Laws, Regulations & Annotations
Property Taxes Law Guide – Revision 2011
California Constitutional Provisions
Article XIII A Tax Limitation
- 1 Maximum ad valorem tax on real property
- 2 Valuation of real property
- 3 Changes in state taxes
- 4 Imposition of special taxes
- 5 Effective dates
- 6 Provisions severable
ARTICLE XIII A* Tax Limitation
[Sections 1 through 6 added by amendment adopted June 6, 1978.]
* Note.—This section constitutes a valid enactment by initiative measure. It is not a constitutional revision; does not violate the single subject requirement; the rollback and two-thirds voting requirement for special local taxes do not violate equal protection and the right to travel is not impaired. Amador Valley Joint Union High School District,
et al. v. State Board of Equalization, et al., 22 Cal.3d 208; R. H. Macy & Co. v. Contra Costa County, 226 Cal.App.3d 352. Nordlinger v. Lynch, 225 Cal.App.3d 1259, Nordlinger v. Hahn, 505 U.S. 1; Northwest Financial, Inc. v. State Board of Equalization, 229 Cal.App.3d 198, cert. den. 505 U.S. 1219. Although the drafters of this Article did not intend to adopt a definition that could readily permit its circumvention, it is clear that they did not intend to interfere with benefit-related assessments. Accordingly, this Article does not preclude a public entity from shifting funding for an improvement from its general fund to special assessment, so long as the requisite special benefit exists. Knox v. City of Orland, 4 Cal.4th 132.
Section 1. Maximum ad valorem tax on real property. (a) The maximum amount of any ad valorem tax on real property shall not exceed one percent (1%) of the full cash value of such property. The one percent (1%) tax to be collected by the counties and apportioned according to to the districts within the counties.
(b) The limitation provided for in subdivision (a) shall not apply to ad valorem taxes or special assessments to pay the interest and redemption charges on any of the following:
(1) Indebtedness approved by the voters prior to July 1, 1978.
(2) Bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast by the voters voting on the proposition.
(3) Bonded indebtedness incurred by a school district, community college district, or county office of education for the construction, reconstruction, rehabilitation, or replacement of school facilities, including the furnishing and equipping of school facilities, or the acquisition or lease of real property for school facilities, approved by 55 percent of the voters of the district or county, as appropriate, voting on the proposition on or after the effective date of the measure adding this paragraph. This paragraph shall apply only if the proposition approved by the voters and resulting in the bonded indebtedness includes all of the following accountability requirements:
(A) A requirement that the proceeds from the sale of the bonds be used only for the purposes specified in Article XIIIA, Section 1(b) (3), and not for any other purpose, including teacher and administrator salaries and other school operating expenses.
(B) A list of the specific school facilities projects to be funded and certification that the school district board, community college board, or county office of education has evaluated safety, class size reduction, and information technology needs in developing that list.
(C) A requirement that the school district board, community college board, or county office of education conduct an annual, independent performance audit to ensure that the funds have been expended only on the specific projects listed.
(D) A requirement that the school district board, community college board, or county office of education conduct an annual, independent financial audit of the proceeds from the sale of the bonds until all of those proceeds have been expended for the school facilities projects.
(c) Notwithstanding any other provisions of or of this Constitution, school districts, community college districts, and county offices of education may levy a 55 percent vote ad valorem tax pursuant to subdivision (b).
History.—The amendment of June 3, 1986, added "(1)" before "any" and substituted "July 1, 1978, or (2) any bonded indebtedness . . . voting on the proposition" for "the time this section becomes effective" after "prior to" in the first sentence of subdivision (b). The amendments of November 8, 2000, (Proposition 39), added "any of the following;" after "redemption charges on" in the first sentence of subdivision (b); substituted a period for ", or" after "prior to July 1, 1978" and deleted "any" before "Indebtedness approved by" in the first sentence of paragraph (1) of subdivision (b); deleted "any" before "Bonded indebtedness for" in the first sentence of paragraph (2) of subdivision (b); added paragraph (3) to subdivision (b); and added subdivision (c).
Notes.—Proposition 39, effective November 8, 2000, provides the following:
SECTION 1. TITLE
This act shall be known as the Smaller Classes, Safer Schools and Financial Accountability Act.
SEC. 2. FINDINGS AND DECLARATIONS
The people of the State of California find and declare as follows:
(a) Investing in education is crucial if we are to prepare our children for the 21st Century.
(b) We need to make sure our children have access to the learning tools of the 21st Century like computers and the Internet, but most California classrooms do not have access to these technologies.
(c) We need to build new classrooms to facilitate class size reduction, so our children can learn basic skills like reading and mathematics in an environment that ensures that California's commitment to class size reduction does not become an empty promise.
(d) We need to repair and rebuild our dilapidated schools to ensure that our children learn in a safe and secure environment.
(e) Students in public charter schools should be entitled to reasonable access to a safe and secure learning environment.
(f) We need to give local citizens and local parents the ability to build those classrooms by a 55 percent vote in local elections so each community can decide what is best for its children.
