Laws, Regulations & Annotations

Property Taxes Law Guide – Revision 2010
 

California Constitutional Provisions

Article XIII A Tax Limitation

Section 2

Sec. 2. Valuation of real property. (a) The "full cash value" means the county assessor's valuation of real property as shown on the 1975–76 tax bill under "full cash value" or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment. All real property not already assessed up to the 1975–76 full cash value may be reassessed to reflect that valuation. For purposes of this section, "newly constructed" does not include real property that is reconstructed after a disaster, as declared by the Governor, where the fair market value of the real property, as reconstructed, is comparable to its fair market value prior to the disaster. Also, the term "newly constructed" does not include the portion of reconstruction or improvement to a structure, constructed of unreinforced masonry bearing wall construction, necessary to comply with any local ordinance relating to seismic safety during the first 15 years following that reconstruction or improvement.

However, the Legislature may provide that under appropriate circumstances and pursuant to definitions and procedures established by the Legislature, any person over the age of 55 years who resides in property that is eligible for the homeowner's exemption under subdivision (k) of Section 3 of Article XIII and any implementing legislation may transfer the base year value of the property entitled to exemption, with the adjustments authorized by subdivision (b), to any replacement dwelling of equal or lesser value located within the same county and purchased or newly constructed by that person as his or her principal residence within two years of the sale of the original property. For purposes of this section, "any person over the age of 55 years" includes a married couple one member of which is over the age of 55 years. For purposes of this section, "replacement dwelling" means a building, structure, or other shelter constituting a place of abode, whether real property or personal property, and any land on which it may be situated. For purposes of this section, a two-dwelling unit shall be considered as two separate single-family dwellings. This paragraph shall apply to any replacement dwelling that was purchased or newly constructed on or after November 5, 1986.

In addition, the Legislature may authorize each county board of supervisors, after consultation with the local affected agencies within the county's boundaries, to adopt an ordinance making the provisions of this subdivision relating to transfer of base year value also applicable to situations in which the replacement dwellings are located in that county and the original properties are located in another county within this State. For purposes of this paragraph, "local affected agency" means any city, special district, school district, or community college district that receives an annual property tax revenue allocation. This paragraph shall apply to any replacement dwelling that was purchased or newly constructed on or after the date the county adopted the provisions of this subdivision relating to transfer of base year value, but shall not apply to any replacement dwelling that was purchased or newly constructed before November 9, 1988.

The Legislature may extend the provisions of this subdivision relating to the transfer of base year values from original properties to replacement dwellings of homeowners over the age of 55 years to severely disabled homeowners, but only with respect to those replacement dwellings purchased or newly constructed on or after the effective date of this paragraph.

(b) The full cash value base may reflect from year to year the inflationary rate not to exceed 2 percent for any given year or reduction as shown in the consumer price index or comparable data for the area under taxing jurisdiction, or may be reduced to reflect substantial damage, destruction or other factors causing a decline in value.

(c) For purposes of subdivision (a), the Legislature may provide that the term "newly constructed" does not include any of the following:

(1) The construction or addition of any active solar energy system.

(2) The construction or installation of any fire sprinkler system, other fire extinguishing system, fire detection system, or fire-related egress improvement, as defined by the Legislature, that is constructed or installed after the effective date of this paragraph.

(3) The construction, installation, or modification on or after the effective date of this paragraph of any portion or structural component of single- or multiple-family dwelling that is eligible for the homeowner's exemption if the construction, installation, or modification is for the purpose of making the dwelling more accessible to a severely disabled person.

(4) The construction or installation of seismic retrofitting improvements or improvements utilizing earthquake hazard mitigation technologies, that are constructed or installed in existing buildings after the effective date of this paragraph. The Legislature shall define eligible improvements. This exclusion does not apply to seismic safety reconstruction or improvements that qualify for exclusion pursuant to the last sentence of the first paragraph of subdivision (a).

(5) The construction, installation, removal, or modification on or after the effective date of this paragraph of any portion or structural component of an existing building or structure if the construction, installation, removal, or modification is for the purpose of making the building more accessible to, or more usable by, a disabled person.

