Laws, Regulations & Annotations

P

660.0000 POSSESSORY INTEREST

Annotation 660.0133

660.0133 Lease. When a nontaxable public entity leases real property to a nonprofit public benefit corporation, and the public entity created and owns the non-profit corporation, a taxable possessory interest is created as to all portions of the property not subject to pre-existing leases to third parties. Nevertheless, since the lessee corporation is wholly-owned by the lessor, the transfer is excluded from change-in-ownership under Revenue and Taxation Code section 62(a)(2). The possessory interest must be assessed at its base year value prior to the creation of the new leasehold interest, adjusted for the lesser of inflation or market value in accordance with Revenue and Taxation Code section 51. The value of the possessory interest does not, however, include the value of pre-existing leases to third parties. The pre-existing leases to third parties will themselves continue to be taxable as possessory interests unless specifically exempted by other statutory provisions, and may be separately assessed. C 11/17/1992.