(g) We need to ensure accountability so that funds are spent prudently and only as directed by citizens of the community.
SEC. 3. PURPOSE AND INTENT
In order to prepare our children for the 21st Century, to implement class size reduction, to ensure that our children learn in a secure and safe environment, and to ensure that school districts are accountable for prudent and responsible spending for school facilities, the people of the State of California do hereby enact the Smaller Classes, Safer Schools and Financial Accountability Act. This measure is intended to accomplish its purposes by amending the California Constitution and the California Education Code:
(a) To provide an exception to the limitation on ad valorem property taxes and the two-thirds vote requirement to allow school districts, community college districts, and county offices of education to equip our schools for the 21st Century, to provide our children with smaller classes, and to ensure our children's safety by repairing, building, furnishing and equipping school facilities;
(b) To require school district boards, community college boards, and county offices of education to evaluate safety, class size reduction, and information technology needs in developing a list of specific projects to present to the voters;
(c) To ensure that before they vote, voters will be given a list of specific projects their bond money will be used for;
(d) To require an annual, independent financial audit of the proceeds from the sale of the school facilities bonds until all of the proceeds have been expended for the specified school facilities projects; and
(e) To ensure that the proceeds from the sale of school facilities bonds are used for specified school facilities projects only, and not for teacher and administrator salaries and other school operating expenses, by requiring an annual, independent performance audit to ensure that the funds have been expended on specific projects only.
SEC. 7. CONFORMITY
The Legislature shall conform all applicable s to this act. Until the Legislature has done so, any statutes that would be affected by this act shall be deemed to have been conformed with the 55 percent vote requirements of this act.
SEC. 8. SEVERABILITY
If any of the provisions of this measure or the applicability of any provision of this measure to any person or circumstances shall be found to be unconstitutional or otherwise invalid, such finding shall not affect the remaining provisions or applications of this measure to other persons or circumstances, and to that extent the provisions of this measure are deemed to be severable.
SEC. 9. AMENDMENT
Section 6 of this measure may be amended to further its purpose by a bill passed by a majority of the membership of both houses of the Legislature and signed by the Governor, provided that at least 14 days prior to passage in each house, copies of the bill in final form shall be made available by the clerk of each house to the public and the news media.
SEC. 10. LIBERAL CONSTRUCTION
The provisions of this act shall be liberally construed to effectuate its purposes.
Construction.—As used in Article XIII A, an ad valorem tax is any source of revenue derived from applying a property tax rate to the assessed value of property. Heckendorn v. City of San Marino, 42 Cal.3d 481. Subdivision (b) excludes from the operation of subdivision (a) taxes levied to pay any indebtedness approved by the voters, not just taxes levied to pay bonded indebtedness. Shasta County v. Trinity County, 106 Cal.App.3d 30. Real property annexed to a water district after passage of this section is subject to an ad valorem tax in excess of one percent to pay interest and redemption charges on indebtedness of the district approved by the voters prior to that date, despite the fact that the property annexed was not included within the territory served by the district at the time the indebtedness was approved. Metropolitan Water District v. Dorff, 98 Cal.App.3d 109. An assessment on real property in the area served by a water agency to make up a deficiency incurred by the agency as a result of its purchases and resales of water does not violate the maximum tax limitation where the contract between the agency and the seller, approved by county voters, authorized a tax or assessment sufficient to provide for all payments under the contract. Kern County Water Agency v. Board of Supervisors, 96 Cal.App.3d 874. Ad valorem real property taxes levied by a local water agency to help fund the agency's payments on its water supply contract with the Department of Water Resources were levied to pay an indebtedness approved by the state's voters before July 1, 1978, and come within the exception to the restriction of subdivision (b). Goodman v. Riverside County, 140 Cal.App.3d 900. The one percent maximum tax limitation does not apply to special assessments levied pursuant to Streets & Highway Code, sections 5000 et seq. and 10000 et seq. Fresno County v. Malmstrom, 94 Cal.App.3d 974. Streets and Highway Code Section 5302.5 does not authorize a county to impose ad valorem property taxes beyond the one percent limitation of subdivision (a) to pay a special assessment imposed on public property. City of San Marcos v. Board of Supervisors, 159 Cal.App.3d 355.
Nonvoted special assessments for local improvements that directly benefit the property assessed do not come within the 1 percent limitation on the taxation of real property. Solvang Municipal Improvement District v. Board of Supervisors, 112 Cal.App.3d 545. City Council of the City of San Jose v. South, 146 Cal.App.3d 320. Ad valorem special assessments or special benefit assessments levied by a flood control district, Department of Water Resources, or Reclamation Board must be collected by the county either on an equalized ad valorem roll basis or by levy of a proportionate special benefit assessment, and the adoption of Article XIII A did not alter the county's statutory obligation to do so. American River Flood Control District v. Sayre; The People ex rel. Department of Water Resources v. Board of Supervisors, 136 Cal.App.3d 347.
