Laws, Regulations & Annotations

Property Taxes Law Guide – Revision 2012
 

California Constitutional Provisions

ARTICLE XIII Revenue and Taxation

Section 3

Sec. 3. Exempt property. The following are exempt from property taxation:

(a) Property owned by the State.

(b) Property owned by a local government, except as otherwise provided in Section 11(a).

(c) Bonds issued by the State or a local government in the State.

(d) Property used for libraries and museums that are free and open to the public and property used exclusively for public schools, community colleges, state colleges, and state universities.

(e) Buildings, land, equipment, and securities used exclusively for educational purposes by a nonprofit institution of higher education.

(f) Buildings, land on which they are situated, and equipment used exclusively for religious worship.

(g) Property used or held exclusively for the permanent deposit of human dead or for the care and maintenance of the property or the dead, except when used or held for profit. This property is also exempt from special assessment.

(h) Growing crops.

(i) Fruit and nut trees until 4 years after the season in which they were planted in orchard form and grape vines until 3 years after the season in which they were planted in vineyard form.

(j) Immature forest trees planted on lands not previously bearing merchantable timber or planted or of natural growth on lands from which the merchantable original growth timber stand to the extent of 70 percent of all trees over 16 inches in diameter has been removed. Forest trees or timber shall be considered mature at such time after 40 years from the time of planting or removal of the original timber when so declared by a majority vote of a board consisting of a representative from the State Board of Forestry, a representative from the State Board of Equalization, and the assessor of the county in which the trees are located.

The Legislature may supersede the foregoing provisions with an alternative system or systems of taxing or exempting forest trees or timber, including a taxation system not based on property valuation. Any alternative system or systems shall provide for exemption of unharvested immature trees, shall encourage the continued use of timberlands for the production of trees for timber products, and shall provide for restricting the use of timberland to the production of timber products and compatible uses with provisions for taxation of timberland based on the restrictions. Nothing in this paragraph shall be construed to exclude timberland from the provisions of Section 8 of this article.

(k) $7,000 of the full value of a dwelling, as defined by the Legislature, when occupied by an owner as his principal residence, unless the dwelling is receiving another real property exemption. The Legislature may increase this exemption and may deny it if the owner received State or local aid to pay taxes either in whole or in part, and either directly or indirectly, on the dwelling.

No increase in this exemption above the amount of $7,000 shall be effective for any fiscal year unless the Legislature increases the rate of State taxes in an amount sufficient to provide the subventions required by Section 25.

If the Legislature increases the homeowners' property tax exemption, it shall provide increases in benefits to qualified renters, as defined by , comparable to the average increase in benefits to homeowners, as calculated by the Legislature.

(l) Vessels of more than 50 tons burden in this State and engaged in the transportation of freight or passengers.

(m) Household furnishings and personal effects not held or used in connection with a trade, profession, or business.

(n) Any debt secured by land.

(o) Property in the amount of $1,000 of a claimant who—

(1) is serving in or has served in and has been discharged under honorable conditions from service in the United States Army, Navy, Air Force, Marine Corps, Coast Guard, or Revenue Marine (Revenue Cutter) Service; and—

(2) served either

(i) in time of war, or

(ii) in time of peace in a campaign or expedition for which a medal has been issued by Congress, or

(iii) in time of peace and because of a service-connected disability was released from active duty; and—

(3) resides in the State on the current lien date.

An unmarried person who owns property valued at $5,000 or more, or a married person, who, together with the spouse, owns property valued at $10,000 or more, is ineligible for this exemption.

If the claimant is married and does not own property eligible for the full amount of the exemption, property of the spouse shall be eligible for the unused balance of the exemption.

(p) Property in the amount of $1,000 of a claimant who—

(1) is the unmarried spouse of a deceased veteran who met the service requirement stated in paragraphs (1) and (2) of subsection 3(o), and

(2) does not own property in excess of $10,000, and

(3) is a resident of the State on the current lien date.

(q) Property in the amount of $1,000 of a claimant who—

(1) is the parent of a deceased veteran who met the service requirement stated in paragraphs (1) and (2) of subsection 3(o), and

(2) receives a pension because of the veteran's service, and

(3) is a resident of the State on the current lien date.

Either parent of a deceased veteran may claim this exemption.

An unmarried person who owns property valued at $5,000 or more, or a married person, who, together with the spouse, owns property valued at $10,000 or more, is ineligible for this exemption.

(r) No individual residing in the State on the effective date of this amendment who would have been eligible for the exemption provided by the previous section 1¼ of this article had it not been repealed shall lose eligibility for the exemption as a result of this amendment.

