Laws, Regulations & Annotations

Property Taxes Law Guide – Revision 2012
 

Revenue and Taxation Code

Property Taxation

Part 2. Assessment

Chapter 3. Assessment Generally

Article 1.9. Historical Property*

Section 439.2

439.2. Valuing enforceably restricted historical property. When valuing enforceably restricted historical property, the county assessor shall not consider sales data on similar property, whether or not enforceably restricted, and shall value that restricted historical property by the capitalization of income method in the following manner:

(a) The annual income to be capitalized shall be determined as follows:

(1) Where sufficient rental information is available, the income shall be the fair rent that can be imputed to the restricted historical property being valued based upon rent actually received for the property by the owner and upon typical rentals received in the area for similar property in similar use where the owner pays the property tax. When the restricted historical property being valued is actually encumbered by a lease, any cash rent or its equivalent considered in determining the fair rent of the property shall be the amount for which the property would be expected to rent were the rental payment to be renegotiated in the light of current conditions, including applicable provisions under which the property is enforceably restricted.

(2) Where sufficient rental information is not available, the income shall be that which the restricted historical property being valued reasonably can be expected to yield under prudent management and subject to applicable provisions under which the property is enforceably restricted.

(3) If the parties to an instrument that enforceably restricts the property stipulate therein an amount that constitutes the minimum annual income to be capitalized, then the income to be capitalized shall not be less than the amount so stipulated.

For purposes of this section, income shall be determined in accordance with rules and regulations issued by the board and with this section and shall be the difference between revenue and expenditures. Revenue shall be the amount of money or money's worth, including any cash rent or its equivalent, that the property can be expected to yield to an owner-operator annually on the average from any use of the property permitted under the terms by which the property is enforceably restricted.

Expenditures shall be any outlay or average annual allocation of money or money's worth that can be fairly charged against the revenue expected to be received during the period used in computing the revenue. Those expenditures to be charged against revenue shall be only those that are ordinary and necessary in the production and maintenance of the revenue for that period. Expenditures shall not include depletion charges, debt retirement, interest on funds invested in the property, property taxes, corporation income taxes, or corporation franchise taxes based on income.

(b) The capitalization rate to be used in valuing owner-occupied single family dwellings pursuant to this article shall not be derived from sales data and shall be the sum of the following components:

(1) An interest component to be determined by the board and announced no later than October 1 of the year preceding the assessment year and that was the yield rate equal to the effective rate on conventional mortgages as most recently published by the Federal Housing Finance Board as of September 1, rounded to the nearest one-fourth of 1 percent.

(2) A historical property risk component of 4 percent.

(3) A component for property taxes that shall be a percentage equal to the estimated total tax rate applicable to the property for the assessment year times the assessment ratio.

(4) A component for amortization of the improvements that shall be a percentage equivalent to the reciprocal of the remaining life.

(c) The capitalization rate to be used in valuing all other restricted historical property pursuant to this article shall not be derived from sales data and shall be the sum of the following components:

(1) An interest component to be determined by the board and announced no later than October 1 of the year preceding the assessment year and that was the yield rate equal to the effective rate on conventional mortgages as determined by the Federal Housing Finance Board September 1, rounded to the nearest one-fourth of 1 percent.

(2) A historical property risk component of 2 percent.

(3) A component for property taxes that shall be a percentage equal to the estimated total tax rate applicable to the property for the assessment year times the assessment ratio.

(4) A component for amortization of the improvements that shall be a percentage equivalent to the reciprocal of the remaining life.

(d) Unless a party to an instrument that creates an enforceable restriction expressly prohibits the valuation, the valuation resulting from the capitalization of income method described in this section shall not exceed the lesser of either the valuation that would have resulted by calculation under Section 110, or the valuation that would have resulted by calculation under Section 110.1, as though the property was not subject to an enforceable restriction in the base year.

(e) The value of the restricted historical property shall be the quotient of the income determined as provided in subdivision (a) divided by the capitalization rate determined as provided in subdivision (b) or (c).

(f) The ratio prescribed in Section 401 shall be applied to the value of the property determined in subdivision (d) to obtain its assessed value.

History.—Stats. 1984, Ch. 678, in effect January 1, 1985, deleted "the board for purposes of surveys required by Section 1815 of this code and" after "property," in the first sentence. Stats. 1993, Ch. 831, in effect October 6, 1993, substituted "that" for "such" and "that" for "which" throughout text; substituted "the" for ''such" after "computing" in the first sentence of the third paragraph of paragraph (3) of subdivision (a); substituted "A" for "An" before "historical" in paragraphs (2) of subdivision (b) and (c); added subdivision (d); and relettered former subdivisions (d) and (e) as (e) and (f), respectively. Stats. 1996, Ch. 1087, in effect January 1, 1997, substituted "Federal Housing Finance Board" for "Federal Home Loan Bank Board" after "determined by the" in paragraph (1) of subdivisions (b) and (c). Stats. 2003, Ch. 471 (SB 1062), in effect January 1, 2004, substituted "October 1" for "September 1" after "no later than", substituted "most recently published" for "determined" after "conditional mortgages as", added "as of September 1" after "Housing Finance Board", and substituted "one-fourth of 1" for "1/4" after "to the nearest" in the first sentence of paragraph (1) of subdivision (b); and substituted "October 1" for "September 1" after "no later than", added "as of September 1" after "Housing Finance Board", and substituted "one-fourth of 1" for "1/4" after "to the nearest" in the first sentence of paragraph (1) of subdivision (c).

* Article 1.9 was added by Stats. 1977, Ch. 1040, in effect January 1, 1978. Purpose of this article is to implement Proposition 7 (Res. Ch. 198, Stats. 1974) on ballot for the Primary Election of June 8, 1976 which amended Section 8 of Article XIII of the California Constitution.

Note.—Section 6, Stats. 1977, Ch. 1040, provided that the state shall not be required to provide subventions for revenues lost to a city, county, and county by reason of such city, county or city and county acting pursuant to the provisions of this act. Sec. 7 provided Bd. of Equal. to report to Legislature on or before December 31, 1980 evaluating the effect of this act.