Levy of ad valorem tax to meet city's obligations to the Public Employee's Retirement System is not subject to the 1 percent limitation on the taxation of real property. The term "indebtedness", as traditionally understood, covered the obligations arising under the city's pension plan, and the phrase "interest and redemption charges" denotes no more or less than the sums from time to time necessary to avoid default on obligations to pay money, including those for pensions. Carman v. Alvord, 31 Cal.3d 318. Only "indebtedness", the principal sum of bonds, must have been approved by the voters prior to the passage of this section, not "interest and redemption charges", and water district could issue bonds after passage of the section at an interest rate greater than that approved by the voters prior to passage of the section. Metropolitan Water District v. Dorff, 138 Cal.App.3d 388. A city's obligations arising under pension systems constitute an "indebtedness" and the sums paid by the city to avoid default thereon constitute the payment of "interest and redemption charges", and once indebtedness is found to have had the voters' prior approval, taxes levied to pay the obligations arising thereunder are exempt from the limitation and need not also be approved by the voters. Valentine v. City of Oakland, 148 Cal.App.3d 139. A 1983 ordinance imposing a property tax to meet city's obligations to its retirement system is not subject to the one percent limitation on the taxation of real property where city charter approved by the voters in 1957 provided for retirement benefits being mandated at the level then existing by ordinance and the proceeds from the tax were to be used to fund the level of benefits in existence in 1957. City of Fresno v. Superior Court, 156 Cal.App.3d 1137. A city charter provision, adopted in 1937, requiring the city to provide for a tax of 7 cents on each $100 of assessed valuation for the support of the city's libraries, created an "indebtedness" exempt from the limitation. An "indebtedness" may be created by statute rather than by contract, and the critical consideration in determining whether a city has created an "indebtedness" is whether its voters obligated themselves prior to 1978 to make expenditures in the future for a specified purpose. Patton v. City of Alameda, 40 Cal.3d 41.
City was entitled to receive a proportionate share of delinquent penalties by virtue of its right to share in property taxes collected by County, as provided for in subdivision (a). In the absence of legislative directive providing otherwise, the delinquent penalties followed the taxes. City of Los Angeles v. Los Angeles County, 139 Cal.App.3d 999.
Pension plan contributions made by city to PERS through the imposition of additional property taxes are an obligation constituting an indebtedness approved by the voters within the meaning of Article XIII A, such indebtedness is not limited to an indebtedness that was fixed and certain at the time of voter approval since changes in contributions were envisaged and approved by the voters, and Article XIII A does not prohibit levy and collection of such taxes. City of Watsonville v. Merrill, 137 Cal.App.3d 185. A water district which had authorized, in 1964, $3.2 million in bonds pursuant to former Water Code Section 71931, but which had issued only $1.7 million of the bonds prior to the passage of this section, had the authority to issue the remaining $1.5 million of the bonds. Pursuant to former Section 71931, the bonds were "approved" by district landowners by means of their failure to register disapproval against their issuance, and although the landowners were not necessarily residents of the district, they were, as holders of title, "voters" for purposes of incurring the bonded indebtedness, pursuant to present Section 71931. Thus, the unissued bonds come within the exception to the restriction of subdivision (b). Las Virgenes Municipal Water District v. Dorgelo, 154 Cal.App.3d 481.
As used in subdivision (b), "indebtedness" refers to an actual debt of an amount certain for money already received, such as upon the sale of construction or improvement bonds, and to be repaid in periodic payments in installments upon principal and interest with the intent and purpose of redeeming the original debt, and successful school district tax override measures that antedated Article XIII A do not constitute the kind of "indebtedness" provided for therein so as to allow school districts with existing override tax rates to continue to collect taxes beyond the limits imposed by Article XIIIA. Arvin Union School District v. Ross, 176 Cal.App.3d 189. The passage of a new city charter by the voters of a city in July of 1978 did not constitute prior voter approval of excess taxation for retirement benefits added after 1978. Excess taxation for added retirement benefits violated this article. Howard Jarvis Taxpayers Association v. Orange County, 110 Cal.App.4th 1375.
1978–79 Secured roll.—The Tax Injunction Act, 28 U.S.C. § 1341, barred federal court consideration of plaintiff's action challenging the constitutionality of Article XIII A and seeking refund of property taxes. Marvin F. Poer and Co. v. Alameda County, 725 F.2d 1234.
1978–79 Unsecured roll.—Sections 1(a) and 2(a) were not applicable to property taxed on the unsecured portion of the assessment roll for the tax year 1978–79. Taxes on unsecured property, both real and personal, were to be assessed at the prior year's rate for the secured roll as provided by Article XIII, Section 12 of the Constitution. Board of Supervisors v. Lonergan, 27 Cal.3d 855; R. E. Hanson, Jr. Mfg. v. Los Angeles County, 27 Cal.3d 870. The application of this article to the unsecured tax rolls can be determined in refund actions by individual taxpayers pursuant to Revenue and Taxation Code Section 5140, and plaintiffs were not entitled to preliminary injunctive relief enjoining county officials from spending funds allegedly collected in violation of the one percent limitation on the taxation of real property established by this section. Daar v. Alvord, 101 Cal.App.3d 480.
