Laws, Regulations & Annotations

Property Taxes Law Guide – Revision 2017

California Constitutional Provisions

ARTICLE XIII Revenue and Taxation

Section 1

[Sections 1 through 33 added by amendment adopted November 5, 1974.]

Section 1. Taxable property. Unless otherwise provided by this Constitution or the laws of the United States.

(a) All property is taxable and shall be assessed at the same percentage of fair market value. When a value standard other than fair market value is prescribed by this Constitution or by statute authorized by this Constitution, the same percentage shall be applied to determine the assessed value. The value to which the percentage is applied, whether it be the fair market value or not, shall be known for property tax purposes as the full value.

(b) All property so assessed shall be taxed in proportion to its full value.

Construction.—Article XIII A of the Constitution did not repeal or in any way alter the provisions of Article XIII pertaining to taxation according to fair market value. State Board of Equalization v. Board of Supervisors, 105 Cal.App.3d 813; Shellenberger v. Board of Equalization of San Joaquin County, 147 Cal.App.3d 510.

Article XIII A replaces the fair market value standard with that of acquisition value for assessment purposes. Under said Article XIII A, the assessment ratio is the percentage of assessed value to full value, and although full value was once synonymous with fair market value, such is no longer the case. R. E. Hanson, Jr. Mfg. v. Los Angeles County, 27 Cal.3d 870.

Self-executing.—The assessor's duty to assess escaped property upon discovery is one which is imposed upon him not only by statute but by the self-executing provisions of this section requiring uniformity of assessments. California Computer Products, Inc. v. Orange County, 107 Cal.App.3d 731; General Dynamics Corporation v. San Diego County, 108 Cal.App.3d 132.


Note.—This section applies only to taxes, both general and special, and has no application to special assessments. Turlock Irrigation District v. Williams, 76 Cal. 360; Emery v. San Francisco Gas Co., 28 Cal. 345. There is a well defined distinction between special and general taxes, and between taxes and special assessments.

General taxes are levies imposed on all the property within the jurisdiction of the taxing agency for ordinary governmental purposes; no special benefit to the taxpayer need be shown, nor need the revenue be spent only for particular governmental functions.

Special taxes are like general taxes except that they are levied for a designated purpose upon all property within a certain district. The fact that some property benefits more than other property does not prevent the levy from being a tax. Anaheim Sugar Co. v. Orange County, 181 Cal. 212; Joint Highway District v. Hinman, 220 Cal. 578, 586. A special tax, as defined in Article XIII A, Section 4 of the Constitution, is a tax levied for a specific purpose, rather than a levy placed in the general fund to be utilized for general governmental purposes. One characteristic of a special tax is that it levies a fee to replace revenue for services that were affected by Article XIII A. Carlsbad Municipal Water District v. QLC Corporation, 2 Cal.App.4th 479; Ehrlich v. City of Culver City, 15 Cal.App.4th 1737. A special tax, for purposes of Article XIII A, Section 4 of the Constitution, is a tax levied to fund a specific governmental project or program and must be distinguished from regulatory fees imposed under the police power. City of Dublin v. Alameda County, 14 Cal.App.4th 264. A "special" tax is one levied to fund a specific government project or program, such as education, and any tax levied by a special purpose district or agency is a "special tax." Hoogasian Flowers, Inc. v. State Board of Equalization, 23 Cal.App.4th 1264. Howard Jarvis Taxpayers' Assn. v. City of San Diego, 72 Cal.App.4th 230. A special tax is a tax collected and earmarked for a special purpose, rather than being deposited in a general fund. Riverside County Community Facilities District v. Bainbridge 17, 77 Cal.App.4th 644.

Special assessments are not taxes in the constitutional sense at all, although sometimes spoken of as taxes but are levies upon real property in a district for the purpose of paying for improvements, the amount of the levy being based upon the benefits accruing to the property as a result of the improvements. City of San Diego v. Linda Vista Irrigation District, 108 Cal. 189. A special assessment is a charge imposed on particular real property for a local public improvement of direct benefit to that property. Russ Building Partnership v. San Francisco, 44 Cal.3d 839; Pacific Gateway Assoc. Joint Venture v. San Francisco, 44 Cal.3d 839; Crocker National Bank v. San Francisco, 44 Cal.3d 839; Kern County Builders, Inc. v. North of the River Mun. Water Dist., 214 Cal.App.3d 805; Evans v. City of San Jose, 3 Cal.App.4th 728. A special assessment is a compulsory charge placed by the state on real property in a predetermined district, made under express legislative authority for defraying in whole or in part the expense of a permanent public improvement therein. Southern California Rapid Transit Dist. v. Bolen, 1 Cal.4th 654; Knox v. City of Orland, 4 Cal.4th 132. Howard Jarvis Taxpayers' Assn. v. City of San Diego, 72 Cal.App.4th 230.

Whether a particular charge is a special tax or special assessment is not governed by the designation thereof in the statute providing therefor, but is governed by the nature of the imposition. People v. Austin, 47 Cal. 353.

The main differences between special taxes and special assessments may be summarized as follows:

First, special taxes are levied on all the property, both real and personal, within the district subject to the tax; whereas, assessments are levied only on real property; secondly, the rate of a tax levy must be uniform on all of the taxable property of the district, whereas, the rate of a special assessment may be uniform but generally varies, as it is supposed to be proportionate to benefits received. Wells v. Union Oil Co., 25 Cal.App.2d 165, 166.

Senate Bill 1, Ch. 24, Stats. 1978, in effect March 3, 1978, amended various provisions of the Revenue and Taxation Code and the Government Code. However, this bill was repealed due to the passage of Proposition 13 (Article XIII A) and the failure of Proposition 8 on the June 6, 1978 ballot.