History.—Additional amendment adopted November 5, 1974, increased the amount of the exemption of subdivision (k) from $3,000 to $7,000 and added the third paragraph thereof. The amendment of November 8, 1988, deleted former subsection (o)(4) requiring that the veteran "resided in the State either (i) on November 3, 1964, or (ii) at the time of entry into one of the branches of the armed forces named in paragraph (1) of this subsection; deleted former subsections (i) and (ii) of subsection (p)(3) requiring that the unmarried spouse "(i) resided in the State on November 3, 1964, or (ii) is the unmarried spouse of a deceased veteran who met the residency requirement stated in paragraph 4 of subsection 3(o)."; and deleted former subsections (i) and (ii) of subsection (q)(3) requiring that the parent of a deceased veteran "(i) resided in the State on November 3, 1964, or (ii) is the parent of a deceased veteran who met the residency requirement stated in paragraph (4) of subsection 3(o)".

(a) Note.—See Revenue and Taxation Code, Section 202.

Construction.—Public ownership of property alone confers the exemption; it is not conditioned on use of property exclusively for governmental purposes. Exemption extends to property taxes and to special assessments. Thus, a county tax on a municipal utility district that generated electricity from geothermal steam in the county was invalid under this section. Sacramento Municipal Utility District v. Sonoma County, 235 Cal.App.3d 726. Because state and local government property is exempt from property taxation under this section, such property is also exempt from special assessments, including a city's sewage facilities charge to derive capital for sewer construction. Regents of University of California v. City of Los Angeles, 100 Cal.App.3d 547. Such property is also exempt from an increased sewer service charge where the charge was to be used to derive capital for sewer construction and constituted a disguised special assessment. Regents of University of California v. City of Los Angeles, 148 Cal.App.3d 451. The government is not required to do anything in order to claim or preserve its tax exempt status. L&B Real Estate v. Housing Authority of the County of Los Angeles, 149 Cal.App.4th 950.

Land and improvements occupied by the Franchise Tax Board under a lease-purchase agreement were exempt under this Article since, despite the lease agreement, the state held the essential indicia of ownership. The financing arrangement closely resembled the financing of a purchase through a loan secured by a deed of trust on the subject property, most of the property rights were vested in the state, and the lease provided for automatic vesting of title in the state at the expiration of the lease if all rental payments were made. The state thus occupied the property as a beneficial owner and would eventually hold all incidents of ownership if it so chose. State property is not to be taxed unless there is express authority for taxation. Mayhew Tech Center, Phase II v. Sacramento County, 4 Cal.App.4th 497.

A term used in a constitutional amendment must be construed according to the meaning it had when the amendment was adopted. The Legislature cannot expand the meaning of an amendment by subsequent legislation, since such an expansion would be equivalent to a constitutional amendment. Nunes Turfgrass, Inc. v. Kern County, 111 Cal.App.3d 855.

A constitutional amendment should be construed in accordance with the ordinary meaning of the words as generally understood at the time of its enactment. Thus, where it does not appear that words used in such an amendment were used in a technical sense, the voters must be deemed to have construed the amendment by the meaning apparent on its face according to the general use of the words employed. Pugh v. City of Sacramento, 119 Cal.App.3d 485.

(b) Note.—See Revenue and Taxation Code, Section 202.

Construction.—Public ownership alone confers the exemption; the exemption is not conditioned on use of the property exclusively for governmental purposes. The government is not required to do anything in order to claim or preserve its tax exempt status. L&B Real Estate v. Housing Authority of the County of Los Angeles, 149 Cal.App.4th 950.

Property owned by a county and used for a public purpose is exempt from a city's property tax under this section; however, it does not provide exemption for assessments by special districts. Santa Barbara County v. City of Santa Barbara, 59 Cal.App.3d 364.

(d) Note.—See Revenue and Taxation Code, Section 202.

Construction.—This section is self-executing. "Museum", as used therein, means a building the predominant purpose of which is to house and display objects of lasting value. This definition does not preclude other uses, but it requires use as a museum to be primary. Evidence of plaintiff's limited hours, appointment policy, isolated location, and lack of publicity suggested only a limited use of the property as a museum and hence, the exemption was inapplicable. Fellowship of Friends, Inc. v. Yuba County, 235 Cal.App.3d 1190.

The University of California is a state university within the meaning of section 3(d), exempting from taxation property used exclusively for state universities. Regents of University of California v. State Bd. of Equalization, 73 Cal.App.3d 660.