Apportionment.—This article expressly authorizes the Legislature to apportion property tax revenues. San Miguel Consolidated Fire Protection District v. Davis, 25 Cal.App.4th 134.
Newly constructed property.—The supplemental assessment provisions of Revenue and Taxation Code Section 75.12, which delay the supplemental assessment of newly constructed property held for sale until it changes ownership or is rented, leased, or otherwise used by the owner, do not violate this section. Shafer v. State Board of Equalization, 174 Cal.App.3d 423.
Payment of money judgments.—The initiative limitations on taxing and spending contained in Article XIII A, Article XIII B, and Article XIII C do not preclude judicial enforcement by writ of mandate of a judgment imposing inverse condemnation liability, an obligation imposed by statutory . Payment of such a judgment does not implement a municipal "purpose" within the meaning of the Articles' provisions; rather, such payment acts solely to vindicate the constitutional rights of the landowner. F & L Farm Co. v. City Council of the City of Lindsay, 65 Cal.App.4th 1345. This article prohibits a county from levying property taxes in excess of 1 percent to pay a money judgment under Harbors and Navigation Code Section 6361 and Government Code Sections 970 through 971. Although Section 6361 authorizes a board of supervisors to levy a special tax sufficient to meet a port district's annual estimate of the amount of money it will need "for all purposes," that statute has been superseded by the statutes implementing Proposition 13 insofar as they are inconsistent. Formulae for the distribution of tax funds to local agencies and districts have been enacted by the Legislature (Rev. & Tax. Code, Sec. 93 et seq.), and a district can no longer expect a county to levy taxes to raise whatever sum the district budget calls for. (Disapproving F & L Farm Co. v. City Council, 65 Cal.App.4th 1345 to the extent it holds to the contrary.) Ventura Group Ventures, Inc. v. Ventura Port District, 24 Cal.4th 1089.
Non-ad valorem general property tax.—A "parcel tax" consisting of an annual flat fee assessed against property holdings in a city, which tax was designed to raise revenue for deposit in the city's general fund for municipal services, is a non-ad valorem general property tax and invalid under this section where it fell due annually at fixed times and it was not apportioned by the type and extent of municipal services used. City of Oakland v. Digre, 205 Cal.App.3d 99.
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. For purposes of this section, the term "newly constructed" does not include that portion of an existing structure that consists of the construction or reconstruction of seismic retrofitting components, as defined by the Legislature.
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 applies 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 does 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, 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. This provisions of this subdivision applies to any property acquired after March 1, 1975, but affects 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 applies 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 applies 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 applies 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 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, are 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, img src="../../../../images/deletion.gif" alt="deletion" />are 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). The amendment of June 8, 2010, (Proposition 13) substituted "applies" for "shall apply" throughout the text; substituted "For purposes of this section," for "Also," before "the term" and substituted "that portion of an existing structure that consists of the construction or reconstruction of seismic retrofitting components, as defined by the Legislature" for "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" after "not include" in the third sentence of the first paragraph and substituted "does" for "shall" after "value, but" in the third sentence of the third paragraph of subdivision (a); deleted former paragraph (4) which provided that "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).", and renumbered former paragraph (5) as (4) of subdivision (c); substituted "This subdivision applies" for "The provisions of this subdivision shall be applied" before "to any" and substituted "affects" for "shall affect" after "1975, but" in the third sentence of subdivision (d); substituted "one-million-dollar" for "one million dollar" after "subparagraph (A), the" in the second sentence of subparagraph (B) of paragraph (2) of subdivision (h); and substituted "are" for "shall be" after "November 1, 1988" twice in the first and second sentences of subdivision (j).
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.
By the terms of the trust, the entire fee interest in the property was transferred to the plaintiff and other beneficiaries upon the settlor's death. A "change in ownership" occurred within the meaning of California Constitution Article XIII A, section 2, subdivision (a) because the entire equitable estate in the property, which included a life estate, was transferred. The settlor, as the sole beneficial owner of the residence before her death, retained no interest in the residence after her death. Steinhart v. County of Los Angeles (2010) 47 Cal. 4th 1298.
Sec. 3. Changes in state taxes. (a) Any change in state statute which results in any taxpayer paying a higher tax must be imposed by an act passed by not less than two-thirds of all members elected to each of the two houses of the Legislature, except that no new ad valorem taxes on real property, or sales or transaction taxes on the sales of real property may be imposed.
(b) As used in this section, "tax" means any levy, charge, or exaction of any kind imposed by the State, except the following:
(1) A charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the State of conferring the benefit or granting the privilege to the payor.
(2) A charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the State of providing the service or product to the payor.
(3) A charge imposed for the reasonable regulatory costs to the State incident to issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof.
(4) A charge imposed for entrance to or use of state property, or the purchase, rental, or lease of state property, except charges governed by Section 15 of Article XI.
(5) A fine, penalty, or other monetary charge imposed by the judicial branch of government or the State, as a result of a violation of law.
(c) Any tax adopted after January 1, 2010, but prior to the effective date of this act, that was not adopted in compliance with the requirements of this section is void 12 months after the effective date of this act unless the tax is reenacted by the Legislature and signed into law by the Governor in compliance with the requirements of this section. (d) The State bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor's burdens on, or benefits received from, the governmental activity.
