HANGE IN WNERSHIP - boe.ca.gov

1 ASSESSORS' handbook . SECTION 401. CHANGE IN OWNERSHIP. SEPTEMBER 2010. REPRINTED JANUARY 2015. CALIFORNIA STATE BOARD OF EQUALIZATION. SEN. GEORGE RUNNER (RET.), LANCASTER FIRST DISTRICT. FIONA MA, CPA, SAN FRANCISCO SECOND DISTRICT. JEROME E. HORTON, LOS ANGELES COUNTY THIRD DISTRICT. DIANE L. HARKEY, ORANGE COUNTY FOURTH DISTRICT. BETTY T. YEE, SACRAMENTO STATE CONTROLLER. CYNTHIA BRIDGES, EXECUTIVE DIRECTOR. Foreword On June 6, 1978, the voters in California approved Proposition 13 which added article XIII A to the California Constitution. Article XIII A generally limits the amount of ad valorem tax to a maximum of 1 percent of the full cash value of the real property. For purposes of this limitation, the Constitution defines full cash value to mean a county assessor's valuation of real property as shown on the 1975-76 tax bill, or thereafter, the appraised value of that real property when purchased, newly constructed, or a change in ownership has occurred.

2 As long as the property has the same owner, its assessed value generally cannot increase by more than 2 percent each year even if the property's market value is increasing at a faster rate. As a result, the market value of many properties is often higher than the assessed value. In its original form and at the time of its passage in 1978, Proposition 13 did not provide for any exclusion from a change in ownership. However, even during the implementation process of Proposition 13, various exclusions were contemplated. In defining change in ownership, the Legislature also provided examples of what is not a change in ownership (for example, interspousal transfers). In addition, subsequent amendments to article XIII A have been approved by voters which enacted other change in ownership exclusions. Examples of these include base year value transfers for persons over the age of 55 and the exclusion of parent-child transfers.

3 The California Legislature codified the definition of change in ownership and any implemented amendments to article XIII A dealing with change in ownership, by enacting Revenue and Taxation Code sections 60 through This section of the Assessors' handbook is a compilation of the information included in the Revenue and Taxation Code statutes, Property Tax Rules, and court cases as they relate to change in ownership. Topics covered in this handbook section include changes in ownership as they pertain to tenancies in common, joint tenancies, trusts and estates, legal entities, leases, cooperative housing, interspousal transfers, domestic partners, and others. This handbook also discusses the more common change in ownership exclusions and the various base year value transfers. Section 15606, subdivision (c), of the Government Code directs the State Board of Equalization (Board) to prescribe rules and regulations governing county assessors in the performance of their duties, and subdivision (f) provides that the Board shall issue instructions, such as those set forth in this handbook section.

4 While rules and regulations adopted by the Board are binding as law, Board-adopted handbook sections are advisory only. Nevertheless, courts have held that they may be properly considered as evidence in the adjudicatory process. 1. 1. Coca-Cola Co. v. State Board of Equalization (1945) 25 918; Prudential Ins. Co. v. City and County of San Francisco (1987) 191 1142; Hunt-Wesson Foods, Inc. v. County of Alameda (1974) 41 163. AH 401, Change in Ownership i September 2010. The citations and law references in this publication were current as of the writing of the handbook section. Board staff met with members of the California Assessors' association , County Counsels' association of California, and industry representatives to solicit input for this handbook section. The Board approved this handbook section on September 15, 2010.

5 /s/ David J. Gau David J. Gau Deputy Director Property and Special Taxes Department California State Board of Equalization Date AH 401, Change in Ownership ii September 2010. Table of Contents CHAPTER 1: OVERVIEW .. 1. ASSESSMENT PRE- AND POST-PROPOSITION 1. CHANGE IN OWNERSHIP .. 3. TRANSFERS THAT DO NOT CONSTITUTE A CHANGE IN OWNERSHIP .. 4. Base Year Value Transfers .. 5. DATE OF CHANGE IN OWNERSHIP .. 5. Sales .. 5. Sales Contract .. 6. Option to 6. Inheritance .. 6. 7. Life Estate .. 8. 8. REBUTTABLE PRESUMPTION REGARDING OWNERSHIP INTERESTS .. 8. VOID AND VOIDABLE 10. RESCINDED TRANSFERS .. 10. REPORTING CHANGES IN OWNERSHIP .. 10. Change in Ownership 10. Preliminary Change of Ownership Report .. 11. Reporting Changes in Control of Legal 11. CONSEQUENCES OF CHANGE IN 13. CHAPTER 2: FORMS OF INDIVIDUAL PROPERTY OWNERSHIP.

6 14. OVERVIEW OF FORMS OF PROPERTY OWNERSHIP .. 14. TENANCY IN COMMON .. 14. JOINT TENANCY .. 15. Transfers of Joint Tenancy Interest .. 15. Joint Tenancy Original Transferor Exclusion .. 16. Spouse of Original Transferor .. 18. Transfer from Tenancy in Common .. 18. Revocable Trusts and Joint 19. Presumption of Original Transferor Status .. 20. Reasonable Cause to Presume Joint Tenancy .. 21. Termination of Joint Tenancy and of Original Transferor Status .. 21. Severing a Joint Tenancy .. 22. CHAPTER 3: TRUSTS .. 23. DEFINITIONS .. 23. Trust Terms .. 23. Types of Trusts .. 24. CHANGE IN OWNERSHIP .. 25. Revocable 25. Irrevocable 26. Multiple Beneficiaries and Sprinkle Provisions .. 27. Filing of a Subdivision Map for Property Held in a 27. AH 401, Change in Ownership iii September 2010. CHAPTER 4: LIFE ESTATES AND ESTATES FOR 29.

