Designed to close a loophole in Proposition 13 which has allowed businesses to avoid property tax reassessments upon the purchase of a property, Tom Ammiano’s proposed Assembly Bill 2372 aims to refine what constitutes a sale. But as originally drafted, the bill would have created a loophole of its own.
The current definition of a change in ownership which triggers a reassessment is the transfer of 50 percent or more of the interests in a property to a single entity. By structuring sales as a series of transfers to multiple legal entities, none of which would acquire a larger than 50 percent share, reassessements and higher property taxes could be avoided.
Under AB2372, a cumulative 90 percent change of ownership interests would trigger a reassessment as well. Originally drafted as a 90 percent change in interests within three years, a clause which was quickly identified as another potential loophole, the three year clause has just been dropped.
The amended bill has been passed by the Senate Committee on Governance and Finance and is on to Appropriations.