History.—The amendment of November 2, 2010 (Proposition 26), designated the former first paragraph as subdivision (a) and substituted "Any change in state statute which results in any taxpayer paying a higher tax" for "From and after the effective date of this article, any changes in State taxes enacted for the purpose of increasing revenues collected pursuant thereto whether by increased rates or changes in methods of computation" before "must be" and substituted "act" for "Act" after "by an" in the first sentence therein and added subdivision (b), (c) and (d).
Note.—Section 1 of Proposition 26, in effect November 3, 2010, provided the following Findings and Declarations of Purpose:
The people of the State of California find and declare that:
(a) Since the people overwhelmingly approved Proposition 13 in 1978, the Constitution of the State of California has required that increases in state taxes be adopted by not less than two-thirds of the members elected to each house of the Legislature.
(b) Since the enactment of Proposition 218 in 1996, the Constitution of the State of California has required that increases in local taxes be approved by the voters.
(c) Despite these limitations, California taxes have continued to escalate. Rates for state personal income taxes, state and local sales and use taxes, and a myriad of state and local business taxes are at all-time highs. Californians are taxed at one of the highest levels of any state in the nation.
(d) Recently, the Legislature added another $12 billion in new taxes to be paid by drivers, shoppers, and anyone who earns an income.
(e) This escalation in taxation does not account for the recent phenomenon whereby the Legislature and local governments have disguised new taxes as "fees" in order to extract even more revenue from California taxpayers without having to abide by these constitutional voting requirements. Fees couched as "regulatory" but which exceed the reasonable costs of actual regulation or are simply imposed to raise revenue for a new program and are not part of any licensing or permitting program are actually taxes and should be subject to the limitations applicable to the imposition of taxes.
(f) In order to ensure the effectiveness of these constitutional limitations, this measure also defines a "tax" for state and local purposes so that neither the Legislature nor local governments can circumvent these restrictions on increasing taxes by simply defining new or expanded taxes as "fees."
Construction.—As used in Article XIII A, an ad valorem tax is any source of revenue derived from applying a property tax rate to the assessed value of property. Heckendorn v. City of San Marino, 42 Cal.3d 481. The supplemental assessment provisions of Revenue and Taxation Code Sections 75.10 and 75.11 only affect the time at which existing real property taxes are calculated and imposed and thus, they do not impose new ad valorem taxes in violation of this section. Shafer v. State Board of Equalization, 174 Cal.App.3d 423.
Sec. 4. Imposition of special taxes. Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district, may impose special taxes on such district, except ad valorem taxes on real property or a transaction tax or sales tax on the sale of real property within such City, County or special district.
Construction.—This section is not self-executing but requires enabling legislation. California Building Industry Ass'n. v. Governing Board of the Newhall School District, 206 Cal.App.3d 212. An ad valorem tax levied to meet a city's pension obligation, not subject to the 1 percent limitation of Section 1(b), cannot be construed to fall within this section. Carman v. Alvord, 31 Cal.3d 318. A proposed city initiative ordinance defining "special tax" was invalid since "special tax" had already been defined by judicial decision and by statute and was also invalid as an unful attempt to impair essential governmental functions through interference with administration of the city's fiscal powers. City of Atascadero v. Daly, 135 Cal.App.3d 466. A county sales tax measure is a general tax as a matter of and hence, not subject to the voter approval requirements applicable to special taxes under this section. Coleman v. Santa Clara County, 64 Cal.App.4th 662. A redevelopment agency is not a special "district" within the meaning of this section since it does not have the power to levy (impose and collect) taxes. Thus, a sales and use tax ordinance adopted by a redevelopment agency did not violate the section. Huntington Park Redevelopment Agency v. Martin, 38 Cal.3d 100. The supplemental assessment provisions of Revenue and Taxation Code Sections 75.10 and 75.11 only affect the time at which existing real property taxes are calculated and imposed and thus, they do not impose new ad valorem taxes in violation of this section. Shafer v. State Board of Equalization, 174 Cal.App.3d 423. This section was intended to assure effective property tax relief by restricting the taxing power of local governments. This is so because any tax savings resulting from Article XIII A could be withdrawn or depleted by additional or increased state or local levies of taxes other than property taxes. Rider v. San Diego County, 1 Cal.4th 1.
Effective date.—An ordinance imposing a transfer tax which became operative on June 29, 1978, was not affected by this section which became effective on July 1, 1978, and thus, was not invalid under the provisions thereof. Pugh v. City of Sacramento, 119 Cal.App.3d 485; Northgate Partnership v. City of Sacramento, 155 Cal.App.3d 65. An ordinance increasing business license taxes enacted on June 29, 1978, and which became effective immediately was not affected by this section which became effective on July 1, 1978. National Independent Business Alliance v. City of Beverly Hills, 128 Cal.App.3d 13.
Qualified voters.—"Qualified electors" include the registered voters of the city who voted in the election and do not include possible affected non-resident property owners. Neilson v. City of California City, 133 Cal.App.4th 1296.
