Can California rely on Property Tax Exclusions from Prop 19?
Despite the growing waves of criticism and anxiety from residents in California, regarding Proposition 19, given all the cheer-leading from the California realtor community, more or less led by the CA Realtor’s Association – state sponsored public relations continues to convince us how fabulous Proposition 19 truly is.
We are constantly reminded that, despite certain obvious limitations affecting homeowners and beneficiaries inheriting property from their parents, we do have new property tax exclusions from Prop 19. Proposition 19 is providing us with tremendous property tax breaks which did not exist previously, with Proposition 58 tax relief.
Truth? Publicity? Or happy talk…
Supposedly, despite new property tax exclusions from Prop 19, the state will see an extra yearly revenue of a billion dollars plus, to help schools in towns and cities – although the California State Board of Equalization (BOE) is a little short on concrete specifics and details, in terms of how much revenue is actually expected to come in overall from these new property tax laws; and specifically how much money will go to fire departments, and how much will be allocated to help seniors and the elderly… and homeowners with serious infirmities.
Moreover, Proposition 19 also seems to be rather fuzzy, with respect to anticipated property tax revenue that is supposedly going towards balancing budgets – possibly with provisions to step up the state’s recovery from Pandemic driven financial losses.
Additionally, beyond property tax exclusions from Prop 19 that we already know about, and hope will be consistent – extra tax revenue from Proposition 19 is supposedly expected to furnish all sorts of other “significant added protections” for CA residents – although proponents of Prop 19 as well as BOE are extremely vague, as far as articulating precisely what these “protections” might be every year. Again – fact based info dissemination? Or simply PR happy talk…
Prop19 revenue for city and county fire departments & schools
Proponents of Proposition 19 singled out supporters of Proposition 13 property tax relief as creators of “tax schemes” and “deceptive practices” – “costing local governments and schools up to $1.5 billion every year” – without describing exactly what those “tax schemes” and “deceptive practices” actually are… And what those numbers that supposedly cost the school system a small fortune really look like – above and beyond vague projections designed to scare tax payers half to death.
We also frequently hear about “unfair tax loopholes” used by supposed “East Coast investors” and “celebrities” or “wealthy non- California residents” as well as “trust fund heirs” – who are perpetually unnamed, wealthy property owners, who supposedly avoid paying “their fair share of property taxes on vacation homes, income properties, and beachfront rentals they own in California.”
An obvious reference to the Lloyd Bridges family, the only family in 40 years that has been named as property tax perpetrators of the above so-called violations, whose heirs happened to inherit a nice beach home, using Proposition 13 to cap property taxes at 2%… subsequently renting the home out at $16,000 per month to vacationers from out of state. (As opposed to residing in the property as a “primary residence”.)
No other family has ever been named and singled out as using Proposition 13 for such “nefarious purposes”. It appears that the justification for Proposition 19 limitations were based on this one family… this one inheritance.
Maintaining the spirit of Proposition 13 and Prop 58
Proponents of Proposition 19 insist that their favorite tax measure will “continue to preserve the intent of Proposition 58 and Proposition 193” – keeping family homes affordable when parents and grandparents pass on their family home to children and grandchildren to use as a “primary residence”.
As we all know, this is partly true, and where limitations are concerned… partly not true. Fortunately, beneficiaries can still use a parent-to-child exclusion in conjunction with Proposition 19.
When inheriting property while keeping a low property tax base, smart beneficiaries are still able to buyout property tax shares from siblings, with advice from a Property Tax Consultant like Michael Wyatt; and funding from a Trust Lender such as Commercial Loan Corp.
We continue to hear about the $1 billion per year in Prop 19 generated revenue that is going to fire departments and unions, school systems and local governments. We also hear about that revenue somehow being used for emergency services, public hospitals, general healthcare, homeless folks, and housing projects. However… again, no specifics. Just general allusion to a lot of hopeful initiatives.
At the same time Californians hope that they will be able keep parents property taxes, and take advantage of property tax transfers to retain a low property tax rate from this parent-to-child transfer upon inheriting property from parents, while inheriting property taxes… to avoid property tax reassessment – typically through a parent-child transfer.
Homeowners and beneficiaries are waiting to see what specific applications will be readily available to them:
• to limit property tax increases for victims of wildfires, replacing damaged or destroyed property; limiting damage from wildfires on homes through supposed funding for fire protection and emergency response.
• to cap property tax increases on family homes used as a primary residence by protecting the right of parents and grandparents to pass on their family home to children and grandchildren as a primary residence.
• to take advantage of supposedly “thousands of housing opportunities” by making homes available for first-time homeowners and families in all 58 counties across the state of California.
Ultimately, Californians are taking for granted that there is a cap on property tax increases for primary residences for homeowners over 55 years old, people with severe disabilities, and victims of natural disasters or wildfires by removing county restrictions – apparently allowing these residents to locate a home that “better fits their needs”.
State leadership may be asking residents to stretch their trust a long way; without any iron-clad guarantees. Just a long list of top-down assurances. And residents as well as estate attorneys and tax lawyers, as well as accountants, are wondering, going forward into a murky future, what they can question… and what they can really rely on.