Construction.—The Legislature has no power to exempt any property from taxation (Mackay v. San Francisco, 113 Cal. 392), nor may it impose additional taxes on any property. Fatjo v. Pfister, 117 Cal. 83; Spring Valley Water Co. v. Alameda County, 24 Cal.App. 278. The Legislature may not grant an exemption from property taxation unless authorized to do so by the Constitution. Connolly v. Orange County, 1 Cal.4th 1105. Government Code Section 26912 and former Revenue and Taxation Code Section 2237, now Revenue and Taxation Code Sections 93 and 95 et seq., which were enacted to implement Article XIII A of the Constitution and under which counties could levy the 1 percent property tax allowed under Article XIII A and distribute the revenues to local agencies but only to those agencies that levied a property tax during the 1977–78 fiscal year, did not violate the uniformity provisions of this section. Those provisions require that all property in the state be taxed in proportion to its value, and they are mandatory. However, under the challenged legislation, the county was the sole taxing entity, and it imposed a uniform tax rate on all real property. Thus the distribution of tax revenues under those statutes did not violate the uniformity requirement. City of Rancho Cucamonga v. Mackzum, 228 Cal.App.3d 929.

There was no violation of this section when the directors of a joint highway district allocated 90 percent of the cost of certain construction work to one county and 10 percent to the other. Joint Highway District v. Hinman, 220 Cal. 578. The cancellation of delinquent taxes on lands within a special assessment district pursuant to a plan for refunding the indebtedness of the district and in consideration of a reduction in the indebtedness has been held not to violate this section. San Bernardino County v. Way, 18 Cal.2d 647. Cf. Redman v. Weisenheimer, 102 Cal.App. 488, holding invalid a tax levied upon the property in only four of the five school districts comprising a union district, and Wilson v. Supervisors, 47 Cal. 91, holding that the uniformity requirement of the 1849 Constitution prohibited the remission of taxes upon certain of the property within a district.

Section 987 (repealed by Stats. 1949, p. 2573) of the Revenue and Taxation Code, which provides for the taxation of only the possessory interest of a purchaser of land from the Veterans Welfare Board under a contract whereby the board retains title only for security purposes, is invalid under this section for the purchaser is the owner for tax purposes and the property must be taxed to him in proportion to its value. Eisley v. Mohan, 31 Cal.2d 637.

The fact that the assessed value of certain property was reduced by allegedly illegal actions of a county board of equalization and the board of supervisors after adjournment of the board of equalization does not deprive another taxpayer whose assessment was not similarly reduced of the uniformity of taxation guaranteed by this section and the equal protection clause of the Federal Constitution where the taxpayer did not allege or prove that his property was similar in character or situation to the property reduced; or that his property was overvalued, or the reduced property undervalued by the reductions. Crothers v. Santa Cruz County, 151 Cal.App.2d 219. Claimed lack of uniformity required by this section due to denial of a claim for refund for property taxes because of failure to exhaust administrative remedy is meritless. Any lack of uniformity was due to taxpayer's failure to comply with the requirements of the assessment appeal process. Sea World, Inc. v. San Diego County, 27 Cal.App.4th 1390.

Equalization relates to the entire county and not just a small portion assessed at a lower figure than any individual taxpayer. That some property is assessed at a ratio lower than other property is not controlling, the test is not inequality as compared to neighboring property but inequality as compared to the county as a whole. Best v. Los Angeles County, 228 Cal.App.2d 655.

When unincorporated territory owned by one city is annexed into another city and the property was subject to taxation prior to its acquisition by the owning city, it is subject to taxation by the annexing city. Barnett v. City of Alhambra, 227 Cal.App.2d 411.

Value.—Property is not "taxed in proportion to its value" when the assessment is grossly excessive or discriminatory. Such assessments are constructively fraudulent, and relief against them will be granted by the courts. Mahoney v. City of San Diego, 198 Cal. 388; Blinn Lumber Co. v. Los Angeles County, 216 Cal. 468 and 474; Los Angeles County v. Ransohoff, 24 Cal.App.2d 238, Cf. A. F. Anderson Estate, Inc. v. Payne, 12 Cal.App.2d 530. An assessment based on a value that results in a tax equal to the costs of assessment and collection rather than based on recognized appraisal methods is not made "in proportion to its value." Red Bluff Developers v. Tehama County, 258 Cal.App.2d 668.

Although the valuations placed on the various kinds of property must be in proportion to the worth of such properties, so that one class of property will not be more heavily taxed than any other class, it is not required that the assessments be at 100 percent of value. Rittersbacher v. Board of Supervisors, 220 Cal. 535.

The provision that state property be taxed in proportion to its value is mandatory. McClelland v. Board of Supervisors, 30 Cal.2d 124.

A special assessment for a sewerage system which exceeded the actual cost of the improvement so as to furnish revenue to the city was invalid for the property was not being taxed in proportion to its value. City of Los Angeles v. Offner, 55 Cal.2d 103.

In assessing timberland, the factors of accessibility, terrain, species, quality, logging conditions, and distance from market are influenced to some degree by the size of contiguous parcels held in a single ownership. However, a system of discounts applied to total timber in the county held in single ownership, and not limited to that located on contiguous lands, constituted an unlawful, discriminatory assessment practice. Jones Lumber Co. v. Del Norte County, 251 Cal.App.2d 645. (Cert. denied, 389 U.S. 1015.) Subsequent to the board's adoption of rule 41 (a regulation governing the valuation of timber), the court held on similar facts that the assessor's valuation was valid where the quantity of timber owned by a taxpayer was one of many factors used by the assessor in converting the immediate harvest value of the timber to market value. Jones Lumber Corporation v. Brickwedel, 274 Cal.App.2d 680.