7 LIFE ESTATES .. 29. Transfer by Life 30. ESTATES FOR YEARS .. 30. CHAPTER 5: LEASES .. 32. TERM OF LEASE .. 33. Homeowners' Exemption Presumption .. 33. Amendment or Extension of Lease Term .. 34. TERMINATION OF LEASES .. 34. Merger of Leasehold and Leased Fee 35. REAPPRAISAL OF LEASED PROPERTY .. 35. SUBLEASES .. 36. GOVERNMENT LESSEE .. 36. MINERAL PROPERTIES .. 37. CHAPTER 6: LEGAL 38. OVERVIEW .. 38. OWNERSHIP OF LEGAL ENTITIES .. 38. Corporations .. 38. Nonprofit 38. 39. Limited Liability 40. Joint 40. Massachusetts Business Trusts .. 41. Real Estate Investment 41. CHANGE IN OWNERSHIP OF LEGAL ENTITIES .. 41. Real Property 41. Transfer of Interest in an 42. Change in Control .. 42. Original Co-owner Interest Transfers .. 43. Counting and Cumulation of Original Co-Owner Interests .. 44. Mergers of Legal 46.

8 Acquisition by Majority Partner .. 46. Legal Entity Interests Held by Trust .. 47. Irrevocable Trusts .. 47. Revocable 48. CHANGE IN OWNERSHIP EXCLUSIONS INVOLVING LEGAL ENTITIES .. 48. Proportional Ownership Interest Transfer Exclusion .. 48. Interspousal and Registered Domestic Partner 50. Affiliated Group 52. Parent-Child and Grandparent-Grandchild Exclusion .. 52. COOPERATIVE HOUSING CORPORATIONS .. 52. CHAPTER 7: STEP TRANSACTION DOCTRINE .. 54. APPLICATION TO PARENT-CHILD AND GRANDPARENT-GRANDCHILD EXCLUSIONS .. 56. AH 401, Change in Ownership iv September 2010. CHAPTER 8: COMMON INTEREST DEVELOPMENTS .. 57. REAPPRAISAL OF INTERESTS .. 57. COOPERATIVE HOUSING CORPORATIONS .. 58. CONDOMINIUM CONVERSIONS .. 58. TIME-SHARES .. 59. Time-Share 60. Time-Share 60. CHAPTER 9: MANUFACTURED HOMES AND MOBILEHOME 61.

9 CHANGE IN OWNERSHIP OF MANUFACTURED 61. CHANGE IN OWNERSHIP OF MOBILEHOME PARKS .. 61. Transfers to Resident-Owned Entities .. 62. Transfers of Rental Spaces to the Residents .. 62. Transfers to Non-Resident-Owned Entities .. 63. Change in Ownership of Spaces .. 64. Pro Rata 64. Transfers of Manufactured Home Park Spaces in Entities Formed Prior to 1985 .. 65. CHAPTER 10: MISCELLANEOUS 67. EMPLOYEE BENEFIT PLANS .. 67. Individual Retirement 68. 68. AIR RIGHTS .. 69. ADVERSE POSSESSION .. 70. TAXABLE POSSESSORY INTERESTS .. 71. Change in Ownership of Taxable Possessory 71. Subleases of Taxable Possessory Interests .. 73. Sale and Leaseback 74. Easement .. 74. CHAPTER 11: INTERSPOUSAL AND REGISTERED DOMESTIC PARTNER. 75. ELIGIBLE RELATIONSHIPS .. 75. 75. Registered Domestic 76. COMMUNITY AND SEPARATE PROPERTY.

10 77. Community 77. Separate Property .. 77. No Attribution Between Members of the Community .. 78. INTERSPOUSAL 78. REGISTERED DOMESTIC PARTNER EXCLUSION .. 79. TRANSFERS UPON DEATH .. 80. TRANSFERS INVOLVING LEGAL ENTITIES .. 80. Transfer of Interests in a Legal Entity .. 80. Transfer of Real Property .. 81. PROPERTY SETTLEMENT AND POST-SETTLEMENT AGREEMENT TRANSFERS .. 82. AH 401, Change in Ownership v September 2010. CHAPTER 12: PARENT-CHILD AND GRANDPARENT-GRANDCHILD EXCLUSIONS.. 84. OVERVIEW .. 84. ELIGIBLE TRANSFERORS AND TRANSFEREES .. 84. Children .. 84. Grandchild .. 85. Registered Domestic Partnerships .. 86. ELIGIBLE PURCHASES AND TRANSFERS .. 86. Purchase or Transfer .. 87. Acquisition by Inheritance .. 87. 87. Estate Distributions Pro Rata and Non-Pro Rata .. 88. Beneficiary-to-Beneficiary 89.