Special district.—A "special district" includes any local taxing agency created to raise funds for city or county purposes to replace revenues lost because of real property tax restrictions of this Article, even if the agency lacks power to impose property taxes. Thus, a county agency formed to impose a sales tax to finance the construction of county justice facilities, upon the approval of a tax ordinance by a majority of county voters, was a special district within the meaning of this section. Rider v. San Diego County, 1 Cal.4th 1. A special district includes any local taxing agency created to raise funds for city or county purposes to replace revenues lost by the restrictions of Article XIII A. However, it is not necessary that the agency be controlled by the city or county; it need only be controlled by an entity subject to the super-majority requirement of Article XIII A. Thus, the San Francisco Educational Financing Authority, controlled by the city and county unified school district and the community college district, is a special district within the meaning of this section. Hoogasian Flowers, Inc. v. State Board of Equalization, 23 Cal.App.4th 1264. A special library district (Ed. Code § 19600) empowered to levy taxes on property was a "special district" within the meaning of this section and thus subject to the two-thirds' vote requirement thereof, which was not subject to a close scrutiny equal protection analysis. Altadena Library District v. Bloodgood, 192 Cal.App.3d 585. A county repair and projects authority, controlled by the county and created to impose a tax that circumvented this Article, is a "special district", even if it lacks power to levy property taxes. An intent to circumvent may be inferred whenever a new tax agency is essentially controlled by one or more cities or counties that otherwise would have had to comply with the super-majority provisions of this section. Monterey Peninsula Taxpayers Association v. Monterey County, 8 Cal.App.4th 1520. A "special district" includes any local taxing agency created to raise funds for city or county purposes to replace revenues lost by reason of the restrictions of this Article. Thus, under the Orange County Regional Justice Facilities Act and the County Regional Justice Facilities Financing Act, which provide for the adoption and implementation of local sales tax ordinances to fund detention and courthouse facilities upon approval by the voters in specified counties, ordinances not approved by two-thirds of the county's voters are invalid. Howard Jarvis Taxpayers' Assn. v. State Board of Equalization, 20 Cal.App.4th 1598.
A municipal utility district formed prior to the adoption of Article XIII A and not empowered to levy real property taxes is not a special district as defined in Government Code Section 50075 et.seq. Brydon v. East Bay Municipal Utility District, 24 Cal.App.4th 178.
Special taxes.—The term "special taxes" means taxes which are levied for a specific purpose. Thus, a payroll and gross receipts tax, the proceeds of which were placed in the city's general fund for use for general governmental expenditures, is not a "special tax". City and County of San Francisco v. Farrell, 32 Cal.3d 47. A non-ad valorem tax may be imposed upon real property if the tax is a "special" tax dedicated to specific purposes and approved "by a two-thirds vote of the qualified electors of" the city, county, or special district imposing the tax. A special tax can be used for more than one purpose without losing its status as a special tax. Neilson v. City of California City, 133 Cal.App.4th 1296. A special tax is a tax levied for a specific purpose, rather than a levy placed in the general fund to be utilized for general governmental purposes. Thus, a fee imposed upon a developer for the construction of water facilities necessitated by the development of a condominium complex, which fee was not levied for general revenue purposes, was not a special tax. Carlsbad Municipal Water District v. QLC Corporation, 2 Cal.App.4th 479. A special tax is a tax levied to fund a specific governmental project or program, even though, under this definition, every tax levied by a special purpose district or agency would be deemed a special tax. Although City and County of San Francisco v. Farrell, 32 Cal.3d 47, held that the proceeds of a tax placed in a city's treasury for general governmental purposes was not a special tax, that case does not apply to limited purpose agencies. Rider v. San Diego County, 1 Cal.4th 1. A sales tax levied by a county repair and improvement authority was a special tax, even though the tax was intended to fund 27 different projects rather than a specific project. A single tax with specific amounts earmarked for specific projects is different from revenues deposited in the general fund, and the fact that 27 specific taxes are combined in one does not convert the tax into a general tax for general government purposes. Monterey Peninsula Taxpayers Association v. Monterey County, 8 Cal.App.4th 1520.
A "parcel tax", the proceeds of which were to go into the city's general fund for the enhancement and maintenance of municipal services, is not a "special tax". City of Oakland v. Digre, 205 Cal.App.3d 99. A utilities tax, the proceeds of which were placed in the city's general fund for use for general governmental expenditures, including police and fire protection, is not a "special tax". Fenton v. City of Delano, 162 Cal.App.3d 400. A city's tax ordinance providing that the proceeds of the tax were to be paid to the city's general fund to be "used for any and all municipal purposes" was not a special tax, even though most of the proceeds derived from the tax were used for street repairs. Neecke v. City of Mill Valley, 39 Cal.App.4th 946. A facilities fee for connecting an apartment complex to a water system was a "special tax" under this section, requiring a two-thirds vote of the electorate of the district for its enactment. Although the fee, if reasonably related to the cost of the service for which it was imposed, would fall within the scope of the "service" fee defined by Government Code Section 50076, and would thus be outside the definition of "special tax", the district failed to sustain its burden of proving that its fee did not exceed the reasonable cost of providing the service for which it was imposed. Beaumont Investors v. Beaumont-Cherry Valley Water District, 165 Cal.App.3d 227. City's fire hydrant fee ordinances which did not contain language limiting the use of the fees and the fund established by the ordinances solely to those installations and repairs necessitated by new development, as mandated by this section, were constitutionally invalid. Bixel Associates v. City of Los Angeles, 216 Cal.App.3d 1208.
