When the Assessor's Office reappraises your property due to a change in ownership or new construction, you will be notified by mail of the new assessed value. This notification is known as a Notice of Supplemental Assessment. The reappraisal may result in the issuance of a supplemental tax bill. If the new assessed value is greater than the previous taxable value, the result will be a bill for the increase in value. A positive increase will generate a one-time supplemental bill. However, if the new assessed value is lower than the previous taxable value, it will result in a negative value. A negative value indicator will generate a one-time supplemental refund.
It is important to understand that supplemental tax bills are in addition to the regular annual tax bill and are mailed directly to the owner of the property. Unlike the annual property tax bills, lending agencies do not receive the original or a copy of the supplemental tax bill. These bills are the responsibility of the owner even if the regular annual property taxes are normally paid by a lender through an impound account. You may need to discuss the matter carefully with your lender. In any case, do not presume that your lender will automatically pay these types of bills. For an overview of the Supplemental Assessment process see below.
Proposition 13 was passed by voter initiative on June 1978. It requires the reappraisal of property at the time of any change of ownership, or at the time of completion of new construction.
The California State Legislature created the "supplemental assessment" of property in 1983. Revenue and Taxation Code Section 75 states that the intent of the State Legislature was "...to fully implement Article XXIIIA of the California Constitution and to promote increased equity among taxpayers" by enrolling and making adjustments of taxes resulting from changes in assessed value due to changes in ownership and completion of new construction at the time they occur."
The fiscal tax year begins on July 1 of any year and ends on June 30 of the next calendar year.
The action of the Legislature resulted in the following typical scenario: A property owner has owned their property for many years. The assessed value of their property on January 1, the lien date for taxes, is $30,000. They sell their property for $100,000. Under "Supplemental Assessment," the new owner will be billed for the increase in value for the prorated portion of the fiscal tax year for which the increase in value exists, beginning with the first day of the month following the reappraisable event. The following example is based on this situation.
Suppose a property sells on October 8, 2015. On that date, the seller's assessed value was $30,000. The purchase price was $100,000. On the first day of the month following the change of ownership, there are eight months remaining in fiscal year 2015-2016. The proration factor for the supplemental assessment purposes is .67, based upon the eight remaining months of the twelve-month fiscal year. The resulting bill would be derived by multiplying .67 (8/12) times $70,000 (the value increase), times the applicable tax rate as set by the Board of Supervisors.
If you purchase a property or complete new construction between Jan 1 and June 30 of any year, your supplemental bill will cover two fiscal or tax years. Suppose a change of ownership occurs on February 15, 2015. The assessed value was $20,000, and the new purchase price is $100,000. The new owner would owe supplemental taxes on the $80,000 increase in value applicable to the remainder of the 2014-2015 fiscal year, which includes the months of March, April, May and June of 2015. Proposition 13 requires the Assessor to increase the assessed value by a maximum of 2% for fiscal year 2015-2016, which begins on July 1, 2015. In this case, the prior taxable value for 2014-2015 would increase to $20,400. Therefore, the supplemental value for the entire fiscal year 2015-2016 will be $100,000-$20,400, or $79,600. The total of the two fiscal years will be the sum of $80,000 value increase prorated for a four-month period and the $79,600 value increase for the full 12-month period.
If you purchase, then sell property within a short period of time, the supplemental tax bill you receive should cover only the time you owned the property. The new owner should receive a separate supplemental tax bill. Be sure to check the dates used to prorate the period covered is the period during which you actually owned the property. The new owner of the property will receive a "Notice of Supplemental Assessment."
If an appeal of the Supplemental Assessment value is to be filed, it must be done within sixty days of the mailing of the "Notice of Supplemental Assessment," not when the supplemental bill is received.
If the purchase of a property is for your principal place of residence and you have not claimed a Homeowner's Exemption on any other residence in California during the tax year, you may be eligible for a homeowner's exemption of your supplemental bill. Information on filing will be printed on the Notice of Supplemental Assessment. Once you receive your notice, you can contact our office if you have further questions.