(d) For purposes of this section, the term, "change in ownership" does not include the acquisition of real property as a replacement for comparable property if the person acquiring the real property has been displaced from the property replaced by eminent domain proceedings, by acquisition by a public entity, or governmental action that has resulted in a judgment of inverse condemnation. The real property acquired shall be deemed comparable to the property replaced if it is similar in size, utility, and function, or if it conforms to state regulations defined by the Legislature governing the relocation of persons displaced by governmental actions. The provisions of this subdivision shall be applied to any property acquired after March 1, 1975, but shall affect only those assessments of that property that occur after the provisions of this subdivision take effect.

(e) (1) Notwithstanding any other provision of this section, the Legislature shall provide that the base year value of property that is substantially damaged or destroyed by a disaster, as declared by the Governor, may be transferred to comparable property within the same county that is acquired or newly constructed as a replacement for the substantially damaged or destroyed property.

(2) Except as provided in paragraph (3), this subdivision shall apply to any comparable replacement property acquired or newly constructed on or after July 1, 1985, and to the determination of base year values for the 1985–86 fiscal year and fiscal years thereafter.

(3) In addition to the transfer of base year value of property within the same county that is permitted by paragraph (1), the Legislature may authorize each county board of supervisors to adopt, after consultation with affected local agencies within the county, an ordinance allowing the transfer of the base year value of property that is located within another county in the State and is substantially damaged or destroyed by a disaster, as declared by the Governor, to comparable replacement property of equal or lesser value that is located within the adopting county and is acquired or newly constructed within three years of the substantial damage or destruction of the original property as a replacement for that property. The scope and amount of the benefit provided to a property owner by the transfer of base year value of property pursuant to this paragraph shall not exceed the scope and amount of the benefit provided to a property owner by the transfer of base year value of property pursuant to subdivision (a). For purposes of this paragraph, "affected local agency" means any city, special district, school district, or community college district that receives an annual allocation of ad valorem property tax revenues. This paragraph shall apply to any comparable replacement property that is acquired or newly constructed as a replacement for property substantially damaged or destroyed by a disaster, as declared by the Governor, occurring on or after October 20, 1991, and to the determination of base year values for the 1991–92 fiscal year and fiscal years thereafter.

(f) For the purposes of subdivision (e):

(1) Property is substantially damaged or destroyed if it sustains physical damage amounting to more than 50 percent of its value immediately before the disaster. Damage includes a diminution in the value of property as a result of restricted access caused by the disaster.

(2) Replacement property is comparable to the property substantially damaged or destroyed if it is similar in size, utility, and function to the property that it replaces, and if the fair market value of the acquired property is comparable to the fair market value of the replaced property prior to the disaster.

(g) For purposes of subdivision (a), the terms "purchased" and "change in ownership" do not include the purchase or transfer of real property between spouses since March 1, 1975, including, but not limited to, all of the following:

(1) Transfers to a trustee for the beneficial use of a spouse, or the surviving spouse of a deceased transferor, or by a trustee of such a trust to the spouse of the trustor.

(2) Transfers to a spouse that take effect upon the death of a spouse.

(3) Transfers to a spouse or former spouse in connection with a property settlement agreement or decree of dissolution of a marriage or legal separation.

(4) The creation, transfer, or termination, solely between spouses, of any coowner's interest.

(5) The distribution of a legal entity's property to a spouse or former spouse in exchange for the interest of the spouse in the legal entity in connection with a property settlement agreement or a decree of dissolution of a marriage or legal separation.

(h) (1) For purposes of subdivision (a), the terms "purchased" and "change in ownership" do not include the purchase or transfer of the principal residence of the transferor in the case of a purchase or transfer between parents and their children, as defined by the Legislature, and the purchase or transfer of the first one million dollars ($1,000,000) of the full cash value of all other real property between parents and their children, as defined by the Legislature. This subdivision shall apply to both voluntary transfers and transfers resulting from a court order or judicial decree.

(2) (A) Subject to subparagraph (B), commencing with purchases or transfers that occur on or after the date upon which the measure adding this paragraph becomes effective, the exclusion established by paragraph (1) also applies to a purchase or transfer of real property between grandparents and their grandchild or grandchildren, as defined by the Legislature, that otherwise qualifies under paragraph (1), if all of the parents of that grandchild or those grandchildren, who qualify as the children of the grandparents, are deceased as of the date of the purchase or transfer.

