Compromise Reached to Close CA Loophole in Property Reassessments – Los Angeles Income Tax Planning & Income Tax Litigation Attorney Bruce Givner

by Bruce Givner on June 3, 2014

In 1978, California voters approved Proposition 13, a landmark piece of legislation which stated that reassessments of commercial and residential property could only occur when the property was sold or substantially renovated, providing a threshold for reassessment at a 50% change in interest in a property. In the more than 30 years since, property owners have used this “loophole” to avoid tax reassessment when a change of ownership occurred using creative and complicated transactions.

On May 15, 2014, the California Assembly Revenue and Taxation Committee voted 6-2 to approve A.B. 2372 which targets transactions in which property shares are divided in a change of ownership to avoid the reassessment trigger under Proposition 13. Assemblyman Tom Ammiano (D), who authored the bill along with Raul Bocanegra (D), has introduced 5 bills in the past six years aimed at closing this particular loophole, but without success until now. “Closing this loophole has been a goal of progressives for years because it has shifted the property tax burden onto the backs of homeowners and other individuals,” Ammiano said in a news release.

One of the main reasons for the bill’s current success is the compromise that swayed several groups that had opposed changes to Proposition 13 in the past. These groups include the California Business Roundtable, the California Chamber of Commerce (CalChamber), and the California Business Properties Association. Allan Zaremberg, President and CEO of CalChamber, said the bill would ensure reassessments occur in accordance with Proposition 13 when property truly changes hands.

Although the amendment which reflects the agreement have not yet been printed, a mock-up version provides some insight into the changes. The mock-up version reads: “changes in ownership in which 90 percent or more of the ownership of a business, whether through mergers, private equity buyouts, transfer of ownership from one financial institution to another, transfers of shares of limited liability companies or trusts, transfers of partnership shares, or other changes by which 90 percent or more is transferred shall constitute a change of ownership subject to reassessment.” The bill will also require greater transparency in deeds filed involving real property and financial transactions, along with improved reporting and enforcement when a reassessment appears to be triggered.

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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