A local school district's levy imposing a "special tax" on all new residential construction in the district to fund new school construction was preempted by the later enacted Government Code Section 65995, part of a larger legislative program for school construction financing. The intent was to make uniform statewide the process of school construction financing and to empower school districts to impose development charges, and allowing the district to collect special taxes to offset development costs in addition to collecting the maximum amount allowed under the statute would upset that intent. Also, a "special tax" is a "charge" that Section 65995 specifically prohibited. Grupe Development Co. v. Superior Court of San Bernardino County, 4 Cal.4th 911.
As used in Article XIII A, an ad valorem tax is any source of revenue derived from applying a property tax rate to the assessed value of property. Thus, an ordinance imposing a graduated tax based on the city's zoning and classifications, determined by real property parcel size, was not an ad valorem tax and did not violate Article XIII A but was in accordance with the scheme established in Government Code Section 53978, governing special taxes. Heckendorn v. City of San Marino, 42 Cal.3d 481. "Special tax" as used in this section does not embrace fees charged in connection with regulatory activities when the fees do not exceed the reasonable cost of providing services necessary to the activity for which the fee is charged and are not levied for unrelated revenue purposes. Pennell v. City of San Jose, 42 Cal.3d 365.
Special assessments.—Special assessments charged for improvements to individual properties which do not exceed the benefits the assessed properties receive from the improvements are not special taxes within the meaning of this section. Fresno County v. Malmstrom, 94 Cal.App.3d 974. Special assessments levied for maintaining landscaped median islands on public streets within maintenance district are not special taxes. City Council of the City of San Jose v. South, 146 Cal.App.3d 320. Special assessments levied to finance maintenance for existing parks are not special taxes within the meaning of this section. Public parks confer a special benefit upon property and thus, parks are legitimate subjects for special assessments. Knox v. City of Orland, 4 Cal.4th 132. A special assessment to finance local improvements is not a general or special tax, but the property assessed must receive a special benefit from the improvement funded by the assessment. City of Larkspur v. Marin County Flood Control etc. District, 168 Cal.App.3d 947.
A city ordinance enacted by a charter city that imposed a present lien on undeveloped property to pay in the future an apportioned share of the costs of public facilities required to accommodate the needs of future residents of the property upon development was a special assessment. The ordinance as applied was a valid exercise of the city's power to require undeveloped land to bear the costs of the public facilities necessary for the health and welfare of its future residents. J. W. Jones Companies v. City of San Diego, 157 Cal.App.3d 745. Facilities benefit assessments used to finance public facilities in a new development, including construction of a water line, parks, library, and fire station, conferred a direct benefit on the development properties and were thus special assessments. City of San Diego v. Holodnak, 157 Cal.App.3d 759. County landfill fees imposed by a county to fund landfill improvements pursuant to Health and Safety Code Section 5471 are special assessments. Kern County Farm Bureau v. Kern County, 19 Cal.App.4th 1416.
A sewer capacity fee imposed by a water district to fund capital improvements is a special assessment from which other public entities are exempt (unless there is contrary legislative authority). A state agency such as a school district isresponsible for paying a special assessment such as the capacity fee only when the Legislature authorizes such payment. San Marcos Water District v. San Marcos Unified School District, 42 Cal.3d 154.
Assessments.—Provisions of Streets and Highway Code Section 36500 et seq., and an ordinance authorizing imposition of assessments on businesses for the purposes of general downtown promotions, the furnishing of music, and other expenditures unrelated to capital improvements, did not constitute a special tax under this section, which does not apply to certain revenue-generating procedures employed by local governments or to special assessments. Although the downtown promotion charge was not a true special assessment, that did not necessarily mean it was a special tax. The city and Legislature determined that downtown promotion inures to the benefit of business and landlords within the improvement district because the funds are used to make the downtown area a safer, cleaner, and more economically viable area. Under these circumstances, in which the business license holder who pays the assessment is specially benefitted, the assessment is not a "special tax." Evans v. City of San Jose, 3 Cal.App.4th 728.