(B) A purchase or transfer of a principal residence shall not be excluded pursuant to subparagraph (A) if the transferee grandchild or grandchildren also received a principal residence, or interest therein, through another purchase or transfer that was excludable pursuant to paragraph (1). The full cash value of any real property, other than a principal residence, that was transferred to the grandchild or grandchildren pursuant to a purchase or transfer that was excludable pursuant to paragraph (1), and the full cash value of a principal residence that fails to qualify for exclusion as a result of the preceding sentence, shall be included in applying, for purposes of subparagraph (A), the one million dollar ($1,000,000) full cash value limit specified in paragraph (1).

(i) (1) Notwithstanding any other provision of this section, the Legislature shall provide with respect to a qualified contaminated property, as defined in paragraph (2), that either, but not both, of the following shall apply:

(A) (i) Subject to the limitation of clause (ii), the base year value of the qualified contaminated property, as adjusted as authorized by subdivision (b), may be transferred to a replacement property that is acquired or newly constructed as a replacement for the qualified contaminated property, if the replacement real property has a fair market value that is equal to or less than the fair market value of the qualified contaminated property if that property were not contaminated and, except as otherwise provided by this clause, is located within the same county. The base year value of the qualified contaminated property may be transferred to a replacement real property located within another county if the board of supervisors of that other county has, after consultation with the affected local agencies within that county, adopted a resolution authorizing an intercounty transfer of base year value as so described.

(ii) This subparagraph applies only to replacement property that is acquired or newly constructed within five years after ownership in the qualified contaminated property is sold or otherwise transferred.

(B) In the case in which the remediation of the environmental problems on the qualified contaminated property requires the destruction of, or results in substantial damage to, a structure located on that property, the term "new construction" does not include the repair of a substantially damaged structure, or the construction of a structure replacing a destroyed structure on the qualified contaminated property, performed after the remediation of the environmental problems on that property, provided that the repaired or replacement structure is similar in size, utility, and function to the original structure.

(2) For purposes of this subdivision, "qualified contaminated property" means residential or nonresidential real property that is all of the following:

(A) In the case of residential real property, rendered uninhabitable, and in the case of nonresidential real property, rendered unusable, as the result of either environmental problems, in the nature of and including, but not limited to, the presence of toxic or hazardous materials, or the remediation of those environmental problems, except where the existence of the environmental problems was known to the owner, or to a related individual or entity as described in paragraph (3), at the time the real property was acquired or constructed. For purposes of this subparagraph, residential real property is "uninhabitable" if that property, as a result of health hazards caused by or associated with the environmental problems, is unfit for human habitation, and nonresidential real property is "unusable" if that property, as a result of health hazards caused by or associated with the environmental problems, is unhealthy and unsuitable for occupancy.

(B) Located on a site that has been designated as a toxic or environmental hazard or as an environmental cleanup site by an agency of the State of California or the federal government.

(C) Real property that contains a structure or structures thereon prior to the completion of environmental cleanup activities, and that structure or structures are substantially damaged or destroyed as a result of those environmental cleanup activities.

(D) Stipulated by the lead governmental agency, with respect to the environmental problems or environmental cleanup of the real property, not to have been rendered uninhabitable or unusable, as applicable, as described in subparagraph (A), by any act or omission in which an owner of that real property participated or acquiesced.

(3) It shall be rebuttably presumed that an owner of the real property participated or acquiesced in any act or omission that rendered the real property uninhabitable or unusable, as applicable, if that owner is related to any individual or entity that committed that act or omission in any of the following ways:

(A) Is a spouse, parent, child, grandparent, grandchild, or sibling of that individual.

(B) Is a corporate parent, subsidiary, or affiliate of that entity.

(C) Is an owner of, or has control of, that entity.

(D) Is owned or controlled by that entity.

If this presumption is not overcome, the owner shall not receive the relief provided for in subparagraph (A) or (B) of paragraph (1). The presumption may be overcome by presentation of satisfactory evidence to the assessor, who shall not be bound by the findings of the lead governmental agency in determining whether the presumption has been overcome.

(4) This subdivision applies only to replacement property that is acquired or constructed on or after January 1, 1995, and to property repairs performed on or after that date.

