Property Assessment Basics
California Tax Law OverviewIn June 1978, under Proposition 13, the concept of base-year value for property tax was established. The assessments for the year 1975-76 function as the original base-year values. Following this, new base-year values are created only when a property is purchased, new construction is done, or if the property changes ownership. Also under Prop 13, the base-year value can only increase a maximum of 2 percent per year, as set by the State Board of Equalization, to keep up with the inflation of money.
Under normal circumstances, the Factored-Base value (base value plus the inflation factor) is well under the market value as time goes by. This was the intent of Proposition 13. It revolved around the belief that a person who owns their property for a long time should not be taxed higher because their neighbors are buying during a higher real estate market.
In order to protect property owners when the real estate market fluctuates downward, another proposition was passed in November 1978. Proposition 8 was established to protect property owners from being taxed on a value that is higher than current market. The Assessor can review your assessed value and enroll the lower of either the factored-base value or the current market value.
Temporary Value ReductionsThe Assessor may temporarily lower the assessed value of your property if the market value as of lien date*, January 1, of the current year was below the total assessed value shown on your annual property tax bill. A decline in market value can be the result of changes in the property, the neighborhood, or the real estate market. If you think that your property is assessed at a value that is above the market value as of January 1, you can call our office to request that we review your case.
It is important to note that reductions in assessed value are temporary and reviewed every year until the Factored-Base-Year value is lower than market value. In addition, Proposition 8 assessments are not restricted by the Proposition 13 two percent maximum increase. However, property assessed under Proposition 8 cannot be assessed at a level higher than its Proposition 13 Factored-Base-Year value.