Designed to protect long-term homeowners from a spike in property taxes as property values rise, California Proposition 13 freezes the tax assessed value of a property at its purchase price plus a nominal annual adjustment of not more than 2 percent.
Proposition 13 applies to both individuals and businesses that own property in California. And having been written to define a sale for commercial properties as a single purchaser having acquired at least a 50 percent share, a number of businesses have followed the letter of the law to avoid resetting property taxes upon purchase by structuring transfers to multiple entities, avoiding the 50 percent limit and reassessment trigger.
Sponsored by Assemblyman Tom Ammiano, Assembly Bill 2372 would refine what constitutes a sale for commercial properties in order to close the little loophole. Under the bill, a 90 percent change of ownership within a three-year period would also trigger a reassessment.
With support from the California Chamber of Commerce and California Business Roundtable, AB2372 passed its first committee hearing last week in a 6-2 partisan vote, leading Assemblyman Brian Nestande, a Republican from Palm Desert to quip: “It must be a cold day in hell. The cow jumped over the moon. And pigs are flying somewhere.”