mass basis. Owners are notified and may file an assessment appeal if they feel the value was not lowered sufficiently.  The local newspapers and other real estate reports indicate that property values in my neighborhood have declined ten percent this year. Wouldn't this be proof? Do I still have to provide comparable sales.   

 

Can Proposition 8 cases be appealed solely on economic evidence, using the income approach to value, or is it the rule that comparable sales must also be used?  Any relevant evidence may be admitted if it is the customary method in which a property is appraised.

 

Determination of Value

I think the assessed value of my home has been higher than market value for the past two years. Can I apply for Proposition 8 review for both last year and this year?
No. Only the most recent January 1st assessment may be reviewed. Proposition 8 neither allows for relief pertaining to other dates / prior years nor applies to supplemental assessments. If you are questioning the assessment from a prior year, you must go through the assessment appeals process.

 

If my assessed value is reduced under Proposition 8, how long will it last?

Proposition 8 reassessments last at least one year; the value reductions are not permanent. The assessed value may either decrease or increase depending on the market value of your property on January 1 of each subsequent year. Your assessed value, however, will never result in an increased value that is more than the trended base year value. Once the market value of a Proposition 8 property exceeds its Proposition 13 factored base year value, the Proposition 13 value will be reinstated as the upper limit of assessed valuation.
Please note that your factored base year value continues to increase by an annual inflation factor of no more than two percent each year even during the time your property is assessed under Proposition 8.

 

What can I do if I don't agree with the value the assessor has concluded after having filed my Proposition 8 application?

If you disagree with the county assessor’s findings, you may file a formal appeal with the County Assessment Appeals Board or the County Board of Equalization. These Boards are independent bodies established to resolve differences in property value opinions between the county assessor and property owners. You must file your appeal on an Application for Changed Assessment between July 2 and either September 15 or November 30 of the fiscal year that you are disputing. To determine the filing deadline date for your county, go to /proptaxes/pdf/filingperiods.pdf.

 

I co-own an undivided 50 percent interest in real property with two base year values ($70,000 and $100,000) for a total of $170,000. The estimated market value for the property was $200,000 when I purchased it earlier this year, but by year end, the property value had already declined to $180,000.

  a) What value will be used to determine the assessed value for the first year after purchase?
  b) What value will be used to determine the assessed value for subsequent years?
a) As section 50 governs the value to be placed on the roll for the first lien date following a change in ownership, each of your fractional interest will be treated separately to determine whether the base year value or current market value is the lower amount:
Base year value #1: $70,000 x 1.02 factor = $ 71,400
+ fair market value on your interest --
$ 90,000 (base year value #2)
= $ 90,000
Total base year value first year after purchase = $ 161,400
Since this value is lower than the current market value (assuming that the current market value has in fact declined to $180,000), the factored base year value of $161,400 will be enrolled as the first year's assessment.
b) Section 51 governs the taxable value for all subsequent assessment years. The market value of your property will be based upon the value of the entire appraisal unit as it is bought and sold in the market. For the next fiscal year, the factored base year value would be $173,400 ($170,000 x 1.02 = $173,400). Assuming the market value has not changed, the current market value of the entire property is $180,000, thus, the factored base year value should be enrolled since it is the lower value.

I purchased my home in July 2006 for $600,000, which was the assessed value on my 2006-2007 property tax bill. Sales of similar model homes in January through March 2007 were $600,000; however, sales in September and October of 2007 were $570,000, and current listings for sale are even lower. Does my home qualify for a Proposition 8 reassessment?   Your property does not qualify for Proposition 8 relief for the 2007-2008 tax year because the assessed value is not lower than the market value on January 1, 2007. However, you may qualify for Proposition 8 relief for the next tax year, 2008-2009, if the market value on January 1, 2008, continues to be lower than the assessed value as the recent sales may indicate.

 

What will happen to my Proposition 8 assessed value if market values start to rise?

A Proposition 8 reduction in assessed value is only temporary, and the assessor is required to review the market value of the property each lien date after the reduction, until such time as the factored base year value is less than or equal to the market value at which time the factored base year value will be reinstated.
Unless there is a change in ownership or new construction, this increase in value cannot exceed the original assessed value (base year value) plus the annual inflationary factor not to exceed two percent per year.

Filing Requirements

Where can I get an application or form to file for Proposition 8 tax relief?
You must contact your local county assessor for specific filing procedures. Due to the wide-spread declines in value, many counties have provided an informal form to request a review of your property's assessed value. Some counties have this form available on their website, or you may request that one be sent to you or you may pick one up from their office. Some counties only require that you notify them in writing or by calling them to request a review. To ease the number of calls your county assessor is receiving due to the current market situation, please first visit their website, which may be accessed via the following link: www.boe.ca.gov/proptaxes/assessors.htm.