(j) Unless specifically provided otherwise, amendments to this section adopted prior to November 1, 1988, shall be effective for changes in ownership that occur, and new construction that is completed, after the effective date of the amendment. Unless specifically provided otherwise, amendments to this section adopted after November 1, 1988, shall be effective for changes in ownership that occur, and new construction that is completed, on or after the effective date of the amendment.

History.—The amendment of November 7, 1978, corrected to lower case the words "county assessor's" and corrected the spelling of "occurred" in the first sentence, substituted "full cash value" for "tax levels" in the second sentence, and added the third sentence to subdivision (a); and substituted "full cash" for "fair market", substituted "2 percent" for "two percent (2%)", and added the balance of the first sentence of subdivision (b) after "Jurisdiction". The amendment of November 4, 1980, added subdivision (c). The amendment of June 8, 1982, added subdivision (d). The amendment of June 5, 1984, added the fourth sentence to subdivision (a). The amendment of November 6, 1984, added "both of" after "include"; added "following:" after "the" in the first sentence of subdivision (c), added "(1) The" before "construction" in the former first sentence, and added subsection (2) thereto. The amendment of June 3, 1986, added subdivisions (e) and (f). The amendments of November 4, 1986, deleted "the term" after "section,", substituted "does" for "shall" after "newly constructed" and substituted "the" for "such" after "value of" in the third sentence of subdivision (a); added the second paragraph to subdivision (a); and added subdivisions (g), (h), and (i). The amendment of November 8, 1988 deleted "not" after "shall" substituted "on or after November 5, 1986" for "prior to the effective date of this paragraph" in the fifth sentence of the second paragraph, and added the third paragraph of subdivision (a); added "adopted prior to November 1, 1988," after "section" and substituted "changes in ownership" for "change in ownerships" after "effective for" in the first sentence, and added the second sentence of subdivision (i). The amendment of June 5, 1990, added the fourth paragraph of subdivision (a), substituted "any" for "both" in subdivision (c), and added subsection (3) to subdivision (c). The amendment of November 6, 1990, added subsection (4) to subdivision (c). The amendment of November 2, 1993, added (1) before "Notwithstanding" in the first paragraph, added (2) and "Except as provided in paragraph (3)" before "This" in the second paragraph, and added paragraph (3) to subdivision (e). The amendment of June 7, 1994, added paragraph (5) to subdivision (c). The amendment of March 26, 1996, added "(1)" before "For purposes of", substituted "change in ownership" for "change of ownership" after "purchased," and added paragraph (2) to subdivision (h). The amendment of November 3, 1998, substituted "that" for "which" throughout text; added quotation marks to the phrase "full cash value" in the first sentence of subdivision (a); substituted "single- or multiple-family" for "single or multiple family" after "component of a" in the first sentence of paragraph (3) of subdivision (c); substituted "one million dollars ($1,000,000)" for "$1,000,000" after "the first" in the first sentence of paragraph (1) of subdivision (h); relettered former subdivision (i) as subdivision (j) and added the second sentence therein; and added subdivision (i).

Construction.—The 1978 amendment, which amended this section by specifically providing that acquisition value will be reduced to reflect a decline in real property value, applies retroactively to the 1978–79 fiscal year. State Board of Equalization v. Board of Supervisors, 105 Cal.App.3d 813. Revenue and Taxation Code Sections 110.1(f) and 51 and Cal. Admin. Code Title 18, Section 460, which interpreted the inflation factor provisions of Section 2(b), requiring adjustment of 1975–76 base values for the three tax years between establishment of the full cash value base in 1975 and the 1978 effective date of Article XIII A, were not opposed to the constitutional provisions, which were ambiguous as to when application of the inflation factor was to commence, and represented a valid exercise of legislative power. Armstrong v. San Mateo County, 146 Cal.App.3d 597. "The appraised value of real property when purchased", as used in Section 2(a), constitutes a change in the time at which property purchased after March 1, 1975, is to be appraised and assigned a value.