A cost-less-depreciation method of valuation must be so designed that the cost factors are modulated by the depreciation factors in a manner reasonably calculated to achieve full value with respect to the particular property being assessed. Bret Harte Inn, Inc. v. San Francisco, 16 Cal.3d 14.

Adoption of Property Tax Rule 474, which provides a rebuttable presumption for the assessment of petroleum refinery property as a single appraisal unit, does not exceed the rulemaking authority of the California State Board of Equalization because the rule is consistent with applicable constitutional and statutory provisions (California Constitution article XIII, section 1, article XIII A, section 2, subdivision (b); Revenue and Taxation Code sections 51, 110); moreover, the rule is consistent with the existing practice of defining the appraisal unit as the collection of assets normally bought and sold as a single unit. Western States Petroleum Association v. Board of Equalization (2013) 57 Cal.4th 401.

Assuming presence of intangibles. - Although assessors can assume the presence of intangible assets and rights necessary to put taxable property to beneficial or productive use, such intangibles cannot be taxed directly. Consequently, the California State Board of Equalization is required to remove the replacement cost for applied emission reduction credits that it added to the Board’s replacement cost value indicator for the assessment of a power plant. But no deduction is required from the Board’s income approach value indicator because there is no separate income stream attributable to the applied emission reduction credits. Elk Hills Power, LLC v. Board of Equalization (2013) 57 Cal.4th 593.

Discrimination.—In absence of bad faith, discriminatory taxation is a question of fact to be resolved by the board of equalization, and a court will review its decision only to determine if it was based on substantial evidence. Sacramento Municipal Utility District v. El Dorado County, 5 Cal.App.3d 26.

Excise taxes not affects.—This section applies only to property taxes and not to excise taxes. Consequently, business license taxes (City of Los Angeles v. Los Angeles Independent Gas Co., 152 Cal. 765; Kaiser Land Etc. Co. v. Curry, 155 Cal. 638; McAdams Oil Co. v. City of Los Angeles, 32 Cal.App.2d 359), fees charged applicants for dentistry licenses (Matter of Application of Victor, 27 Cal.App. 73), inheritance taxes (Estate of Watkinson, 191 Cal. 591), franchise taxes (City Investments, Ltd. v. Johnson, 6 Cal.2d 150), use taxes (Douglas Aircraft Co., Inc. v. Johnson, 13 Cal.2d 545), and income taxes (Weber v. Santa Barbara County, 15 Cal.2d 82) are not subject to the limitations imposed by this section.

But a municipal "license fee" exacted of every person "owning" a truck or taxicab is a property tax rather than an excise tax because it is imposed solely by reason of ownership, and it is therefore violative of this section. Flynn v. San Francisco, 18 Cal.2d 210. A city parcel tax to pay for governmental services and imposed upon every owner of real property in the city, without regard to the use of the property or the use of any city services, is not an "excise tax" despite that designation by the city but rather, is a property tax violative of this section because it taxes mere ownership of property. Thomas v. City of East Palo Alto, 53 Cal.App.4th 1084.


Express exemption not required.—Public property is not to be taxed unless there is express authority therefor. Pasadena v. County of Los Angeles, 182 Cal. 171; State Land Settlement Board v. Henderson, 197 Cal. 470; Housing Authority v. Dockweiler, 14 Cal.2d 437.

Scope of exemption.—A reclamation district is an agency of the state and its property is exempt from taxation. Reclamation District No. 551 v. Sacramento County, 134 Cal. 477. Accord as respects a housing authority created pursuant to Stats. Extra Session 1938, p. 9, and its property (Housing Authority v. Dockweiler, 14 Cal.2d 437) and an irrigation district and its property (Glenn-Colusa Irrigation District v. Ohrt, 31 Cal.App.2d 619), but note exception in the following paragraph as respects the land and improvements of an irrigation district located outside the district.

Land and improvements located outside a water district or irrigation district and subject to taxation at the time of acquisition by the district remain taxable inasmuch as a water or an irrigation district is a municipal corporation within the meaning of the exception provided by this section to the exemption of public property. Metropolitan Water District v. Riverside County, 21 Cal.2d 640; Rock Creek Water District v. Calaveras County, 29 Cal.2d 7, and Imperial Irrigation District v. Riverside County, 96 Cal.App.2d 402, 990, expressly overruling Turlock Irrigation District v. White, 186 Cal. 183 and Laguna Beach County Water District v. Orange County, 30 Cal.App.2d 740. See also Waterford Irrigation District v. Stanislaus County, 102 Cal.App.2d 839; Vista Irrigation District v. San Diego County, 98 Cal.App.2d 270; Turlock Irrigation District v. Tuolumne County, 124 Cal.App.2d 611.

The annexation to an irrigation district, upon petition of the district, of noncontiguous land owned by the district, located outside its boundaries and not susceptible of irrigation by the works of the district, and taxable at the time of it acquisition by the district is valid and the land thereby becomes exempt from taxation under this section. Mariposa County v. Merced Irrigation District, 32 Cal.2d 467; County of Tuolumne v. Oakdale Irrigation District, 32 Cal.2d 891; Calaveras County v. Oakdale Irrigation District, 32 Cal.2d 890; Vista Irrigation District v. Board of Supervisors, 32 Cal.2d 477; Vista Irrigation District v. San Diego County, 98 Cal.App.2d 270; Oakdale Irrigation District v. Calaveras County, 133 Cal.App.2d 127 (property owned jointly by two districts); Rock Creek Water District v. Calaveras County, 133 Cal.App.2d 141 (invalid proceedings cured by validating act). But any installments of tax on such annexed property due and paid prior to the completion of the annexation cannot be recovered. Turlock Irrigation District v. Tuolumne County, 124 Cal.App.2d 611. Cf. City of Long Beach v. Board of Supervisors, 50 Cal.2d 674, cited in the note hereunder entitled "Effect on existing liens."