 


When can I file my application or make my request for Proposition 8 reassessment?
Generally, you must file your claim form with the assessor between January 1 and December 31 for the fiscal year beginning on July 1 of that same year. However, some county assessors request that you file only during certain time periods. Please check with the county assessor's office where your property is located to determine whether specific filing periods apply in that county.

 

Do I file the Proposition 8 application annually?

No. Any properties that have received Proposition 8 reductions in the prior year as a result of the assessor's informal review process or as a result of an assessment appeals board decision is automatically reviewed in the following year to ascertain whether that year's lien date value should be maintained, lowered, or increased. However, keep in mind that you must annually review the assessed value of your property to determine your need to confer again with the assessor or file a formal Application for Changed Assessment.

 

I didn't look at my tax bill until it was due in November, and I paid it, but I'm pretty sure the assessed value is higher than the current market value. Is it too late to do anything about it now?

No. Your assessed value may still be reduced if the assessor agrees with you. In the case where the current market value of the property should have been enrolled rather than the factored base year value, section 4831(b) of the Revenue and Taxation Code allows the assessor to correct the assessment roll within one year after the roll is annually due to the auditor on July 1 for any errors or omission involving the assessor’s value judgment in failing to reflect a decline in value.

Claim Processing

What happens after I submit my claim to the county assessor or after I notify the assessor's office of my request for a Proposition 8 reduction?
If your property’s current market value is below its factored Proposition 13 base year value, then:
The assessed value will be lowered to market value for the applicable fiscal year.
The annual tax bill sent to you will reflect the reduced value; however, some assessors may also mail out a notice of reduced value to notify you of the changed value prior to you receiving the tax bill.
The following year, the assessor will repeat this process and will enroll the current market value at that time or the Proposition 13 factored base year value, whichever is lower.

 

I filed my Proposition 8 application by December 31. When and how will I know if my property’s value will be reduced?

Due to the widespread declines in value, your assessor's office may be backlogged and notifications will be delayed. Some assessors will mail a notice while some will merely send out a corrected tax bill. Please check with your county assessor's office for their procedures at www.boe.ca.gov/proptaxes/assessors.htm. However, if you haven't heard from your assessor by the time your county's formal assessment appeals deadline draws near, you may consider filing an Application for Changed Assessment with your county clerk of the board of supervisors to ensure your property value is reviewed for the year in question.                                                                                                         
I filed a Proposition 8 application in May 2008 to request that the value enrolled on my property as of January 1, 2008 be reviewed. Can I postpone paying the first installment of my taxes due in November 2008 if the assessor hasn't notified me of any changes to my property value?
No. You must pay your property taxes according to the tax bill you received or penalties and interest will incur. If a reduction in assessed value is warranted, a notice of correction and a revised tax bill or refund based on the difference in value will be processed by your county assessor. If you have not been notified of the results of the assessors' review by the time the deadline to file an assessment appeal in your county draws near, you may want to file a formal assessment appeals application to ensure the value of your property is reviewed.

Other Declines in Value

We had a fire in the studio unit located above our detached garage. We decided not to rebuild the studio unit. Will the property’s assessed value be lowered even though the assessed value of the property with the studio was lower than current market value?
If all or a portion of the improvements are destroyed or removed from a property, the assessor should recognize the removal of the improvements and, thus, the value may be lowered if such removal results in a lower market value. If the base year value of the studio was separate from your main home, however, the removal of the improvements will only result in a reduction of its assessed improvement value from your tax bill, leaving the factored base value of your main home unaffected. Unlike Proposition 8, where the decline in value is reflected as of the January 1 lien date, if the assessor has recognized the removal of the improvements, you may receive a supplemental assessment to reflect the decrease in value as of the date the studio unit was damaged and removed.                                          
If an improvement suffers from physical depreciation and a new, lower base year value is established due to this, can the former, higher base year factored value be reinstated if the improvement subsequently increases in value?
No. Provided there was no new construction to the improvement or a change of ownership, once a new base year value is established, increases are limited to two percent per year. The former base year value is no longer used as any basis for comparison.

What if my improvement declines in value by ten percent due to deferred maintenance but the parcel's land value increases by more than two percent? Can the improvement value be reduced to its market value and the land value be limited to the two percent increase, resulting in an overall decline in value?
The land and improvement make up the entire appraisal unit. There is no legal provision to review separately the land and/or improvements for assessment purposes; thus the total assessed value of both the land and improvements will be reviewed. If the increase in land value offsets the decrease in improvement value, no reduction will be considered. The two percent increase limitation or decline in value reductions are not separately applied to the land or to the improvements.

 

I still have questions on Proposition 8. Who can I call?

If you have further questions, you may call the Board's Assessment Services Unit at
916-445-4982