Thus, an appraisal of property purchased is to be made as of the date purchased, and for properties sold after March 1, 1975, which had only lien date values between 1975 and 1979, the assessor properly went back and calculated the values of such properties as of the dates purchased without regard to such lien date values. Schoderbek v. Carlson, 152 Cal.App.3d 1027. Subdivision (a) of this section defines "full cash value" for a property purchased after 1975 as the appraised value of the property at the time of purchase. Where the full cash value is established upon purchase and sale of a property, "full cash value" has the same meaning as fair market value measured at the date of such purchase. Once established at the date of purchase, the full cash value becomes the base value for purposes of property taxation. Blackwell Homes v. Santa Clara County, 226 Cal.App.3d 1009; Maples v. Assessment Appeals Board, 103 Cal.App.4th 172. Article XIII A applies to oil and gas properties and interests, and Cal. Admin. Code Title 18, Section 468, establishing valuation principles for taxation of oil and gas reserves, was a proper interpretation of Article XIII A as applied to oil and gas properties, which have no real parallel with other types of property. Section 468 correctly treats additions to proved reserves due to changed physical or economic conditions as additions to real property interests, provides that existing proved reserves may not be increased in value more than 2 percent per year, and recognizes reductions in value of existing proved reserves due to depletion from production. Lynch v. State Board of Equalization, 164 Cal.App.3d 94. Cal. Admin. Code Title 18, Section 468, is applicable to establish the value property containing a mineral interest, rather than alternative methods of valuation, notwithstanding that the buyer of the property owned the entire fee interest. The Section contemplates that the base year value of the nonpetroleum interest is fixed in accordance with this article, but the petroleum interest is subject to revaluation based on changes in proved reserves, as defined in subdivision (b) thereof and as calculated pursuant to subdivision (c) thereof. And the Section does not preclude the assessor from assigning any value to unproved reserves. Maples v. Assessment Appeals Board, 103 Cal.App.4th 172. Proved reserves are not the only value component of an oil and gas mineral interest. The purchase price can represent the fair market value and assessable value of this type of property. A company's purchase of mineral rights can include more than just the right to remove oil and gas from land; it may also include rights to explore and develop oil and gas reserves. Such rights fall under the definition of land, which includes the right to use a property for all ful purposes. Accordingly, proved reserves, as valued by Rule 468, are not the sole measure of determining the fair market value of an oil and gas interest. Instead, oil and gas interests are valued in terms of an appraisal unit in which proved reserves are merely one component; the "appraisal unit" includes proved reserves, land (other than mineral interests), and improvements. California Minerals v. County of Kern, 152 Cal.App.4th 1016. Article XIII A applies to geothermal properties and interests, and Cal. Admin. Code Title 18, Section 468, establishing valuation principles for taxation of oil and gas reserves, was a proper interpretation of Article XIII A as applied to geothermal properties, which have no real parallel with other types of property. Phillips Petroleum Co. v. Lake County, 15 Cal.App.4th 180. Corporation whose purchase of residence resulted in the reassessment of the real property at fair market value, an amount four times greater than the assessed values of comparable homes of long-time resident neighbors, had no constitutional basis for challenging the reassessment. Northwest Financial, Inc. v. State Board of Equalization, 229 Cal.App.3d 198. The supplemental assessment provisions of Revenue and Taxation Code Section 75.18, which implement Section 2(b), do not constitute an ad valorem tax increase. Shafer v. State Board of Equalization, 174 Cal.App.3d 423.

For purposes of Section 2(h), a change in ownership of real property that is passed from parent to child as inheritance under a will does not occur on the date of death, but results from a judicial decree or order of distribution after probate of the estate, since it is only then that the devisee attains the right of sole possession and beneficial use in addition to bare legal title. Larson v. Duca, 213 Cal.App.3d 324. This section and Section 1(a) apply only to locally assessed property, not to the unit taxation of public utility property. Unit taxation is properly characterized not as a taxation of real property or personal property or a combination thereof, but rather as the taxation of a going concern, wherein Article XIII A applies only to real property taxes. ITT World Communications, Inc. v. City and County of San Francisco, 37 Cal.3d 859. The full cash value base of real property as provided in subdivision (b) of section 2, article XIII A, is established upon a change in ownership or completion of new construction and is the value to which the annual inflation factor not to exceed 2 percent is applied. A reassessment of real property solely due to a decline in value lower than the factored full cash value base does not establish a new full cash value base. County of Orange v. Bezaire, 117 Cal.App.4th 121.

