Legislation has been introduced to overhaul California's Proposition 13 and allow for regular reassessments of commercial and industrial properties.
The proposal creates a split roll that would only protect homes and agricultural land from increasing property tax assessments.
State Constitutional Amendment 5
State Senators Loni Hancock and Holly Mitchell filed SCA 5 in early June. The measure requires regular reassessment of offices, factories, and other business properties, ensuring that they are taxed closer to current market value.
Under Prop 13, real estate is only reassessed when there's a change in ownership. As SCA 5 explains,
"The California Constitution generally limits ad valorem taxes on real property to 1% of the full cash value of that property. For purposes of this limitation, “full cash value” is defined as the assessor’s valuation of real property as shown on the 1975–76 tax bill under “full cash value” or, thereafter, the appraised value of that real property when purchased, newly constructed, or a change in ownership has occurred."
SCA 5 also proposes to exempt the first $500,000 of tangible personal business property from taxes beginning January 1, 2019, a five-year phase in for assessment increases greater than 25%, and a $3,000,000 county aggregate value to remain under Prop. 13.
Not a New Idea
Attempts have been made to revise Prop 13 many times in the past. Most recently, a bill was defeated in the State Assembly last year that would have restricted the ability of businesses to avoid reassessment when a building changes hands.
The latest push for a split roll comes at a time when there are serious discussions in certain circles about how to keep the revenue flowing from the Proposition 30 tax increase that is due to expire over the next few years.
Since SCA 5 is a constitutional amendment, it requires a two-thirds vote in the legislature before it can be placed on the ballot in November 2016. A two-thirds majority vote would not require approval from the governor.
If the measure is not approved by lawmakers, supporters could still collect petition signatures to place it on the ballot.