Section 3(d) is concerned primarily with defining the circumstances under which property not owned by a public school or university is entitled to a tax exemption. Its purpose is to encourage private property owners to make property available for public school use. Although leasehold interests in university property may be property that is exempt from taxation under this section, private homeowners' possessory interests in land owned by the University of California and leased for long terms to the homeowners (university faculty and employees) as sites for privately owned residences were not exempt since their property interests were used for their private use, not for the benefit of the University. Connolly v. Orange County, 1 Cal.4th 1105.

Warehouses and administrative buildings constitute an incidental use of property that is within the test of exclusive use for purposes of public schools and free public libraries. Yttrup Homes v. Sacramento County, 73 Cal.App.3d 279.

If the portion of property used for public schools is clearly identifiable from the nonexempt portion, then an apportionment is proper since the exempt portion is subject to exclusive use by the public school system. Oates v. Sacramento County, 78 Cal.App.3d 745.

The use of a university golf course is an integral part of the educational and recreational function within the meaning of section 3(e). Board of Trustees v. Santa Clara County, 86 Cal.App.3d 79.

A student's possessory, leasehold interest in family housing owned by the University of California is exempt from property tax under Article XIII, section 3(d). Mann v. Alameda County, 85 Cal.App.3d 505.

Decisions Under Former Article XIII, Section 1.

Construction.—Under the rule of strict but reasonable construction the phrase "exclusively used for public schools" refers not only to primary but to certain incidental uses as well; however, such incidental uses must be directly connected with, essential to, and in furtherance of the primary use and not merely revenue-generating devices. Honeywell Information Systems, Inc. v. Sonoma County, 44 Cal.App.3d 23.

(e) Note.—See Revenue and Taxation Code, Section 203.

Construction.—The exemption from property taxation provided by this section does not extend to unified school district-imposed school development fees. Loyola Marymount University v. Los Angeles Unified School District, 45 Cal.App.4th 1256.

Decisions Under Former Article XIII, Section 1a.

Collegiate grade.—Exemption is granted to an institution of collegiate grade as a whole and not otherwise, and when the grades are mixed in the same institution there can be no exemption. Pasadena University v. Los Angeles County, 190 Cal. 786. However, a university which complies with Revenue and Taxation Code Section 203 by requiring the completion of a four-year high school course or its equivalent for admission of all regular students is not deprived of its status as an institution entitled to exemption under this section by the fact that it gives college courses to special students who have not had the prerequisite high school education. University of Southern California v. Robbins, 1 Cal.App.2d 523, noted in 8 So. Calif. L. Rev. 261.

An association offering courses of study in drama and theater arts leading to a diploma or degree is entitled to an exemption under this section where the admission requirements and the courses of study are the equivalent of or superior to comparable courses in other institutions recognized as of collegiate grade, and where all the profits of the school and the income from its property are used to conduct the school. Pasadena Playhouse Ass'n. v. Los Angeles County, 69 Cal.App.2d 611.

Hospital.—The words "educational institution," as used in this section, do not include a society organized primarily for hospital purposes, but which incidentally thereto conducts a school of nursing. Lutheran Hospital Society v. Los Angeles County, 25 Cal.2d 254.

Use tax.—The exemption from taxation provided by this section applies only to direct property taxation. The exemption has no application to the use tax, which is an excise tax. California Inst. of Technology v. Johnson, 55 Cal.App.2d 856.

Construction.—Property "used exclusively for the purposes of education" includes any facilities which are reasonably necessary for the fulfillment of a generally recognized function of a complete modern college, including housing for faculty and students and a parking lot. The Church Divinity School of the Pacific v. Alameda County, 152 Cal.App.2d 496.

(f) Note.—See Revenue and Taxation Code, Section 251, et seq.

Decisions Under Former Article XIII, Section 1½.

Extent of exemption.—A portion of a church lot which is used by the members of the congregation for the parking of their automobiles when attending church services and also affords light and air for the church building is exempt from taxation under this section. Immanuel Presbyterian Church v. Payne, 90 Cal.App. 176.

An owner of property occupied by a religious corporation as lessee cannot claim the exemption granted by this section. Havens v. Alameda County, 30 Cal.App. 206.

The term "building" does not include the literature of a religious sect stored in its building and such written matter is not exempt from taxation under this section. Watchtower Bible and Tract Society, Inc. v. Los Angeles County, 30 Cal.2d 426, cert. denied, 332 U. S. 811.

Prior to its amendment in 1952 this section did not exempt from taxation a church in the course of construction. First Baptist Church v. Los Angeles County, 113 Cal.App.2d 392.