Taxable property of a municipal corporation.—Under this section, as amended in 1914, improvements acquired by a municipal corporation outside its boundaries are not exempt from taxation by virtue of the fact that they are not located on taxable land. Thus, a water distributing system purchased by a city from a private corporation and lying in and under public roads and streets is subject to taxation. Pasadena v. Los Angeles County, 182 Cal. 171.

Water rights which have been acquired by a municipal corporation outside its boundaries are "lands" within the meaning of this section and are subject to taxation by the county in which they are located. San Francisco v. Alameda County, 5 Cal.2d 243; Waterford Irrigation District v. Stanislaus County, 102 Cal.App.2d 839; Alpaugh Irrigation District v. Kern County, 113 Cal.App.2d 286; North Kern Water Storage Dist. v. Kern County, 179 Cal.App.2d 268.

The purpose of the 1914 amendment being to protect from loss of taxable properties those counties in which municipalities acquired property for the operation of municipal projects, the exemption provision is confined to improvements which are wholly new and does not extend to substitutes for and replacements of improvements existing on property at the time of its acquisition by a municipality. San Francisco v. San Mateo County, 17 Cal.2d 814; City of Pasadena v. Los Angeles County, 37 Cal.2d 129.

Replacements of improvements on land located outside the corporate limits of a municipality, the land and improvements having been subject to taxation at the time of the acquisition thereof by the city, are taxable according to the current value of the replacements and not according to the current value of the improvements existing on the property when acquired. City of Pasadena v. Los Angeles County, 37 Cal.2d 129; Sacramento Municipal Utility District v. County of El Dorado, 5 Cal.App.3d 26. Where water rights located outside its boundaries are acquired by a city from private individuals, rather than from the State directly, such rights are taxable to the city since they were "subject to taxation at the time of acquisition" within the meaning of Article XIII, § 1 of the State Constitution. Tuolumne County v. State Board of Equalization, 206 Cal.App.2d 352.

The raising of the level of land by filling operations is an improvement within the meaning of this section. The inclusion of such an exempt improvement in an assessment of taxable lands is an error in classification which may be corrected by the State Board of Equalization upon application for review, equalization and adjustment pursuant to this section. Failure of the city to make such application precludes recovery of the tax assessed with respect to the exempt improvement. San Francisco v. San Mateo County, 36 Cal.2d 196.

City water rights did not escape assessment where the assessments for the years in question did not show that the water rights were excluded. An incorrect and excessive assessment on water rights results where the assessor fixed the assessment at an amount equivalent to 25 percent of the assessed value of the lot to which the water rights were formerly appurtenant, plus 25 percent of the assessed value of the improvements on such lot. City of Los Angeles v. Inyo County, 167 Cal.App.2d 736.

The situs of the water rights in question for taxation purposes was at the place of diversion, and the situs of such water rights cannot be changed by stipulation of the parties in the grant of those rights. Legislation attempting to exempt all water rights of a water storage district from taxation was invalid. North Kern Water Storage District v. Kern County, 179 Cal.App.2d 268.

Replacement of taxable improvements.—The issue as to whether changes to existing property are taxable "replacements" or nontaxable "improvements" is a question of law and an issue for the court independent of the decision of the State Board of Equalization. Where a municipal utility district purchased water rights and other properties, which were previously used for irrigation and domestic purposes, destroyed the old dam, and erected a larger dam, spillway, auxiliary dam, and dike, which it used for the generation of electricity, the erections were held to be a taxable "replacement" since the components all contributed to impounding the waters which had been impounded by the old dam. Sacramento Municipal Utility District v. El Dorado County, 5 Cal.App.3d 26; City of Los Angeles v. Mono County, 51 Cal.2d 843.

Tax-deeded property.—Property acquired by an irrigation district for delinquent assessments is exempt from taxation. It is immaterial whether such property is regarded as operative or nonoperative since this section requires only that the property be owned by the State, and not that it be used exclusively for governmental purposes. In any event, the functions of an irrigation district are exclusively governmental, and all lands acquired by it are held solely for governmental purposes. Anderson-Cottonwood Irrigation District v. Klukkert, 13 Cal.2d 191. Accord, as to necessity of property being operative: Glenn-Colusa Irrigation District v. Ohrt, 31 Cal.App.2d 619. Cf. Conley v. Hawley, 2 Cal.2d 23, holding that property acquired by the State through delinquent tax sales was held by the State in its proprietary capacity and not for governmental purposes, and therefore was subject to street assessments.

Revenue and Taxation Code Sections 123 and 4102, in requiring one who has purchased delinquent property from a reclamation district to pay, as a condition to redemption, an amount equivalent to taxes on the property during the period it was owned by the district, do not violate this section. Sutter-Yuba Investment Co. v. Waste, 21 Cal.2d 781.

Effect on existing liens.—An irrigation district acquiring property which is subject to liens for taxes imposed by other governmental agencies is not entitled to a cancellation of such taxes by virtue of this section. La Mesa, etc., Irrigation District v. Hornbeck, 216 Cal. 730.

However, county tax liens on lands acquired by a city prior to and after the lien date are discharged upon annexation of the lands by the city within the tax year and the city may recover the taxes paid by it under protest. City of Long Beach v. Board of Supervisors, 50 Cal.2d 674.

Not applicable to special assessments.—This section has no application to assessments levied upon lands for the purpose of paying for specific local improvements upon the basis of benefits conferred. City of San Diego v. Linda Vista Irrigation District, 108 Cal. 189. There is, however, an implied exemption from such assessments in favor of publicly owned property provided the property is devoted to a public use (City of Inglewood v. Los Angeles County, 207 Cal. 697), but not otherwise. City of San Diego v. Linda Vista Irrigation District, supra; Conley v. Hawley, 2 Cal.2d 23.

