The importance of filing a Change of Ownership Statement (COS) was highlighted in two appellate court rulings in California.
Failure to file can have significant ramifications including losing the burden of proof on a personal property purchase price and facing a real property assessment that results in back taxes.
In HGST, Inc. v. County of Santa Clara HGST, Inc. filed an action seeking a refund for business property taxes. HGST bought the property from IBM for $2.4 billion in 2002. The property primarily consists of fixtures, machinery, and equipment for the manufacturing of hard disk drives.
When transactions involve property other than real property, taxpayers are required to provide a COS with certain prescribed information. Failure to provide this statement results in the elimination of the purchase price presumption. HGST argued that, although it did not provide any form setting forth a change in ownership statement, it provided the underlying information.
The trial court ruled, “Although HGST claims that the Purchase Price Presumption is applicable, it failed to offer into evidence that in the Change in Ownership Statement. Given this failure of proof, the Purchase Price Presumption is not applicable as a matter of law.”
When counties reassess real property based on a triggering event that occurred prior to the current assessment year, the assessor has the authority to levy retroactive assessments to recapture any under-taxation due to a change in ownership.
In Prang v. Los Angeles County Assessment Appeals Board No. 2, Assessor Jeffrey Prang petitioned for a writ of administrative mandate challenging a four-year limitations period for determining escape assessments in a change in ownership.
The Downey Landing Shopping Center merged with Downey Landing SPE, LLC. The merger was ultimately determined to have effected a change in ownership. Downey recorded a Certificate of Merger with the county but did not file a COS with the State Board of Equalization.
The 5th Appellate court affirmed that if taxpayer who acquired a legal entity recorded a document with less than all of the information required, then the filing requirement was not satisfied and the assessor may levy escape assessments back to the year of the change in ownership. The total for the escape assessments on the shopping center parcels totaled $16,014,000.