SC&H Group Blog: "Expertise Beyond the Numbers"

California “Split Roll” on Hold But Proposed Amendment to Proposition 13 Likely

There appears to be bipartisan support for a proposed amendment to California’s Proposition 13.  The new bill closes a “loophole” which currently allows a sold or transferred property to avoid reassessment if the “change in ownership” was carved up among multiple owners, with no one owner possessing more than a 50 percent ownership stake.  Under the proposed bill, a commercial property would be reassessed when 90% of more of the property was sold or transferred over a three-year period.

This new bill is a significant amendment to the originally proposed “Split Roll” bill which may have required commercial property owners to pay property taxes at a rate higher than the rate imposed on homeowners. The new bill has the support of the California Chamber of Commerce and others in the business community.

“This historic agreement will help to create a level playing field in California,” said Democrat Rual Bocanegra (D-Pacoima) in a statement, as covered by the Los Angeles Times. “A fair and equitable reassessment system will benefit businesses and help to generate additional revenue for state and local government.”

The 2006 sale of Santa Monica’s Fairmont Miramar Hotel to computer executive Michael Dell was the most famous example of the change in ownership loophole.  At the time of the sale the property was divided up into shares owned by Dell, his wife and two business partners, with no one person taking on more than 49 percent of the property. This move created a savings of approximately $1 million a year in property taxes.

Many believe that this new bill may remove the possibility of more sweeping changes to Proposition 13, but only time will tell.  Please continue to monitor our blog for updates.

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