What Proposition 19 Means for Californians

As many of you already know, Proposition 19 passed in November of 2020 and many of our clients have had questions regarding what it will affect. Here we have broke down exactly what Proposition 19 means for California:

 

On November 3, 2020, California voters approved Proposition 19The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act.

 

How did the ballot measure change the rules governing tax assessment transfers?

Proposition 19 changed the rules for tax assessment transfers. In California, eligible homeowners could transfer their tax assessments to a different home of the same or lesser market value, which allows them to move without paying higher taxes. Homeowners who were eligible for tax assessment transfers are persons over 55 years old, persons with severe disabilities, and victims of natural disasters and hazardous waste contamination.[1]

The ballot measure allowed eligible homeowners to transfer their tax assessments anywhere within the state and allow tax assessments to be transferred to a more expensive home with an upward adjustment. The number of times that a tax assessment can be transferred increased from one to three for persons over 55 years old or with severe disabilities (disaster and contamination victims would continue to be allowed one transfer).[1]

 

How did the ballot measure affect inherited properties?

In California, parents or grandparents could transfer primary residential properties to their children or grandchildren without the property’s tax assessment resetting to market value. Other types of properties, such as vacation homes and business properties, could also be transferred from parent to child or grandparent to grandchild with the first $1 million exempt from re-assessment when transferred.[1]

The ballot measure eliminated the parent-to-child and grandparent-to-grandchild exemption in cases where the child or grandchild does not use the inherited property as their principal residence, such as using a property as a rental house or a second home. When the inherited property is used as the recipient’s principal residence but is sold for $1 million more than the property’s taxable value, an upward adjustment in assessed value would occur. The ballot measure also applied these rules to certain farms. Beginning on February 16, 2023, the $1 million amount would be adjusted each year at a rate equal to the change in the California House Price Index.[1]

 

What did the ballot measure do with changes in revenue?

The ballot measure created the California Fire Response Fund (CFRF) and County Revenue Protection Fund (CRPF). The ballot measure required the California Director of Finance to calculate additional revenues and net savings resulting from the ballot measure. The California State Controller was required to deposit 75 percent of the calculated revenue to the Fire Response Fund and 15 percent to the County Revenue Protection Fund. The County Revenue Protection Fund was set to be used to reimburse counties for revenue losses related to the measure’s property tax changes. The Fire Response Fund was set to be used to fund fire suppression staffing and full-time station-based personnel.[1]

 

Ballot summary

The ballot summary was as follows:[2]

  • Permits homeowners who are over 55, severely disabled, or whose homes were destroyed by wildfire or disaster, to transfer their primary residence’s property tax base value to a replacement residence of any value, anywhere in the state.
  • Limits tax benefits for certain transfers of real property between family members.
  • Expands tax benefits for transfers of family farms.
  • Allocates most resulting state revenues and savings (if any) to fire protection services and reimbursing local governments for taxation-related changes.[3]

 

Fiscal impact statement

The fiscal impact statement was as follows:[2]

  • Local governments could gain tens of millions of dollars of property tax revenue per year. These gains could grow over time to a few hundred million dollars per year.
  • Schools could gain tens of millions of dollars of property tax revenue per year. These gains could grow over time to a few hundred million dollars per year.
  • Revenue from other taxes could increase by tens of millions of dollars per year for both the state and local governments. Most of this new state revenue would be spent on fire protection.[3]

 

 

 

 

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