California

Proposition 8

In November 1978, Proposition 8, a constitutional amendment to Article XIII A, was passed to reflect declines in property value allowing a temporary reduction in property tax for property owners. Proposition 8 requires the county assessor to enroll either a property's adjusted base year value (Proposition 13 value) or its current market value, whichever is less. The factored base year value of real property is the market value as established in 1975 or its market value during the last change of ownership, or when the property was newly constructed. A decline in value occurs when the current market value is lower than the assessed value, as of the lien date, January 1. The lower value is commonly known as the "Prop 8" value.

A property that has been reassessed under Proposition 8 is subject to an annual review to determine its lien date value. The assessed value of a property with a Proposition 8 value in place may increase each lien date (January 1) by more than the standard 2% maximum allowed for properties assessed under Proposition 13; however, unless there is a change in ownership or new construction, a property's assessed value can never increase above its factored Proposition 13 base year value after adjusting for the annual increase.

Proposition 13

Proposition 13, passed in 1978, established the base year value concept for property tax assessments. Under Proposition 13, assessment for real property is determined by the 1975 fair market value with an annual increase limited to the inflation rate, as measured by the Consumer Price Index (CPI), or 2%, whichever is less.

Real Property is subject to reassessment tax purposes when a transfer of ownership takes place or improvements are made. The newly assessed value will then increase on a yearly basis not to exceed 2% per year. The passing of Proposition 13 was intended to protect taxpayers from any unanticipated increases in property taxes and to provide effective tax relief.