Assembly Bill 188 proposes to revise California Proposition 13’s circumstances under which a “change in ownership” of real property owned by a legal entity is deemed to have occurred by closing a commercial property tax loophole to more accurately reflect when change of ownership takes place, thus recovering lost tax revenue.
On May 13th, the Assembly Committee on Revenue and Taxationplaced this bill in suspense, perhaps stalling it permanently. This Committee’s analysis noted the following statements by the author of Assembly Bill 188, Assembly member Tom Ammiano:
“California’s current system for assessing and taxing property, as established under Proposition 13, was designed to provide real property tax relief by imposing a set of limitations upon assessment and taxing powers. Property tax is based on the assessed value of land and improvements, and as a general rule, it is imposed on all property owners and applies to all classes of real property. California property taxes are imposed without distinguishing property used as a principal residence, or an apartment building rented to tenants, or property used for commercial or industrial purposes. Limited Liability Corporations, Real Estate Investment Trusts, and Limited Partnerships, were once held as legal entity tools to promote business growth but have now become complex ownership structures muddling property transactions and obscuring property tax reassessment.
The abuse of the system leaves the tax burden to residential property owners. This undermines our state tax system and hinders the business climate of California by discouraging the formation of new businesses which fear that they could not compete with established companies that are permanently locked into low property taxes by buying in groups.
Opponents of this bill claim this will undo the work of Proposition 13, which saved millions of Californians from losing their homes. However, this bill will not undo that. Instead it will strengthen the law by clarifying when a “change of ownership” occurs so that county tax assessors and state tax officials can properly reassess and tax business property. The goal of this bill is to ensure all property owners in California pay their fair share, creating one small measure to reduce the shift of property taxes from corporate to residential property holders that has occurred over time.”