Change in ownership.—The Legislature did not unfully abridge the California Constitution by undertaking to define in Revenue and Taxation Code section 64(c) the phrase "change in ownership", as used in this section, for purposes of permitting reassessment of realty, and its definition of it was presumptively correct. Sav-on Drugs, Inc. v. Orange County, 190 Cal.App.3d 1611. This section does not expressly, or by necessary implication, preclude the Legislature from creating new exclusions from the phrase "change in ownership;" it simply provides that taxes "shall not exceed" a set amount unless there has been a change in ownership. Strong v. State Board of Equalization, 155, Cal.App.4th 1182. The imposition of a property tax on the possessory interests of commercial air carriers in their use of facilities at an international airport did not violate the intent of Article XIII A by discriminating against lessors and lessees of government property, as compared to lessors and lessees of private property. The Revenue and Taxation Code distinguishes between tax-exempt government property, where a change of ownership allowing reassessment occurs regardless of the term of the taxable possessory interest, and taxable private property, where a change of ownership occurs only if the term of the lease is for 35 years or more. The term of the carriers' alleged taxable possessory interest had been determined by the county to be five years. The Legislature could reasonably determine that an owner who leases his private real property has not transferred ownership for tax purposes, unless the lease is for a substantial length of time. By contrast, when the government gives a taxable possessory interest in land, it can reasonably be viewed as always transferring the equivalent of a fee interest, even if the interest is for a short term, since before the transfer there was no taxable possessory interest at all. United Air Lines, Inc. v. San Diego County, 1 Cal.App.4th 418. Department store owner, which underwent a corporate restructuring that constituted a change in ownership under this section and caused the reassessment of its real property at fair market value (and at an amount 2.5 times higher than that of competing stores in the same mall), had no bases for challenging the reassessment on equal protection or other constitutional grounds. R. H. Macy & Co. v. Contra Costa County, 226 Cal.App.3d 352. Homeowner whose purchase of residence resulted in the reassessment of her real property at fair market value, an amount in excess of the assessed values of comparable homes of long-time resident neighbors, had no constitutional basis for challenging the reassessment. Under this Article, each owner's assessment is based on acquisition value, in compliance with the equal protection clause's prohibition against property owners who are similarly situated in the same class and irrespective of an owner's status as a resident or of an owner's length of residence. And amendments to this section providing that base-year values may be transferred to certain replacement properties, and that certain transfers of property are deemed not to be changes of ownership do not deprive this Article of its rational basis. Nordlinger v. Lynch, 225 Cal.App.3d 1259.

Sale and leaseback.—The sale of a building pursuant to a sale and leaseback arrangement was a change in ownership within the meaning of Section 2(a), triggering reassessment of the property. The sale met the three-prong definition of change in ownership in Revenue and Taxation Code Section 60. And the leaseback for a term of 50 years (including renewal options) of a building pursuant to a sale and leaseback arrangement was a change in ownership, triggering reassessment of the property. The leasehold interest created met the definition of change in ownership in Revenue and Taxation Code Section 61(c). Industrial Indemnity Co. v. City and County of San Francisco, 218 Cal.App.3d 999.

Replacement dwelling.—When an applicant for Proposition 60 tax relief builds a new residence on land purchased years earlier, the value of that replacement dwelling must be determined when construction is complete. Wunderlich v. County of Santa Cruz, 178 Cal. App. 4th 680.

Assessment on termination of Williamson Act Contract.—Agricultural property subjects to such a contract which was terminated in 1977 was properly assessed in 1978 to reflect fair market value under the "roll-back" provisions of Section 2(a). While a literal application of the language of Section 2(a) would require use of the "full cash" value figure reflected on the 1975–76 secured tax-roll, such would violate the essence of Article XIII, Section 8, which was not repealed by Article XIII A. Shellenberger v. Board of Equalization of San Joaquin County, 147 Cal.App.3d 510.

Assessment of golf courses.—No conflict exists between this Section and Article XIII, Section 10 of the Constitution, which establishes an exception to the general rule of assessment valuation on the basis of highest and best use to which property might be put where property is used as a nonprofit golf course. Thus, the value of plaintiffs' properties are their respective 1975–76 "golf course" values subject to the 2 percent per year increases authorized by subdivision (b). Los Angeles Country Club v. Pope, 175 Cal.App.3d 278.

