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Questions & Answers About
Decline in Value (R&T Sec. 51)

 

What does Decline in Value (R&T Sec. 51) say?

Decline in Value (R&T Sec. 51) was passed in 1978 and allows the Assessor to temporarily lower the assessed value of property. Under Decline in Value (R&T Sec. 51), the Assessor may review the market value as of January 1, and enroll for the following tax year the lesser of the:

Factored-Base-Year Value Proposition 13
or
Market Value Decline in Value (R&T Sec. 51)

Reductions in assessed value under Decline in Value (R&T Sec. 51) are temporary and are reviewed annually until the Factored-Base-Year value is again lower than market value and then the factored-base-year value is reinstated. Unless there is a change in ownership or new construction, the assessed value can never increase above the base-year value, plus the appropriate annual cost of living increase not to exceed 2 percent per year, allowed by Proposition 13.

Do properties other than single-family residences qualify?

Yes, all real property qualifies.

How can the assessed value of my property be changed after you reduced it?

The assessor is required to review the temporary Decline in Value (R&T Sec. 51) value each lien date following the initial reduction. The Decline in Value (R&T Sec. 51) value can be further reduced or increased depending on the property's market value as of the lien date. Just as there is no limit on the amount of reduction, there is no limit to the amount being restored to the Factored-Base-Year Value.

Is the Assessor required to restore my factored-base-year value even if it's more than a 2% increase?

Yes, just as there is no limit to the amount of reduction when arriving at market value, there is no limit to the amount being restored when market value increases, up to the factored Proposition 13 base year amount.

If I have been granted a reduction for the current year will I have to request another review next year?

No, once you have been granted a reduction pursuant to Decline in Value (R&T Sec. 51) your next year's value will automatically be reviewed. A Notification of Assessed Value will be sent to you in July, which will indicate our findings.

What should I do if I disagree with the Decline in Value (R&T Sec. 51) value placed on my property?

If after review of the Notification of Assessed Value card you disagree with the value, you have until September 15 of that year in which to file an Application for Changed Assessment with the Assessment Appeals Board.

Why isn't the reduction under Decline in Value (R&T Sec. 51) permanent?

Decline in Value (R&T Sec. 51) requires the Assessor to compare each property's Factored-Base-Year value with the current market value, and enroll the lesser of the two each year.

What if after having been given a reduction, my value continues to decline?

Once a property value has been lowered for Decline in Value (R&T Sec. 51), your next year's assessed value will be automatically reviewed. The lower of current market value and Factored-Base-Year Value will be enrolled.

What will happen to my assessment if values start to rise?

Your value reduction, due to market conditions, is temporary and the Assessor is required to review the market value of the property each lien date after the reduction, until such time as the factored base year value is less than or equal to the market value.  Therefore, if the market value exceeds your factored base value, the factored base value will be enrolled.  If the market value increases above the prior year value, but is still below the factored base value, the new market value will be enrolled.

Unless there is a change in ownership or new construction, this increase in value cannot exceed the original assessed value plus the annual inflationary rate not to exceed 2 percent per year. 

My land value looks all right, but my structure value looks high. Can I just have my structure value lowered?

No, the total property value must be considered. Only total assessed value can be compared. The lower of total property current market value and total property assessed value is enrolled.

I bought my house in 1982, but values are going down and I've lost a lot of equity.  Why don't you lower my value?  

The assessed value on your annual tax bill represents either (1) your base year value that increases each year by an inflation rate not exceeding 2percent, or (2) current market value as of the January 1 lien date. 

If you purchased your home in 1982, the assessed value would have increased annually by a maximum of 2 percent.  The equity you gained over the years most likely was not captured in the taxable value.  So, if you lost equity in your home but the market value is greater than or equal to your factored base value, the Assessor cannot lower your value.

For a property to qualify for a value reduction under Decline in Value (R&T Sec. 51), the market value of the property is analyzed utilizing comparable sales recorded no more than 90 days after January 1st.   

For example:  you purchased your property many years ago and your factored base value has now increased to $200,000.  Comparable properties in your neighborhood were selling at around $300,000 last December and January.  In this example, your assessed value would change by the annual inflation rate (2 percent this year). However, if the comparable properties were selling in the $180,000 range, then you would qualify for a temporary value reduction to the market value.

Why didn't the Assessor lower the value of my home to what the house next door sold for last week?

