Proposition 8 - Decline in Property Value
Proposition 8, passed in November 1978, amended Proposition 13 to recognize declines in value for property tax purposes. As a result, Revenue & Taxation Code Section 51 requires the Assessor to annually enroll either a property's Proposition 13 base year value factored for inflation, or its market value as of January 1st, whichever is less.
A Proposition 8 reduction is a TEMPORARY form of assessment relief. It may be applied when a property's taxable value exceeds the current market value.
Your County Assessor 's Office is required to enroll the lower of two values on all real property:
1. The base year value plus the annual inflationary factor (Your base year value is established as of the date of acquisition and/or completion of new construction. This value is adjusted each year by an inflationary factor determined by the percentage change in the California Consumer Price Index (CCPI). In no event shall the inflation factor exceed 2% in any given year).
2. The current market value (the price your property would sell for on the open market on the January 1st lien date).
If you think your property is being taxed on a value that is higher than its current market value, you may wish to contact your County Assessor 's Office and ask for a review form. Assessment Review Requests may be submitted to the Assessor's Office at any time. Each tax year begins on July 1st and ends the following June 30th. The value for the current tax year will be examined when the Assessment Review Requests are received by the Assessor's Office between July 1st and September 15th. Assessment Review Requests received between September 16th and June 30th may be examined for the next tax year.
Important Points to Remember:
• The Assessor can only consider the market value of your property as of lien date (January 1st).
• The market value of your property will be determined by analyzing sales of comparable properties in the area. Properties with characteristics similar to yours must have sold for less than your current taxable value.
• Supplemental Assessments will not be revised due to Proposition 8 reviews.
Once a Prop 8 reduced value has been enrolled, that property's value must be reviewed each year as of January 1, to determine whether it's current market value is less than its Prop 13 factored value.
Prop 8 values can change from year to year as the market fluctuates. When the market value of the Prop 8 property increases above its Prop 13 factored value, the Assessor will once again enroll its Prop 13 factored value. In no case may a value higher than a property's Prop 13 factored value be enrolled.
Properties enrolled under Prop 8 provisions are not subject to the 2% annual increase limitation that applies to those enrolled under Prop 13 provisions.
Although the market values of all properties may suffer a significant decline during a recession, not all will qualify for a Prop 8 reduction. The current market value must fall below the prop 13 factored base year value (assessed value) before the Assessor can recognize the decline. Following are examples of how the Assessor processes declines in value.
Example of Assessments Involving Properties Declining in Value:
Example 1
Home purchased January 2005, for $400,000 and assessed with $400,000 base year value.
On January 1, 2006 , factored base year (assessed) value is $408,000 ($400,000 +2% inflation) but market value has declined to $300,000.
Action: Assessor reduces assessed value to $300,000 for 2006-2007 assessment roll.
On January 1, 2007 , the home's value continues to decline and is now $280,000, while its factored base year value has risen to $416,160 ($400,000 +2% inflation compounded for 2 years.)
Action: Assessor reduces assessed value to $280,000 for 2007-2008 assessment roll.
On January 1, 2008 , the homes market value increases to $350,000 while its' factored base year value rises to $424,483 ($400,000 +2% inflation compounded for 3 years.)
Action: Assessor raises assessed value to $350,000 for 2008-2009 assessment roll.
On January 1, 2009 , the home's market value increases to $450,000 while its' factored base year value rises to $432,972 ($400,000 +2% inflation compounded for 4 years.)
Action: Assessor reinstates factored base year value of $432,972 for the 2009-10 assessment roll. For additional information, please contact your local Assessor's office regarding the county you live in.
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