Assessment of lands owned by local governments and located outside their boundaries.—Both this section and Article XIII, Section 11 of the Constitution may be applied to taxable lands owned by local governments and located outside their boundaries without any conflict. Article XIII, Section 11 only sets an upper limit on the valuation for tax purposes of property owned by local governments, and this section only sets an upper limit on the valuation and taxation of real property. If the full cash value of lands under this section were lower than either of the two alternative valuation limitations of Article XIII, Section 11, using this section valuation would not conflict with Article XIII, Section 11, as the lower of the two alternative valuation limitations would not be exceeded. If one or both of the alternative valuation limitations were lower than the valuation under this section, it would not conflict with that provision to use the lower valuation under Article XIII, Section 11, because the valuation limitation of this section is only a ceiling. San Francisco v. San Mateo County, 10 Cal.4th 554.

Corporation.—A corporation's sale of an office complex, subject to its executing three 50-year leases and assigning them to its wholly-owned subsidiary prior to sale, was a single transaction resulting in a 100 percent change in ownership. Under the end result test, the interdependence test, and the binding commitment test, the sale and leases were really component parts of a single transaction, the intent being for the buyer to acquire the property subject to the long-term leases, and the step transaction doctrine applied. Crow Winthrop Operating Partnership v. Orange County, 10 Cal.App.4th 1848.

Assessment of gas storage rights upon discovery.—Gas storage rights in certain real parcels were properly valued and assessed in 1978, when they were discovered, since that was the year in which they attained value due to the confluence of certain economic and technological factors. Because the rights were undiscovered, and consequently had no value, prior to 1978, they were not included in the 1975 base year valuation provided by Article XIII A. Tenneco West, Inc. v. Kern County, 194 Cal.App.3d 596.

Escape assessments.—As the result of this Article, the base year value of property is made a cornerstone of taxation, and this valuation cannot be revised or altered under the guise of escape assessments. Thus, "assessment year" in the statutory provision relating to escape assessments must be construed as the year when the base value of the property was determined, in which case the four-year statute of limitations applicable to the making of escape assessments runs from the base year rather than from a subsequent assessment year. Dreyer's Grand Ice Cream, Inc. v. Alameda County, 178 Cal.App.3d 1174. Revenue and Taxation Code Section 532, which provides the statute of limitations for levying escape assessments, does not conflict with this Article. Under that section, escape assessments must be made within four years of July 1 of the assessment year, as defined in Revenue and Taxation Code Section 118, in which property escaped taxation or was underassessed. This Article did not change the definition of "assessment year." An escape assessment is merely a mechanism for implementing existing property tax and cannot be in conflict with it. Blackwell Homes v. Santa Clara County, 226 Cal.App.3d 1009.

Partnership.—Transfer of title to real property owned by a partnership by the successor corporation of one of the general partner corporations, which held title to the property as nominee for the partnership, to the partnership did not constitute a change in ownership under subdivision (a) since a change in ownership does not occur upon transfer of "bare legal title" to property, without a corresponding transfer of "the beneficial use thereof", and since the nominee corporation and later the successor corporation held no more than "bare legal title" to the property for the use and benefit of the partnership. Parkmerced Co. v. City and County of San Francisco, 149 Cal.App.3d 1091. A partnership's sale of an office complex in three steps, with one partner selling its partnership interest to the buyer, the buyer and the other partner liquidating the partnership and taking equal interests in the property, and the other partner then selling its property interest to the buyer, was a single transaction that resulted in a 100 percent change in ownership. Under the end result test, the interdependence test, and the binding commitment test, the three steps were really component parts of a single transaction, the ultimate intent being for the buyer to acquire all of the property, and the step transaction doctrine applied. Shuwa Investments Corporation v. Los Angeles County, 1 Cal.App.4th 1635.

Trust.—Termination of an irrevocable trust on real property and transfer of the property to the beneficiaries in 1978 does not constitute a change in ownership under subdivision (a). Allen v. Sutter County Board of Equalization, 139 Cal.App.3d 887.