Blog #split roll tax

As I mentioned back in April, we will be voting in California on the Split Roll Tax in November, now called Proposition 15.  If you’re not sure what “Split Roll” refers to, see my post: Split Roll Tax And What It Means For California Commercial Real Estate.

A more recent update from AIR points out only a simple majority is required for the measure to pass.  Recent polls indicate its likely to be a tight race, 53% of likely voters were in favor per the Public Policy Institute.  Reassessments could begin 2022-2023 but a recent Press Telegram article indicated the assessor might not have the funds and resources necessary to implement it among other issues.

There is an exemption for properties less than $3 million, however owners who have multiple commercial buildings in excess of $3 million are not exempt.  Properties would be reassessed at least once in every 3 years and the 1% base tax remains in place.

For more information, see the post on A.I.R Forms Practitioner: https://airpractitioner.com/2020/08/05/californias-controversial-split-roll-initiative-prop-15-the-basics/

Come in November here in California, voters will have to opportunity to vote on the split roll tax.  What “split roll” refers to is traditionally all California real estate had a unified tax roll, commercial being assessed the same way residential is.  The split roll initiative proposes changing the way commercial is assessed from residential.

The first initiative for the split roll tax for the November ballot was withdrawn so the one we are likely to vote on is the 2^nd version.  It has been given the somewhat deceptive title “California Schools and Local Communities Funding Act”.  What it proposes is eliminating the limitation on annual increases and taxable value for commercial properties which currently caps at 2% upside a year.  The change would remove the cap and allow commercial property to be reassessed on a continuing basis.

The increase in cost to business and commercial property owners is estimated to be $12 billion a year.  Because most businesses lease their property, the cost would likely  be passed on to the tenant and ultimately flow down to the consumer.  This would remove predictability and stability of costs associated with property tax and would probably cause an initial shock that puts many companies at risk of going out of business.  Advocates have also openly expressed the next step would be going after residential protections.  Some examples of types of businesses that would be affected would be movie theaters, shopping malls, gas stations, supermarkets, retail stores, auto dealerships, car washes, restaurants, hotels, self-storage facilities, factories, warehouses, businesses in office buildings and strip malls.

More information can be found at https://www.hjta.org/.