Annual Reassessments Are Required By Prop 8, Are Assessors Ignoring The Law?
- Written by Rogers Sheffield & Campbell
- Published: 12 May 2015
Proposition 8 (“Prop. 8”) requires California County Assessors to tax property based upon the lower of the base year value or the current market value of the property. The "base year value" is what the County Tax Assessor calls the property's purchase price. Property taxes typically only increase 2% per year over the base year value, but when a property’s value drops below the base year value, Prop 8. allows for temporary property tax reductions due to the lower value.
California’s Proposition 13 is well known to real property owners. It generally caps property taxes at about 1% of the property’s purchase price, which the County Tax Assessor terms its “base year value.” Property taxes typically only increase 2% per year over the base year value. But what happens when a property’s value drops below the base year value?
Fortunately, the California legislature enacted Proposition 8, codified in Revenue & Taxation Code § 51, to allow for temporary property tax reductions when a property’s value falls. Proposition 8 (“Prop. 8”) requires the County Assessor to tax property based upon the lower of the base year value or the current market value.
Unfortunately, after allowing a one year reduction following an assessment appeal, some Assessors would allow a property’s Prop. 8 reduced value to revert to the higher base year value the next year unless an owner filed annual appeals.
To address this problem, Rev. & Tax. Code § 51(e) was amended in 1996 to require Assessors to annually reappraise and reassess after a Prop. 8 reduction. This duty continues until the fair market value recovers to the base year value. Additionally, an Assessor may not condition the annual reappraisals upon the filing of annual assessment appeals.
Despite this change to Rev. & Tax. Code § 51(e), Assessors often ignored it. Assessment appeals can take several years. Some Assessors would refuse to retroactively reappraise a property’s value for the years the Assessment Appeals Board appeal had been pending. Some did not conduct annual reappraisals of any kind, thereby taking the position that property owners must file annual appeals which are explicitly not required by Rev. & Tax. Code § 51(e).
It was inevitable that this would lead to a lawsuit. And, so we have a detailed examination of Rev. & Tax. Code § 51(e) and its legislative history in El Dorado Palm Springs v. Riverside County Board of Supervisors (2002) 104 Cal.App.4th 1262. In the El Dorado case, the owner appealed for a value reduction for a particular year. It took four years before the appeal was granted. The owner had not filed appeals for the years after the initial appeal had been filed. When the owner asked the Assessor for a similar reduction for all four years before the decision, the Assessor refused, arguing that the owner was required to file annual appeals (which the El Dorado court terms “protective appeals”) while the first application was pending.
On appeal, the California District Court of Appeal ruled that the Assessor was wrong and that it had a mandatory duty to retroactively reappraise the property for the intervening and subsequent years under Rev. & Tax. Code § 51(e) without requiring annual appeals. The court stated that “…after a property owner has been granted a Proposition 8 reduction for a prior tax year, section 51 dispenses with the usual requirement to file an assessment appeal.” El Dorado Palm Springs v. Riverside County Board of Supervisors, supra,104 Cal.App.4th at 1268.
Twelve years after the El Dorado court clarified an Assessor’s duties under Rev. & Tax. Code § 51(e), some Assessors are still not in compliance. Some continue to neglect their mandatory duty to conduct retroactive reappraisals for the years the initial appeal was pending and some appear to be ignoring the requirements of Rev. & Tax. Code § 51(e) entirely by refusing to consider the reduced Prop. 8 value for any years after the reduction without the filing of unnecessary and costly annual appeals.
Once property owners discover that the Assessor will not comply with the reappraisal requirement, many attempt to file appeals for the years between the first year a reduction was requested and when the reduction was granted. Owners will often then discover that their local Assessment Appeals Board dismisses such appeals as untimely, even though they were not required to file any appeals after the first appeal under Rev. & Tax. Code § 51(e). The only way to resolve the situation is to challenge the Assessment Appeals Board’s decision to dismiss the “untimely” appeals and the Assessor’s refusal to comply with its mandatory reappraisal and reassessment duty after a Prop. 8 reduction.
While contesting this matter likely requires a California tax assessment appeals attorney, property owners may find that their reduced taxes exceed the cost of an attorney. Since each case is different and timeliness is important, contact an attorney promptly to learn whether legal action may be to your benefit.
Originally posted to The California Litigation Attorney Blog by James J. Manning on Tues, 02/02/2015
- The Real Estate Law Team
Rogers Sheffield & Campbell, LLP
This article is not intended to provide legal advice. For legal advice on any of the information in this post, please use the form to the right or contact us by phone at 805-963-9721.