The law requires the Assessor to value your property as it existed at 12:01 am, January 1, the lien date, each year.  Declines in value that occur after the January 1 lien date cannot legally be recognized until the following January 1 lien date.

For example, say your property's market value was $400,000 on January 1, 2013, $375,000 on May 30, 2013 and $350,000 by the time you receive your property tax bill in October 2013.  The $400,000 value is the value the law requires we compare to your factored base year value when deciding which is lower as of January 1, 2013.  The further decline in value, occurring after January 1, 2013, cannot be recognized until January 1, 2014.

Why is the taxable value so high?  I just bought it for $200,000 less than shown on the annual bill. or Why am I being charged for the previous owner's assessment?  I didn't own it on January 1.

Property taxes become a lien on property as of the January 1st preceding the fiscal year the taxes cover.  In other words, the owner(s) as of January 1, 2013 are being billed for the period July 1, 2013 through June 30, 2014.  If you purchased your property after January 1, but prior to the creation of the original bill the following October, the Tax Collector may send a duplicate bill to the current owner making them aware of the property tax liability.  

Say, for example, you purchased a property January 14, 2013.  Property taxes for the 2012-13 fiscal year are generally prorated in escrow between buyer and seller based on periods of ownership.  While the seller would have received the 2013-14 annual tax bill, the new owner is typically liable for the entire tax bill.

Any difference between the prior owner's value and the fair market value of your home (generally your purchase price) will be addressed through the supplemental process.  If the regular tax bill is paid, and your fair market value is lower than the prior owner's assessed value, a refund will be issued.  In the opposite situation where your fair market value is greater than the prior owner's assessed value, a bill or bills would be generated.

When do I get my supplemental refund and how much will it be for?

The answer about timing is that this varies.  Just as homes are purchased throughout the year, and as businesses deal with business processes during the year, so it goes with the Assessor's Office.  The taxpayer should be prepared to pay taxes on the prior owner's bill without dependence on a refund of taxes from the supplemental process.  This is because both installments of taxes on the annual tax bill may become due and payable before taxes are refunded from the supplemental roll.

As far as the amount of the taxes refunded (or billed) for a supplemental assessment created due to a change in ownership, it is a pro-ration based on the number of days of ownership in the fiscal year.

The Assessor's Office reduced my value, but I believe it's even lower than that.  What can I do? or I don't agree with the Assessor's value.

If you disagree with an assessment made by the Assessor, you have the right to appeal that assessment to the Assessment Appeals Board by filing an Application for Changed Assessment between July 2 and September 15, inclusive.  The assessment appeals regular filing period is July 2 through September 15. However, when September 15 falls on Saturday, Sunday, or a legal holiday, an application that either is hand delivered, mailed and postmarked on the next business day shall be deemed to have been filed within the requisite time period. Therefore, the Clerk of the Assessment Appeals Board will accept appeal applications that are hand delivered, by 5:00 p.m. on Monday, September 16, 2013, and are mailed and postmarked no later than Monday, September 16, 2013. The Assessment Appeals Board is an independent body appointed by the Board of Supervisors to serve as the local Board of Equalization.  The filing of the application, however, does not excuse you from paying taxes as they become due.  To avoid penalties, you must pay your taxes on time

Before filing the application, we recommend that you first discuss your situation with a member of our appraisal staff.  Discussing the appraisal of your property with the Assessor's staff will assist you in understanding the methods and market data used in determining taxable value.

For additional information concerning appeals, you may view a video tutorial about the process produced by the State Board of equalization.

My neighbor and I have the same exact houses.  Why are his taxes lower?

California property tax values are event driven.  The assessed values on all properties are based on the value as of the most recent purchase date plus any new construction since the purchase.  Comparing your assessed value to your neighbors’ assessed value, regardless of the similarities in the properties, is virtually impossible. The dates of the purchase and the value as of those dates are what determine the base year values and subsequently the assessed values of each.

Example: 
Homeowner A purchased their home in December 1982 for $60,000. 

Homeowner B purchased the same exact model in December 2007 for $450,000.

Homeowner A's factored base year value is approximately  $102,900 as of January 1, 2013. 

Homeowner B's factored base year value is approximately  $479,900 as of January 1, 2013. The actual market value, as of January 1, 2013 is $400,000.

Homeowner A's property tax bill will be based on their factored based year value of $102,900 since it is lower than it's market value of $400,000.

Homeowner B's property tax bill will be based on the actual market value of  $400,000 since it's lower than the factored base year value of $479,900.