California Proposition 19

Property Tax Transfers, Exemptions, and Revenue for Wildfire Agencies and Counties Amendment (2020)

• 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.

How does Prop 19 change the rules governing tax assessment transfers?

Proposition 19 is a constitutional initiative passed by California voters that changes the rules for tax assessment transfers. In California, eligible homeowners can now 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 are eligible for tax assessment transfers are persons over 55 years old, persons with severe disabilities, and victims of natural disasters and hazardous waste contamination.

This allows eligible homeowners to transfer their tax assessments anywhere within the state and allows 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 is now 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). These expanded special rules are effective as of April 1, 2021.

How does Prop 19 affect inherited properties?

In California, parents or grandparents can 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, can also be transferred from parent to child or grandparent to grandchild with the first $1 million exempt from re–assessment when transferred. Prop 19 eliminates 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. The property tax bill for an inherited home or farm would go up if the price the property could be sold for exceeds the property’s taxable value by more than $1 million (adjusted for inflation every two years).

These special rules regarding inherited properties are effective as of February 16, 2021.

What does Prop 19 do with changes in revenue?

Prop 19 creates the California Fire Response Fund (CFRF) and County Revenue Protection Fund (CRPF). It requires the California Director of Finance to calculate additional revenues and net savings resulting from the ballot measure. The California State Controller would be required to deposit 75% of the calculated revenue to the Fire Response Fund and 15% to the County Revenue Protection Fund. The County Revenue Protection Fund would be used to reimburse counties for revenue losses related to the measure’s property tax changes. The Fire Response Fund would be used to fund fire suppression staffing and full–time station–based personnel.

Visit the California Secretary of State website for more details:
https://vig.cdn.sos.ca.gov/2020/general/pdf/prop19–title–summ–analysis.pdf

How does Prop 19 compare with the previous laws?

To assist taxpayers, here is how the previous laws compare with Proposition 19 in four areas.

Parent–child and grandparent–grandchild exclusion

Former law: Propositions 58/193. Current law: Proposition 19.

• Principal residence:
  Former law: principal residence of the transferor; no value limit; residence and homesite (excess land may be excluded as “other property”).
  Proposition 19: principal residence of the transferor and transferee; value limit of current taxable value plus $1,000,000 (as biennially adjusted); family homes and farms.
• Other real property:
  Former law: transferor lifetime limit of $1,000,000 of factored base year value.
  Proposition 19: eliminates the exclusion for real property other than the principal residence.
• Grandparent–grandchild middle generation limit:
  Former law: the parent(s) of the grandchild who qualify as child(ren) of the grandparent must be deceased on the date of transfer.
  Proposition 19: no change.
• Filing period:
  Former law: file a claim within 3 years or before transfer to a third party.
  Proposition 19: file for the homeowners’ exemption within 1 year of transfer; file a claim for the exclusion within 3 years or before transfer to a third party.
• Implementing statute:
  Former law: Revenue & Taxation Code section 63.1 (implements Propositions 58/193).
  Proposition 19: Revenue and Taxation Code section 63.2 (implements Proposition 19).
• Important dates:
  Former law: through February 15, 2021.
  Proposition 19: effective February 16, 2021.

Base year value transfer – persons at least age 55 or disabled

Former law: Propositions 60/90/110 (Revenue and Taxation Code section 69.5). Current law: Proposition 19 (Revenue and Taxation Code section 69.6).

• Type of property:
  Former law: principal residence.
  Proposition 19: principal residence.
• Timing:
  Former law: purchase or newly construct a residence within 2 years of sale.
  Proposition 19: purchase or newly construct a residence within 2 years of sale.
• Location of replacement home:
  Former law: same county, or a county with an intercounty ordinance.
  Proposition 19: anywhere in California.
• Value limit:
  Former law: equal or lesser value – 100% if the replacement is purchased/newly constructed prior to sale; 105% if purchased/newly constructed in the first year after sale; 110% if purchased/newly constructed in the second year after sale.
  Proposition 19: any value. There is no adjustment to the transferred base year value if the replacement property is of equal or lesser value than the original property’s market value. “Equal or lesser value” means 100% if the replacement is purchased/newly constructed prior to sale; 105% if purchased/newly constructed in the first year after sale; 110% if purchased/newly constructed in the second year after sale. The amount above “equal or lesser value” is added to the transferred value.
• How many transfers?
  Former law: one time (exception: after using it once for age, a second time for a subsequent disability).
  Proposition 19: three times.
• Implementing statute:
  Former law: Revenue & Taxation Code section 69.5 (implements Propositions 60/90/110).
  Proposition 19: Revenue and Taxation Code section 69.6 (implements Proposition 19).
• Important dates:
  Former law: replaced by Proposition 19 (Revenue and Taxation Code section 69.6).
  Proposition 19: effective April 1, 2021.