Definition of "religious worship".—Belief in a Supreme Being is not a prerequisite to qualification for the exemption provided for by this section. Fellowship of Humanity v. Alameda County, 153 Cal.App.2d 673.

Failure to claim.—Since the exemption to churches is granted by the State Constitution, the statutory requirement of filing a claim for the exemption is regulatory only, and failure to file on the part of a church will not preclude a refund of taxes paid nor a waiver of taxes imposed where payment has not been made. Church of the Brethren v. City of Pasadena, 196 Cal.App.2d 814.

(g) Note.—See Revenue and Taxation Code, Section 204.

Decisions Under Former Article XIII, Section 1b.

Construction.—In order to be exempt from taxation or local assessment under this section it is not sufficient that the income from the property is used exclusively for the care, maintenance, or upkeep of burial grounds; the property itself must be so used or held. Cypress Lawn Cemetery Ass'n. v. San Francisco, 211 Cal. 387.

The word "profit" as used in this section does not refer to the financial benefit that accrues to a cemetery association through the sale of burial space at a price in excess of its cost, but means net earnings, the benefits of which accrue directly or indirectly to the stockholders or members of the association. San Gabriel Cemetery Ass'n. v. Los Angeles County, 49 Cal.App.2d 624.

Property of a cemetery association is exempt from taxation when it has been developed and offered for sale for burial purposes. Such property is none the less "held" for burial purposes by reason of the fact that the rights of interment have not been sold. Pomona Cemetery Ass'n v. Los Angeles County, 49 Cal.App.2d 626.

Land owned by a cemetery association which is no longer dedicated as a cemetery and from which the bodies have been removed is not exempt from taxation under this section, even though the land is to be sold and under Section 7925 of the Health and Safety Code the proceeds of the sale must ultimately be devoted exclusively to purposes of sepulchre. Laurel Hill Cemetery Association v. San Francisco, 81 Cal.App.2d 371.

A passive holding of land "dedicated" for cemetery purposes without making improvements and without lot sales activity, will not support an exemption from taxation. Memorial Hills Association v. Sequoia Investment Corp., 157 Cal.App.2d 119.

Property purchased by a nonprofit cemetery association under a percentage sales contract, and used or held by it exclusively for cemetery purposes, is exempt from taxation. Westminster Memorial Parks v. Orange County, 54 Cal.2d 488.

Waiver.—The provisions of this section are self executing and, since the Legislature has prescribed no procedure to be followed in claiming the exemption, a failure to protest an assessment of cemetery property does not constitute a waiver of the exemption. Sutter Realty Co. v. Sacramento, 64 Cal.App.2d 1.

(h) Construction.—Turfgrass, which does not have to be annually planted or harvested, is not included within the exemption but is similar to nursery stock in trade, which is taxable as personal property. Nunes Turfgrass, Inc. v. Kern County, 111 Cal.App.3d 855.

(j) Note.—See Revenue and Taxation Code, Section 211.

Decisions Under Former Article XIII, Section 12¾.

Construction.—Any formulation of value of timberlands for tax purposes which includes, as an essential element or ingredient, the value of immature growing timber runs afoul of this exemption. Georgia-Pacific Corp. v. Butte County, 37 Cal.App.3d 461.

(k) Note.—See Revenue and Taxation Code, Sections 218, 253.5, et seq.

Construction.—Owners of leasehold condominiums are entitled to this exemption because the interests satisfied the statutory definitional requirements of a condominium, and since a condominium may be a leasehold or subleasehold in duration, each owner owned a condominium within the meaning of Revenue and Taxation Code Section 218. In the context of assessments, the term "owner" is used for both fee and nonfee condominiums, and nonfee condominiums include leasehold and subleasehold condominiums. Smith v. State Board of Equalization, 53 Cal.App.4th 331.

Decisions Under Former Article XIII, Section 1d.

Construction.—This section is intended to provide the homeowner relief from his burden of providing revenue for general governmental purposes and not to reduce payments imposed on his property for local improvements supposedly enhancing the value of his property, and the state is not required to reimburse sanitation districts under subvention provisions of the section. San Bernardino County v. Flournoy, 45 Cal.App.3d 48.

(l) Note.—See Revenue and Taxation Code, Section 209.

Decisions Under Former Article XIII, Section 4.

Construction.—Boats used solely in catching fish and bringing them into market are not entitled to an exemption from taxation, since such boats are not engaged in the transportation of property or persons for hire. Dragich v. Los Angeles County, 30 Cal.App.2d 397.