Private lessees.—A leasehold interest in publicly owned property is subject to taxation. See Annotation to Revenue and Taxation Code Section 107.

Improvements made by a lessee on publicly owned property have been held subject to taxation (City and County of San Francisco v. McGinn, 67 Cal. 110; Outer Harbor etc. Co. v. Los Angeles County, 47 Cal.App. 194), except when the lease requires the lessee to erect the improvements and specifically provides that they are to become the property of the lessor. City of Oakland v. Albers Bros. Milling Co., 43 Cal.App. 191. Cf. Outer Harbor etc. Co. v. City of Los Angeles, 49 Cal.App. 120, holding that only the lessee's possessory right to the land and improvements was subject to taxation.

A possessory interest in government-owned personal property is not a taxable possessory interest in the absence of legislative authority. General Dynamics Corp. v. Los Angeles County, 51 Cal.2d 59.

The taxpayer’s right of possession under the ground lease, which afforded the taxpayer an exclusive right to store his aircraft and equipment on the leased premises, was sufficiently independent of the interests retained by Santa Monica to constitute a taxable possessory interest in lease. The court further held that whether the hangar was a taxable improvement on tax-exempt land was an issue of fact that precluded summary judgment with respect to the hangar. Seibold v. County of Los Angeles (2015) 240 Cal.App.4th 674.

Public lessees.—A private lessor will not be exempt from property taxation on a leasehold interest held by the State or a county. Ohrbach's, Inc. v. Los Angeles County, 190 Cal.App.2d 575; Rothman v. Los Angeles County, 193 Cal.App.2d 522; City of Palo Alto v. Santa Clara County, 5 Cal.App.3d 918.

School property.—Under the provisions of this section exempting school property, ownership is immaterial, the decisive factor being the use made of the property. Consequently, privately owned property which is leased to a school district and used exclusively for a public school is exempt from taxation. Ross v. City of Long Beach, 24 Cal.2d 258.

Federal Government.—Real property previously held by the Reconstruction Finance Corporation and subject, pursuant to the waiver of immunity granted by Section 8 of the Reconstruction Finance Corporation Act, to state and local taxation, becomes property "owned by the United States," immune from such taxes, when it is declared by the Reconstruction Finance Corporation under the Surplus Property Act of 1944 to be surplus to its needs and responsibilities and transferred to another Federal agency for management and disposition as United States property even though record title remained in the Reconstruction Finance Corporation. Rohr Aircraft Corp. v. San Diego County, 51 Cal.2d 759, rev'd 362 U.S. 628. Personal property owned by the Federal Housing Authority is immune from taxation by states and their political subdivisions although a federal statute authorizes taxation by such entities of its real property. United States v. San Diego County, 249 F.Supp. 321. Even though the title was registered in the corporation's name for government secrecy purposes, the ship was immune from assessment where the United States actually owned and controlled the ship. United States v. Los Angeles County, 588 Fed.2d 1308. Federal government cost-reimbursement and fixed-price contracts which provided that title to property acquired in the performance of those contracts passed to the federal government did not establish federal government ownership of overhead personal property such as consumable supplies and low-value office and plant equipment, and thus, was not immune from state property taxation. The title provision in the cost-reimbursement contracts applied only to property subject to controlling regulations, which did not include overhead personal property wherein the government acquired title solely because of partial, advance or progress payments. With regard to the fixed-price contracts, the title provision applied only to enumerated types of property, which did not include overhead personal property. TRW Space & Defense Sector v. Los Angeles County, 50 Cal.App.4th 1703. Federal government cost-reimbursement and fixed-price contracts which provided that title to property acquired in the performance of those contracts passed to the federal government established federal government ownership of overhead personal property such as manufacturing supplies, expensed equipment, and office partitions used by the contractor in the performance of the contracts, and thus, the property was not subject to the county's ad valorem property tax. Hughes Aircraft Company v. Orange County, 96 Cal.App.4th 540. Lands ceded by the Republic of Mexico to the United States prior to the admission of California as a state are not federal enclave lands to which the State ceded exclusive jurisdiction pursuant to Chapter 181 of the Statutes of 1891 and over which the State has no taxing authority. Thus, sovereign jurisdiction remains with the State in such lands and private possessory interests are subject to state property taxation. COSO Energy Developers v. County of Inyo, 122 Cal.App.4th 1512. Overhead property allocated to a fixed-price federal government contract as an indirect cost becomes the property of the federal government and is therefore nontaxable. This decision is consistent with the conclusion reached in Hughes Aircraft Company v. County of Orange (2002) 96 Cal.App.4th 540. Northrop Grumman Corporation v. County of Los Angeles, 134 Cal.App.4th 424.

Classification of water rights.—Appropriative water rights granted to a public entity are exempt from taxation where the rights are based on applications filed by the public entity. The public entity is not the successor to taxable property interests of private parties who filed prior applications which were rejected by the state. In adjusting an assessment of taxable water rights owned by a public entity, the State Board of Equalization is required to indicate in its findings the method used to arrive at its valuation in order to enable a reviewing court to determine whether such valuation is legally acceptable or arbitrary. Amador County v. State Board of Equalization, 240 Cal.App.2d 205.

Valuation of water rights.—Judgment decreeing that an upstream landowner release and return a specified minimum amount of water to the stream did not enlarge a downstream landowner's right of reasonable riparian use. Accordingly, in assessing the value of the downstream water rights after acquisition by a public entity, it was not proper to add the value of the amount of water specified in the decree to the value of the right of reasonable riparian use. Amador County v. State Board of Equalization, 240 Cal.App.2d 228.

Installment contract.—Property the subject of an installment contract of sale, in which the city-vendor retained legal title only as security for the performance of promises made by the vendee, is taxable at its full value to the vendee. Los Angeles Dodgers, Inc. v. Los Angeles County, 256 Cal.App.2d 918.

