On November 3, 2020, California voters approved Proposition 19, The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act, and its provisions have become operative on February 16, 2021 (for intergenerational transfer exclusion) and April 1, 2021 (for base year value transfer).
These frequently asked questions (FAQs) are intended to help property taxpayers navigate those new provisions in light of Proposition 19's lack of clarity or silence on certain topics.
Under Proposition 19, can I transfer my base year value to a home of any value?
Yes; however, if the full cash value of the replacement home is greater than the full cash value of the original home, the difference in full cash values will be added to the transferred factored base year value.
For example, an original home was sold and had a full cash value of $400,000 and a factored base year value of $100,000 at time of sale. If a replacement home is purchased for a full cash value of $600,000, the difference of $200,000 ($600,000 - $400,000) is added to the factored base year value of $100,000. Thus, the replacement home will have a new base year value of $300,000 ($100,000 + $200,000).
Is Proposition 19 retroactive to disasters that occurred in 2020?
Proposition 19 is effective on and after April 1, 2021, and also requires that a replacement primary residence is purchased or newly constructed as a person’s principal residence within two years of the sale of the original primary residence. Proposition 19 is not dependent on the date of disaster. However, future legislation may impact the operation of Proposition 19 and any updates will be posted on the Board’s website.
Under Proposition 19, if I inherit my parent's family home and move into it and establish it as my principal residence, must I live continually in the home to receive the parent-child exclusion? What happens if I move somewhere else?
At least one eligible transferee must continually live in the property as his or her family home for the property to maintain the exclusion. Thus if the property is no longer your family home, it will receive a new taxable value. The new taxable value will be the fair market value of the home on the date you inherited it, adjusted each year for the inflation factor, which is published by the BOE annually.
Does Proposition 19 apply to a transfer of a rental home?
No, Proposition 19 limits the parent-child exclusion to a transfer of a family home that is the principal residence of the transferor and becomes the principal residence of the transferee.
Will I lose the parent-child exclusion if the value of the family home is greater than $1 million dollars?
The value limit under Proposition 19 is the sum of the factored base year value plus $1 million. If the market value exceeds this limit, partial relief is available. The amount exceeding the excluded amount will be added to the factored base year value.
For example, a family home has a factored base year value (FBYV) of $300,000 and a fair market value of $1,500,000. The excluded amount under Proposition 19 is $300,000 + $1,000,000 = $1,300,000. The difference, $1,500,000 - $1,300,000 = $200,000. Thus, the adjusted base year value is $500,000 (FBYV $300,000 + difference of $200,000).
How is a property held in a trust affected by Proposition 19?
The administration of a trust is governed by the trust instrument itself. For properties held in trusts, Revenue and Taxation Code section 61(h) provides that a change in ownership occurs when any interests in real property vest in persons other than the trustor or the trustor's spouse or registered domestic partner when a revocable trust becomes irrevocable (also see Property Tax Rule 462.260). This typically occurs upon the death of the trustor. Thus, the date of death is considered to be the date of change in ownership. Proposition 19 is clear that Proposition 58 applies to transfers that occur on or before February 15, 2021, and Proposition 19 applies to transfers that occur on or after February 16, 2021.
How do I apply for the homeowners' exemption or disabled veterans' exemption within one year of the transfer to qualify for the parent-child or grandparent-grandchild exclusion, as required by Proposition 19?
To apply for the homeowners' exemption or disabled veterans' exemption, a claim must be filed with the County Assessor. BOE-266, Claim for Homeowners' Property Tax Exemption, is the claim form to apply for the homeowners' exemption, and BOE-261, Claim for Disabled Veterans' Property Tax Exemption, is the claim form for the disabled veterans' exemption. Both forms can be obtained from and submitted to the local County Assessor's office where the property is located.
Senate Bill 539 Details – Changing How Prop 19 Impacts the Family Farm
Unfortunately, Proposition 19 has created a number of unresolved issues, and at the end of 2021 the Legislature passed and Governor Newsom signed Senate Bill 539 to clarify its application to farms.
- States that the exclusion shall apply separately to the transfer of each legal parcel that makes up a family farm.
- Defines “Family farm” to mean any real property under cultivation or which is being used for pasture or grazing, or that is used to produce any agricultural commodity, as that term is defined in Section 51201 of the Government Code as that section read on January 1, 2020. S
- Establishes that each legal parcel that makes up a family farm shall be deemed to itself be a family farm, except for a legal parcel containing a family home. A legal parcel containing a family home may qualify separately for exclusion. This means that each parcel that makes up the family farm is capable of seeking the change of ownership exclusion for reassessment, with each parcel value standing independently of each other.