Enrollment at a California port is sufficient to satisfy the registration requirement. The right to the exemption is not lost by reason of the inability of the owner of a vessel to obtain freight or passengers. The test to be applied is whether the vessel is regularly engaged in the transportation of freight or passengers and whether any enforced withdrawal, although of long duration, is merely temporary in character. Los Angeles County v. Craig, 38 Cal.App.2d 58.

Fishing boats are not exempt under this section. Crivello v. San Diego County, 50 Cal.App.2d 713.

Barges equipped with cranes and held stationary while lifting goods between ship and dock are not engaged in the "transportation of freight," as the exemption only applies to "carrier" operations. Smith-Rice Heavy Lifts, Inc. v. Los Angeles County, 256 Cal.App.2d 190.

The term "tons burden" as used in this section refers to net tonnages as registered in the United States Customs Office. Kiessig v. San Diego County, 51 Cal.App.2d 47.

Decommissioned naval landing vessels of more than fifty tons burden, purchased from the United States Government by a foreign corporation and moored in a harbor in this state, not registered in any port in this state nor engaged in the transportation of freight or passengers, are not exempt under this section. Ships and Power Equipment Corp. v. San Diego County, 93 Cal.App.2d 522.

Tugboats primarily engaged in towing barges containing petroleum products are engaged in the transportation of freight and thus are wholly exempt under this section. Star and Crescent Boat Co. v. San Diego County, 163 Cal.App.2d 534.

A sportfishing vessel returning paying customers to the point of departure is engaged in transportation of passengers within the meaning of this section. Alalunga Sport Fishers, Inc. v. San Diego County, 247 Cal.App.2d 663.

A harbor tug primarily engaged in assisting cargo or passenger vessels in navigating the waters and channels of the harbor is not engaged in the transportation of freight or passengers. Crowley Launch & Tugboat Co. v. County of Los Angeles, 16 Cal.App.3d 437.

(o) Note.—See Revenue and Taxation Code, Section 205.

Decisions Under Former Article XIII, Section 1¼.

Waiver.—Even though the above provision is self-executing in the sense that no legislative enactment was required to put it into effect, it is within the power of the Legislature to prescribe a reasonable procedure for claiming the exemption and to provide that a failure to follow such procedure constitutes a waiver of the exemption. Chesney v. Byram, 15 Cal.2d 460.

Construction.—Nontaxable property must be included in the total value of property owned by a veteran to determine if he qualifies for exemption. The assessor for purposes of computing the ceiling property valued nontaxables at market value and taxables at assessed value. Bates v. State Board of Equalization, 275 Cal.App.2d 388.

Motor vehicle license fee.—The provisions of this section exempting veterans from certain property taxes do not exempt them from payment of the tax imposed on motor vehicles by the Motor Vehicle License Fee Act [now Revenue and Taxation Code Section 10701, et seq.] inasmuch as such tax is an excise tax for revenue purposes and not a property tax. Ingels v. Riley, 5 Cal.2d 154.

Honorable discharge.—A person ordered into military service by a local draft board during the World War who eight days later was discharged because of physical deficiency was not honorably discharged within the meaning of this section and is not entitled to an exemption from taxation. Zearing v. Johnson, 10 Cal.App.2d 654.

Termination of war.—Insofar as the exemption of veterans' property from taxation is concerned, the World War ended with the armistice of November 11, 1918. Thus, a person who served in the Army during the period beginning after the armistice was not entitled to the exemption from taxation provided for those who served in time of war, although the treaty of peace was not proclaimed until July 2, 1921. Kaiser v. Hopkins, 6 Cal.2d 537.

Applies regardless of sex.—The exemption granted by this section applies in favor of women as well as men. Lockhart v. Wolden, 17 Cal.2d 628.

Peacetime service.—It also extends to veterans whose service has been only during time of peace and who have been released from active duty because of disability resulting from such service. Baumbaugh v. San Diego County, 44 Cal.App.2d 898.

Assessment to conditional vendee.—Real property in the possession of a purchaser under a conditional contract of sale should be assessed to the purchaser in order that he may claim his exemption as a veteran, even though the seller still holds the legal title for security purposes. Sherman v. Quinn, 31 Cal.2d 661.

Challenge to requirements in Federal Court.—A federal district court refused to entertain jurisdiction of a constitutional challenge to the residency requirement in view of the long-standing policy of the federal courts in refraining from interfering in any matter involving the assessment, levy, or collection of any state tax where a plain, speedy and efficient remedy was available in the state courts. Mandel v. Hutchinson, 494 F.2d 364.