Value.—Insofar as a county included the exempt reversionary interest pursuant to Government Code section 7510, subdivision (b)(1) when the county assessed a commercial lessee's possessory interest under Revenue and Taxation Code section 107 for property owned by a state public retirement system, the valuation methodology is facially unconstitutional because it violates California Constitution article XIII, section 3, subdivision (a), by assessing property tax on publicly-owned real property; further, the valuation methodology violates California Constitution article XIII, section 1, by assessing property in excess of its fair market value as defined in Revenue and Taxation Code sections 110, subdivision (a), and 110.5. California State Teachers’ Retirement System v. County of Los Angeles (2013) 216 Cal.App.4th 41.


Imports.—The importer of goods from a foreign country is not subject to be taxed on the imported goods while they remain unsold and in the original, unbroken packages, Low v. Austin, 13 Wall (U.S.) 29; Sterling Liquor Distributors, Inc. v. County of Orange, 3 Cal.App.3d 510, cert. denied 400 U.S. 822. To the same effect see Imperial Development Co. v. City of Calexico, 47 Cal.App. 666, and Southern Pacific Co. v. City of Calexico, 288 F. 634. In the latter case the fact that the merchandise (cotton) had been compressed and stored in a public warehouse was held to be immaterial. But a pledge or mortgage of imported goods constitutes such a beneficial use of the property as to subject it to the taxing power of the State. Southern Pacific Co. v. City of Calexico, supra. Whether a sea van or cargo container is merely a means of transportation or whether it constitutes an original package so that its opening causes the goods inside to lose their import status is a fact question to be answered according to the circumstances of each case. Singer Co. v. Kings County, 46 Cal.App.3d 852. When the goods are shipped in cartons and bales, bona fide and sturdy packaging devices, they, not the sea-van containers, should be regarded as the original packages. Montgomery Ward & Co., Inc. v. Alameda County, 390 F.Supp. 177.

Where an importer financed the acquisition and delivery of goods in their original containers to a local warehouse through a bank and then used the property to obtain additional financing from a second agency such beneficial use of the goods destroyed their immunity as imports and they became subject to general property tax at that time. Halo Sales Corp. v. San Francisco, 6 Cal.3d 164.

When coconut oil has been imported from the Philippine Islands and placed in temporary storage in this State, not for the purpose of indiscriminate sale but to facilitate its delivery to buyers throughout the United States pursuant to orders theretofore received, a tax on the oil while in such storage constitutes a tax on imports and a burden on foreign commerce, in violation of Sections 8 and 10 of Article 1 of the United States Constitution. Philippine Refining Corp. v. Contra Costa County, 24 Cal.App.2d 665.

One ordering merchandise which is shipped from the Philippine Islands consigned to a bank in California financing the purchase, and who upon execution of a trust receipt to pay said bank the amount of the purchase price receives the bill of lading endorsed in his favor and thereupon obtains the goods, is the "importer" of the same within the meaning of Brown v. Maryland, 12 Wheat, (U. S.) 419, so that while the goods remain in the original form or package in which imported, he is not subject to property taxation with respect thereto. Johnson v. Los Angeles County, 31 Cal.App.2d 579. Where goods are purchased from a Japanese trading company serving as an intermediary between the purchaser and the Japanese manufacturer, as required by Japanese trade practices, it is immaterial whether the title to the goods vests in the purchaser at the time of shipment or only after its arrival in this county in the determination as to whether the purchaser is the "importer" in the constitutional sense. Singer Co. v. Kings County, supra.

Goods shipped into this State from the Philippine Islands or other unincorporated territory of the United States are not exempt from taxation on the ground that they are imports. Dant & Russell, Inc. v. Los Angeles County, 21 Cal.2d 534, cert. denied 320 U.S. 735.

Lumber imported from foreign countries is not exempt from taxation as an import, even though it remains in the importer's warehouse, after the lumber has been segregated and stacked according to thickness, color, etc., to facilitate its sale, and portions of the shipment have been sold. E. J. Stanton & Sons v. Los Angeles County, 78 Cal.App.2d 181.

Nails which are imported in kegs and gunny sacks, hardware cloth in rolls, foundation bolts and washers in sacks, chain in barrels, harrow disks in crates, reinforcing rods in long-ton bundles securely tied, bale ties in bundles tied with wire and wrapped with burlap, barbed wire in rolls or coils, and miscellaneous hardware in wooden boxes, stored in the importer's warehouse, and whose containers or fasteners have not been opened or removed, are in the original packages and are exempt from local taxation as imports. Simon v. Los Angeles County, 141 Cal.App.2d 74.

The Twenty-First Amendment to the United States Constitution, prohibiting transportation of intoxicating liquors into a state in violation of state law, does not permit local ad valorem property taxation of foreign imported liquor in the hands of the importer, in the original package, unconsigned and unsold. Parrott & Co. v. San Francisco, 131 Cal.App.2d 332.

Imported goods held in a manufacturer's inventory for current operational needs are not protected from state taxation under the import-export clause of the federal constitution. The phrase "current operational needs" includes goods which have reached the end of their importation journey and indiscriminate portions of which are used to supply daily operating needs. Virtue Bros. v. Los Angeles County, 239 Cal.App.2d 220, cert. denied 385 U.S. 820.

Despite retention of the original package, if the warehousing of goods was to provide storage as part of a direct sales process which was conducted directly from the warehouse, then unloading of the sea vans was breaking bulk and results in the loss of import immunity. Craig Corp. v. Los Angeles County, 51 Cal.App.3d 909; Nelco Corp. v. Los Angeles County, 72 Cal.App.3d 899; J. N. Ceazan Co. v. Los Angeles County, 102 Cal.App.3d 486.

