Laws, Regulations & Annotations

Property Taxes Law Guide – Revision 2011
 

Property Tax Rules

Title 18, Public Revenues California Code of Regulations

DIVISION 1. STATE BOARD OF EQUALIZATION

CHAPTER 1. STATE BOARD OF EQUALIZATION—PROPERTY TAX

Subchapter 2. Assessment (101–300)

Article 4. Information From Taxpayers and Audits (171–200)

Rule 192

Rule 192. deletionAUDITdeletion SELECTION.

Reference: Sections 106, 469, Revenue and Taxation Code.

(a) DEFINITIONS. For purposes of this regulation:

(1) "Personal property" means all property except real property.

(2) "Business tangible personal property" means personal property used in a profession, trade, or business, and shall include vessels and/or aircraft if used in a profession, trade, or business.

(3) "Trade fixtures" means any fixtures that are used in connection with a trade or business.

(4) "Farming" is a business. When conducting an audit pursuant to this section of a farming or ranching operation, the assessor must determine whether any racehorses taxable to the same taxpayer pursuant to Part 12 of Division 1 of the Revenue and Taxation Code have been underreported or escaped assessment.

(5) "Significant number of audits" means at least 75 percent of the fiscal year average of the total number of audits the assessor was required to have conducted from the 2002–03 fiscal year to the 2005–06 fiscal year, inclusive, on those taxpayers in the county that had a full value of four hundred thousand dollars ($400,000) or more of locally assessable trade fixtures and business tangible personal property.

(6) "Taxpayers with largest assessments" means taxpayers that have the largest assessments of locally assessable trade fixtures and business tangible personal property in the county for the applicable year of audit selection.

(b) GENERAL PROVISIONS. deletionThe assessor must annually conduct a significant number of audits of the books and records of deletiontaxpayers engaged in a profession, trade or business who owndeletion, claimdeletion, possessdeletion, or controldeletion locally assessable trade fixtures and business tangible personal property in the deletioncounty to deletionencourage the accurate and proper reporting of property.

(c) SIGNIFICANT NUMBER OF AUDITS. If the computation of the significant number of audits, as defined in subdivision (a)(5), does not result in a whole number, the number must be rounded before calculating the number of audits that must be performed on taxpayers selected from the pool of taxpayers with the largest assessments and the number of audits that must be performed on taxpayers selected from the pool of all other taxpayers in the county.

(1) Fifty percent of the significant number of audits must be performed on taxpayers selected from the pool of taxpayers with largest assessments.

(A) This pool of taxpayers must be selected from a list of taxpayers in the county, ranked in descending order by the total locally assessed value of both trade fixtures and business tangible personal property.

(B) The qualified number of those taxpayers for inclusion in the pool must be that number equal to 50 percent of the significant number of audits multiplied by four.

(C) All taxpayers in the pool must be audited at least once within each four-year period following the latest fiscal year covered by a preceding audit and the audit may combine multiple fiscal years.

(D) The assessor is relieved of the requirement to audit the taxpayer at least once every four years if the assessor determines that the taxpayer's assessments are no longer large enough for inclusion in the pool. If such is determined, then the next ranking taxpayer not currently within the pool of taxpayers with the largest assessments must be added to the pool.

(E) The assessor is not required to audit a taxpayer that is fully exempt from property taxation under other provisions of law for purposes of the requirements of this section. Therefore, a taxpayer fully exempt from property taxation must not be included in the pool of taxpayers with the largest assessments.

(2) The remaining 50 percent of the significant number of audits must be selected by the assessor from among the pool of all taxpayers.

(A) These audits must be selected in a fair and equitable manner.

(B) These audits may be based on evidence of underreporting as determined by the assessor.

(3) If the significant number of audits is an odd number, the assessor must determine how to split the odd number audit.deletion

(deletiond) OTHER AUDITS. Nothing herein shall be construed to prohibit an assessor from auditing the books and records of any taxpayer deletionmore frequently than once every four years.

(e) EXAMPLES. The following hypothetical examples illustrate the audit selection process.

Example 1: Prior to January 1, 2009, a county with a total number of mandatory audits of 800 during the 2002-2003 fiscal year to the 2005-2006 fiscal year was required to conduct 200 audits (800 ÷ 4) per year. This county's significant number of audits that must be conducted annually is 150 (75% × 200). Of the 150 annual significant number of audits, 75 (50% × 150) must be from the pool of the taxpayers with the largest assessments, and 75 (50% × 150) must be selected from among the pool of all other taxpayers in the county. The number of taxpayers with the largest assessments that must be audited on a four year cycle is 300 (150 × 50% × 4).

Example 2: Prior to January 1, 2009, a county with a total number of mandatory audits of 61 during the 2002-2003 fiscal year to the 2005-2006 fiscal year was required to conduct 15 audits (61 ÷ 4 = 15.25, rounded) per year. This county's significant number of audits that must be conducted annually is 11 (75% × 15.25 = 11.4375, rounded). Of the 11 annual significant number of audits, 5.5 (50% x 11) must be from the pool of the taxpayers with the largest assessments, and 5.5 (50% × 11) must be selected from among the pool of all other taxpayers in the county. The county assessor must determine how to split the odd number audit. The number of taxpayers with the largest assessments that must be audited on a four-year cycle is 22 (11 × 50% x 4). Therefore, during a four-year cycle, the county assessor would be required to audit five from the pool of taxpayers with the largest assessments in the county and six from among the pool of all other taxpayers in the county each year for two years; and six from the pool of taxpayers with the largest assessments in the county and five from among the pool of all other taxpayers in the county each year for the remaining two years.

History: Adopted April 10, 1968, effective May 12, 1968.

Amended January 8, 1969, effective February 12, 1969.

Amended December 12, 1969, effective January 11, 1970.

Amended March 24, 1971, effective April 25, 1971.

Amended October 18, 1973, effective November 25, 1973.

Amended December 15, 1976, effective January 21, 1977.

Amended July 31, 1980, effective November 19, 1980.

Amended July 27, 1982, effective February 10, 1983.

Amended and effective May 29, 1996.

Amended December 22, 1997, effective January 21, 1998.

Amended January 26, 2010, effective May 14, 2010.