Base year value transfer – intracounty disaster relief

Former law: Proposition 50 (Revenue and Taxation Code section 69). Current law: Proposition 19 (Revenue and Taxation Code section 69.6).

• Type of property:
  Former law: any type of property.
  Proposition 19: principal residence.
• Timing:
  Former law: purchase or newly construct property within 5 years of the disaster.
  Proposition 19: purchase or newly construct a residence within 2 years of sale.
• Location of replacement property:
  Former law: within the same county.
  Proposition 19: anywhere in California.
• Value limit:
  Former law: any value; the amount above 120% is added to the transferred value.
  Proposition 19: any value. There is no adjustment to the transferred base year value if the replacement property is of equal or lesser value than the original property’s market value. “Equal or lesser value” means 100% if the replacement is purchased/newly constructed prior to sale; 105% if purchased/newly constructed in the first year after sale; 110% if purchased/newly constructed in the second year after sale. The amount above “equal or lesser value” is added to the transferred value.
• Type of disaster:
  Former law: a disaster for which the Governor proclaims a state of emergency.
  Proposition 19: wildfire, as defined, or natural disaster as declared by the Governor.
• Implementing statute:
  Former law: Revenue & Taxation Code section 69 (implements Proposition 50).
  Proposition 19: Revenue and Taxation Code section 69.6 (implements Proposition 19).
• Important dates:
  Former law: effective July 1, 1985.
  Proposition 19: effective April 1, 2021.

Base year value transfer – intercounty disaster relief

Former law: Proposition 171 (Revenue and Taxation Code section 69.3). Current law: Proposition 19 (Revenue and Taxation Code section 69.6).

• Type of property:
  Former law: principal residence.
  Proposition 19: principal residence.
• Timing:
  Former law: purchase or newly construct a principal residence within 3 years of the disaster.
  Proposition 19: purchase or newly construct a principal residence within 2 years of sale.
• Location of replacement home:
  Former law: a county with an intercounty ordinance.
  Proposition 19: anywhere in California.
• Value limit:
  Former law: equal or lesser value – 105% if purchased/newly constructed in the first year after the disaster; 110% if purchased/newly constructed in the second year after the disaster; 115% if purchased/newly constructed in the third year after the disaster.
  Proposition 19: any value. There is no adjustment to the transferred base year value if the replacement property is of equal or lesser value than the original property’s market value. “Equal or lesser value” means 100% if the replacement is purchased/newly constructed prior to sale; 105% if purchased/newly constructed in the first year after sale; 110% if purchased/newly constructed in the second year after sale. The amount above “equal or lesser value” is added to the transferred value.
• Type of disaster:
  Former law: a disaster for which the Governor proclaims a state of emergency.
  Proposition 19: wildfire, as defined, or natural disaster as declared by the Governor.
• Implementing statute:
  Former law: Revenue & Taxation Code section 69.3 (implements Proposition 171).
  Proposition 19: Revenue and Taxation Code section 69.6 (implements Proposition 19).
• Important dates:
  Former law: effective October 20, 1991.
  Proposition 19: effective April 1, 2021.

For more details on Prop 19, please check out the helpful weblinks below:

• Full text on ACA–11:
  http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200ACA11
• Frequently Asked Questions:
  https://www.boe.ca.gov/prop19/#FAQs

Note: The information presented is intended to provide general and summary information about Proposition 19. It is not intended to be a legal interpretation or official guidance or relied upon for any purpose, but is instead a presentation of summary information. If there is a conflict between the information presented and the text of the proposition or its implementation, the text of the proposition or legal interpretation will prevail. It is highly encouraged that you consult an attorney for advice specific to your situation.