A nondiscriminatory ad valorem property tax on imported goods is not within the constitutional prohibition against laying any imposts or duties on imports. Michelin Tire Corp. v. Wages, Tax Commissioner, 423 U.S. 276. Decisions concerning property taxation are given full retroactive effect unless they are specifically limited by the court to prospective application. No such limitation was announced in the Michelin opinion. Ralston Purina Co. v. Los Angeles County, 56 Cal.App.3d 547. Prior to Michelin, goods removed from sea vans and then stored in the importer's warehouse retained their immunity from taxation while awaiting further shipment to the importer's wholesale or retail outlets. Sears, Roebuck & Co. v. Los Angeles County, 105 Cal.App.3d 58. After Michelin, the focus is not on whether goods have lost their status as imports but rather, on whether the ad valorem property tax is construed as an impost or duty. Limbach v. Hooven & Allison Co., 466 U.S. 353.

Exports.—Although goods in courses of exportation from this State to a foreign country are not subject to taxation here, the exemption is not applicable unless the goods are in actual course of shipment on the assessment date. E. Clemens Horst Co. v. Sacramento County, 89 Cal.App. 311.

The portions of a cement plant that on the first Monday in March had been either crated and prepared for shipment, dismantled but not crated, or not dismantled are taxable even though prior to that date the plant had been sold to a foreign purchaser who had engaged a common carrier to dismantle the plant and deliver the constituent parts thereof to a railway carrier for shipment to Colombia, an export license had been obtained for all the machinery and equipment of the plant and a portion of the plant had already been crated and shipped. Empresa Siderurgica S.A. v. Merced County, 32 Cal.2d 68, aff'd 337 U.S. 154. Property intended for export, which has been moved from the place of purchase to the depot prior to the seller's entering into a valid contract with a foreign buyer, is not exempt from taxation as an export, since the movement to the depot was merely preparatory and there was no certainty that the goods would be shipped to a foreign destination. Hugo Neu Corp. v. Los Angeles County, 241 Cal.App.2d 703. The court subsequently held on similar facts, but where the scrap was delivered to a processing plant by independent dealers and both processed and unprocessed scrap was taxed, that the property had not yet entered the export stream. Hugo Neu Corp. v. Los Angeles County, 7 Cal.App.3d 21.

Rice milled to the exact specifications of foreign purchasers prior to the lien date and stored either in bins belonging to a port authority or in the taxpayer's warehouses awaiting transportation to foreign shores was not an export and was subject to taxation. Rice Growers' Association of California v. Yolo County, 17 Cal.App.3d 227, cert. denied, 404 U.S. 941.

Delivery of California-grown rice to, and its storage in, the port district's elevators were no part of the process of exportation which begins when the goods cross the water's edge. Delivery to a common carrier and subsequent handling of the rice at the port was no part of the export process. Coe v. Errol, 116 U.S. 517, makes it clear that it is only entry with a common carrier for transportation to the goods' ultimate destination, that will suffice. Cargill of California, Inc. v. Yolo County, 26 Cal.App.3d 704, and Montrose Chemical Corp. v. Los Angeles County, 243 Cal.App.2d 300, cert. denied 386 U.S.1004, are disapproved. Farmers' Rice Cooperative v. Yolo County, 14 Cal.3d 616. Cash registers and other business machines built to exact specifications of foreign purchasers and warehoused in Ohio awaiting shipment abroad, title, possession, and control remaining in the manufacturer, were not exports but were subject to taxation. Although there was a practical certainty of exportation, there had been no movement of the machines and no commencement of the process of exportation, without which the immunity conferred by the Import-Export Clause of the Constitution was not available. Kosydar v. National Cash Register Co., 417 U.S. 62.

The use of a common carrier merely to carry the rice from one resting place to another within the same state does not constitute a final movement from the state of origin to the country of destination so as to commence the exportation process. Connell Rice and Sugar Co., Inc. v. Yolo County, 569 F.2d 514.

Physical delivery to a common carrier is required to commence the export process and the mere exchange of documents, dock receipts, will not convert goods that remain stockpiled at the owner's dock to exempt exports. Schnitzer Steel Products of Cal., Inc. v. Alameda County, 56 Cal.App.3d 104.

Foreign commerce.—Liquors which are bottled, stamped, packaged, and labeled for export, transported under bond to California, and stored in a customs bonded warehouse or in a public warehouse pending sale and movement aboard vessels for delivery to foreign destinations or consumption on the high seas, all in accordance with federal laws and regulations and under the control of Federal Government agencies, constitute items of foreign commerce over which the Federal Government has exercised its power of regulation, and the levy of a local property tax on the liquor while held in warehouses in this State violates the Commerce Clause (Article 1, Section 8, Clause 3) of the United States Constitution. National Distillers Products Corp. v. San Francisco, 141 Cal.App.2d 651, cert. denied 352 U.S. 928.

A county may not impose an unapportioned tax on aircraft located physically in foreign countries and engaged in foreign commerce for all or part of a tax year, as such a tax is barred by the Commerce Clause of the United States Constitution. Taxation of the aircraft according to the number of days the aircraft were located in the county is permissible, however. GeoMetrics v. Santa Clara County, 127 Cal.App.3d 940.

Instrumentalities.—A state may not impose an ad valorem property tax on foreign-owned instrumentalities of international commerce even though it is nondiscriminatory. Japan Line, Ltd. v. Los Angeles County, 441 U.S. 434.

Interstate commerce.—Goods shipped into this State are subject to taxation while in storage here, notwithstanding the fact that they are subsequently shipped outside the State pursuant to orders received by the owner outside the State. Dant & Russell, Inc. v. Los Angeles County, 21 Cal.2d 534; cert. denied 320 U.S. 735.

