We have discussed this issue previously in this blog… however, it does bear further introspection. Property taxes that have been deferred for a few months can hardly be called property tax relief! Regardless how many people in state leaders hip positions call it “property tax relief”, it simply is not. It’s merely tax deferment. A parent-child exclusion avoiding property reassessment is a genuine property tax relief benefit.  The press should not conflate the two in headlines as if they were the same. They’re not.  

Genuine Property Tax Relief VS Postponed Property Taxes

The State Controller’s property tax postponement program permits senior property owners and homeowners with a severe disability to defer property taxes on a primary residence – if they are in compliance with the new Prop 19 requirements plus have 40% or more equity in their house; with a household income of $45,810 or less per year. With a lien against the house, until taxes are paid off.

You get to delay paying the tax man for ninety days. So Californians need to determine what this actually accomplishes. Does this help homeowners financially? Now, deferring taxes for five-years might be helpful to some property owners. But a few months is simply not going to move the needle into the “help” column.

Other than being a rather weak gesture, this is a dismal effort to help residents in California get through an unprecedented, tough time. If the folks running the state wanted to really help Californians, they might want to consider simply deleting property taxes this year, and see how the virus crisis is next year.

Not only would this be a great political move – it would actually help homeowners in a big way. It would be a genuine property tax relief initiative.  Postponing property tax payments is merely deferring taxes that have to be repaid anyway, therefore there is no authentic relief of taxation involved here, merely a delay.

Property Tax Exemptions for Disabled Veterans

If a military veteran is 100% disabled as a result of a combat wound or whatever, that veteran can get approved for a full property tax exemption.  Other homestead exemptions exist for veterans over the age of 65, along with surviving spouses.

Eligibility

To be eligible, a homeowner has to apply and subsequently meet all of the criteria below for every year in which a postponement of property taxes is being requested:

• Residents must be age 62 or older; or severely disabled (including blindness);
• Residents must own and reside in a primary home (exception being house-boats);
• Residents must verify a household income of $45,810 or under;
• Residents must own  40% or more of the property;
• There can be no reverse mortgage on the property in question.

Property Taxes that are in Default, or are Unmanageable

CA state law does not allow the SCO (State Controller’s Office) to pay for delinquent or defaulted property taxes that are owed on a home, for example, that is under consideration for postponement of property taxation. Late These taxes simply have to be paid, by California law. Regardless of a Pandemic, or whatever.

However, you can qualify for postponement of current taxes. The amount of defaulted property taxes will be added to the amounts owed against the property to determine equity. Therefore “delinquent” or “defaulted” property tax payments do not qualify for tax deferment. Another reason this mild gesture does not contain any of the earmarks of genuine tax relief…. such as those provided for by tax breaks like a parent-child exclusion avoiding property reassessment.

Interest Rates on Deferred CA Property Tax Payments Owed

The interest rate imposed on “postponed” taxes under this PTP (Property Tax Postponement) program is 5% yearly.  Interest on postponed property taxes is computed monthly on a simple interest basis.  Interest on the postponement account continues to accrue until all postponed property taxes plus interest are repaid to the state. So $1,000 in deferred taxes would be $50 yearly – $4.17 monthly.

Property tax relief? It looks more like loan sharking than it does tax relief.

A Lien or Security Agreement for Postponed Property Taxes

To secure repayment of deferred property taxes, the State Controller’s Office (SCO) imposes a lien against property with the county or a security agreement with the Department of Housing and Community Development. The lien or security agreement remains in effect until the account is paid off. A one-time fee is added to release a lien once the account has been completely paid off.

Property Taxes Paid By California Lenders

The State Controller’s Office (SCO) is not responsible for contacting your lender if your property taxes are currently paid through an impound, escrow, or other type of account.  If you’re approved for Property Tax Postponement (PTP), the SCO will typically agree to make a payment on your behalf directly to the County Tax Collector.  PTP does not reduce your monthly mortgage payment. A business property owner or homeowner must contact their lender directly to pay off monies due.

Refund of Paid Property Taxes

Once an application is approved and property taxes have been paid for a current-year, or if the property taxes are paid by a lender, a property owner receives a refund from their county tax collector.
All full or partial payments are applied to accumulated interest and to the balance owed. Checks or money orders are payable to the “California State Controller’s Office” and mailed to:

California State Controller’s Office
Departmental Accounting Office – PTP
P.O. Box 942850
Sacramento, CA 94250-0001

Collection and repayment process

Homeowners can pay all or a portion of the balance to the State Controller’s Office at any time. However, postponed property taxes and interest are due right away or payable when a homeowner:

a) Moves away from a property;
b) Sells or conveys title to the property;
c) Is deceased but does not have a spouse, registered domestic partner, or other qualified individual who continues to reside in the property;
d) Is delinquent on future property taxes or has other senior liens;
e) Refinances or gets a reverse mortgage on the property in question.

Authentic Property Tax Relief

As you may or may not know – genuine property tax relief does exist in California, in terms of establishing a low property tax base when inheriting a home; through a process discussed in this blog several times, combining a parent-to-child exclusion avoiding property reassessment protected by Proposition 19 in concert with a 5 or 6 figure loan to an irrevocable trust from a trust lender.

The process of buying out siblings’ shares of inherited property through an irrevocable trust loan – the transfer of property between siblings or “sibling to sibling property transfer” – equalizes payment among beneficiaries selling their inherited property shares, and furnishes them with far more cash than a conventional outside buyer would.

Likewise, genuine property tax relief such as keeping a low property tax base when inheriting a home; or property tax transfers in California for those inheriting real estate from parents… giving homeowners the ability to transfer parents property taxes under Proposition 19 in tandem with a locked-in parent-child transfer or a parent-to-child exclusion avoiding property reassessment at high current tax rates when inheriting property taxes, and transferring property taxes in California. 

Although, manufactured home owners with delinquent and/or defaulted property taxes do not qualify for property tax postponement.  However, as we have already indicated, it’s high time to cease discussions altogether about property tax postponement – and start pivoting rapidly towards property tax cancellation, while the pandemic continues to cause shutdowns and job losses and economic hardships for middle class homeowners.