Fees.—Fees for county services in processing subdivision, zoning, and other land use applications are not special taxes within the meaning of this section where they do not exceed the reasonable cost of providing services necessary to the regulatory activities for which they are charged and are not levied for unrelated revenue purposes. Mills v. Trinity County, 108 Cal.App.3d 656; California Building Industry Ass'n. v. Governing Board of the Newhall School District, 206 Cal.App.3d 212; Carlsbad Municipal Water District v. QLC Corporation, 2 Cal.App.4th 479. A mitigation fee payable by a developer as a condition of a city's approval of land-use changes allowing building is not a special tax within the meaning of this section. Ehrlich v. City of Culver City, 15 Cal.App.4th 1737. A water rate structure enacted as part of a drought management program is not a special tax within the meaning of this section. Brydon v. East Bay Municipal Utility District, 24 Cal.App.4th 178. Fees charged for the costs of regulatory activities are not special taxes under an Article XIIIA, Section 4 analysis if they do not exceed the reasonable cost of providing services necessary to the activities for which they are charged and they are not levied for unrelated revenue purposes. California Association of Professional Scientists v. Department of Fish & Game, 79 Cal.App.4th 935.
Fees for (or dedication of land to) local school districts to relieve the overcrowding of local school facilities required as a condition of being granted building permits do not violate this section in that they are neither ad valorem taxes on real property nor special taxes within the meaning of the section. Trent Meredith, Inc. v. City of Oxnard, 114 Cal.App.3d 317. Exactions imposed by school districts on developers of new residential housing within the districts, which exactions were proposed to and approved by voters purportedly under the authority of this section, were development fees, not special taxes. While under Government Code Section 50076 a development fee may be treated as a special tax, such will occur only if the fee exceeds the reasonable cost of providing the service for which it is charged and/or if the fee is levied for general revenue purposes, and neither circumstance existed. Being development fees, the fees were preempted by state because they conflicted with Government Code Sections 53080 and 65995 by taking an amount in excess of the maximum provided for therein. California Building Industry Ass'n. v. Governing Board of the Newhall School District, 206 Cal.App.3d 212. A Fee imposed upon a developer for the construction of water facilities necessitated by the development of a condominium complex, which fee did not exceed the reasonable cost of providing the services, was not levied for general revenue purposes and thus, was not a special tax. Carlsbad Municipal Water District v. QLC Corporation, 2 Cal.App.4th 479. A surcharge on materials deposited in county landfills is not a special tax within the meaning of this section where it does not exceed the reasonably necessary cost of the program it funds and the charges allocated bear a fair or reasonable relationship to the payor's burdens on or benefits from the activity at issue. City of Dublin v. Alameda County, 14 Cal.App.4th 264.
Transit fees imposed on developers of new office buildings as a condition of issuance of certificates of completion and occupancy are not special taxes within the meaning of this section where they are directly related and limited to the cost of increased municipal transportation services engendered by the particular developments. Russ Building Partnership v. San Francisco, 199 Cal.App.3d 1496; Pacific Gateway Assoc. Joint Venture v. San Francisco, 199 Cal.App.3d 1496; Crocker National Bank v. San Francisco, 199 Cal.App.3d 1496. Fees, based on gross receipts, for operation of rental car agencies located off airport premises but serving passengers of county airport are not special taxes within the meaning of this section where the fee was included in the policy considerations adopted when the board was appointed to operate the airport and was merely an authorized fee normally enacted by local governing bodies themselves, not by the voters. Alamo Rent-A-Car, Inc. v. Board of Supervisors, 221 Cal.App.3d 198. Fees based upon square footage, assessed against new developments, and reasonably related to the cost of providing increased services to new developments were not included within the definition of a special tax. Shapell Industries, Inc. v. Governing Board, 1 Cal.App.4th 218.
Tax override elections.—School districts are "special districts" within the meaning of this section, and while school districts were specifically empowered under former Education Code Section 42244 to conduct tax override elections and, if successful, to levy ad valorem property taxes, because the taxes authorized were taxes on real property this section in effect disallowed past and future increases in the revenue limit established by the state pursuant to former Section 42244. Arvin Union School District v. Ross, 176 Cal.App.3d 189.
Documentary transfer tax.—An increase in this tax, which goes into the general fund, is not prohibited by this section because this tax is a general tax. Cohn v. City of Oakland, 223 Cal.App.3d 261. This section does not prohibit the enactment of or increase in a real property transfer tax when the tax is a general, rather than a specific, tax. Furthermore, a transfer tax attaches to the privilege of exercising one of the incidents of property ownership, its conveyance. Such a tax is an excise tax, rather than a property tax, imposed solely on the privilege of disposing of one's property and realizing its actual value. Fielder v. City of Los Angeles, 14 Cal.App.4th 137; Fisher v. Alameda County, 20 Cal.App.4th 120.
Documentary transfer tax revenues.—This section did not prohibit a city incorporated after the effective date thereof and complying with the requirements of Revenue and Taxation Code Section 11911 from sharing in documentary transfer tax revenues collected by the county. The sharing of revenues did not create a new or additional tax in violation of Article XIII A, which did not pertain to the allocation of existing tax revenues. City of Cathedral City v. Riverside County, 163 Cal.App.3d 960.
Sec. 5. Effective dates. This article shall take effect for the tax year beginning on July 1 following the passage of this amendment, except Section 3 which shall become effective upon the passage of this article.
Sec. 6. Provisions severable. If any section, part, clause, or phrase hereof is for any reason held to be invalid or unconstitutional, the remaining sections shall not be affected but will remain in full force and effect.