Nevada County Real Estate Market Snapshot-CA Property Taxes Proposition 8
Created: 3/2/2010
March 2, 2009 – Today California residential real property taxation is primarily regulated by Proposition 13 and Proposition 8.
Proposition 13 – Limits the property tax rate to 1 percent plus voter-approved bonded indebtedness, and defines taxable value as the lower of the property's Factored Base Year Value (FBYV) or market value on lien date, January 1. Factored Base Year Value is the market value of the property when it was acquired by the current owner, plus the value of any new construction, plus an inflation factor of no more than 2% per year. Taxable value can increase more than 2% in one year if the property experiences a change in ownership, new construction or received any temporary reduction in taxable value in a prior tax year.
Proposition 8 – Amended Proposition 13 to provide for declines in value. Prop 8 requires the Assessor to enroll the lower of either: (1) the Factored Base Year Value, or (2) the market value as of the annual lien date January 1. Prop 8 reductions in value are temporary reductions that recognize the fact that the market value as of the January 1 lien date of a property has fallen below its current Prop 13 factored value.
Once a Prop 8 reduced value has been enrolled, that property’s value must be reviewed each year as of the January 1st lien date, to determine whether its 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.
The 58 counties of CA take different approaches to Prop 8 enrollments. Some are pro-active and some are relatively passive, requiring the action of property owners in order to start a Decline in Value reduction. Due to the economic issues faced by local government, staff cuts and increased workloads at the Assessor’s Office can affect the expedience of the process.
In general, if a property was purchased between 2003 and 2008, it may be eligible for enrollment in Prop 8. In order to make an initial determination, it’s a good idea to call your Realtor®, as the Assessor’s office may be somewhat overworked, as explained above. In either case, the initial determination will look at what price was paid for the property, the current assessed value and the current market value.