Goods stored in San Francisco incident to shipment to Hawaii under permits issued by the War Shipping Administration are immune from local taxation despite indefinite delay in shipment resulting solely from the lack of facilities for immediate transportation. Von Hamm-Young Co. v. San Francisco, 29 Cal.2d 798.

Tobacco in transit from New York and Newport News to Hong Kong but involuntarily stopped at Los Angeles owing to the outbreak of the war and returned to Newport News as soon as reasonable rail freight transportation could be arranged is not subject to local taxation. Export Leaf Tobacco Co. v. Los Angeles County, 89 Cal.App.2d 909.

Alcoholic beverages.—The power to regulate interstate commerce in alcoholic beverages, which is delegated to the states by the Twenty-First Amendment of the Constitution of the United States, does not permit local taxation of intoxicating liquors while in transit through this State or while temporarily stored in this State incident to interstate shipment solely because of lack of shipping facilities. Von Hamm-Young Co. v. San Francisco, 29 Cal.2d 798. The similar power to regulate importation does not permit local taxation of foreign imported liquors while still in the hands of the importer in the original package, unconsigned and unsold. Parrott & Co. v. San Francisco, 131 Cal.App.2d 332.

Crops.—Fruit trees (Cottle v. Spitzer, 65 Cal. 456) and alfalfa (Miller v. Kern County, 137 Cal. 516) are not "growing crops" within the meaning of this section.

Rose plants which are planted and raised to sell by a nursery as part of its nursery stock are not growing crops within the meaning of this section. Jackson-Perkins v. Stanislaus County Board of Supervisors, 168 Cal.App.2d 559.

Plants produced by nurseries are not growing crops within the meaning of this section even though defined as growing agricultural products in the Agricultural Code. Stribling's Nurseries, Inc. v. Merced County, 232 Cal.App.2d 759.

In assessing the possessory interest of a lessee of tax exempt land leased for grazing purposes, it is proper to capitalize the rent for the total number of years of the lease and renewal options. Natural grasses on the land, which do not require annual or seasonal planting, are not exempt from taxation as growing crops. El Tejon Cattle Co. v. San Diego County, 64 Cal.2d 428.

U. S. Government checks.—Orders upon the United States Treasury have no constitutional exemption from taxation. Hibernia etc. Society v. San Francisco, 139 Cal. 205, aff'd in 200 U.S. 310.

Exempt property as security.—Loans or solvent credits secured by a pledge of nontaxable property are taxable. Savings & Loan Society v. San Francisco, 131 Cal. 356; San Francisco v. La Societe etc., 131 Cal. 612; Security Savings Bank v. San Francisco, 132 Cal. 599.

Home-port doctrine.—A vessel fishing in international waters all but 100 days a year is not taxable at the port where it remains two thirds of this time, obtains master and crew, and sells its catch, where the owner's residence, vessel's registry, and unloading of catch occur elsewhere. Martinac v. San Diego County, 255 Cal.App.2d 175.

Bonded inventories.—Imported ores and concentrates destined for the domestic market and held under customs bond to supply the current operational needs of a refiner are subject to taxation and are not exempt by virtue of their status either as imports or goods in bond. American Smelting & Refining Co. v. Contra Costa County, 271 Cal.App.2d 437, appeal dismissed 396 U.S. 273.

Vehicles operated on public highway.—Vehicles operated on the public highways under trip permits obtained under section 4003 of the Vehicle Code in lieu of registration are not exempt from ad valorem property tax under section 10758 of the Revenue and Taxation Code. Bigge Crane Rental Co. v. Alameda County, 7 Cal.3d 414.


Not self-executing.—This section is not self-executing, but imposes upon the Legislature the duty providing a method for the ascertainment of the value of the property to be taxed. San Pedro etc. R. R. Co. v. City of Los Angeles, 180 Cal. 18. Cf. Hyatt v. Allen, 54 Cal. 353.

Credits.—Deduction of debts.—The reference to "credits secured by mortgage or trust deed" in the last sentence of the first paragraph of this section refers exclusively to obligations affecting realty. Bank of Willows v. Glenn County, 155 Cal. 352.

The authority granted the Legislature to provide for a deduction from credits of debts due to bona fide residents of this State does not prevent the allowance of a deduction for debts due nonresidents doing business in California. Richfield Oil Corp. v. Los Angeles County, 100 Cal.App.2d 535.

Income taxes due to the Federal Government are not "debts due to bona fide residents of this State" within the meaning of the last sentence of the first paragraph of this section. Douglas Aircraft Co., Inc. v. Los Angeles County, 137 Cal.App.2d 803.

Property.—For definitions of the various forms of property see Revenue and Taxation Code Sections 103 to 107.

Double taxation.—The fact that a business may be required to pay a regulatory license tax under one city ordinance and also to pay property taxes under another ordinance does not render the ordinances invalid on the ground of double taxation inasmuch as this section has no application to excise taxes. Redwood Theatres, Inc. v. City of Modesto, 86 Cal.App.2d 907.

This section applies only to property taxes and does not prohibit the levying by a municipality of two excise taxes on theatres and certain other amusement businesses for the same purpose in the same period. Fox Bakersfield Theatre Corporation v. City of Bakersfield, 36 Cal.2d 136; City of Stockton v. West Coast Theatres, Inc., 36 Cal.2d 879.

Federal reserve and national bank notes.—Federal reserve notes and national bank notes may be validly taxed as tangible personal property without enabling legislation, pursuant to congressional permission to tax money. Beery v. Los Angeles County, 116 Cal.App.2d 290.

Property pledged to the Commodity Credit Corporation.—Barley stored in a public warehouse and pledged to the Commodity Credit Corporation as security for advances made under the federal farm program is taxable to the pledgor. Burhans v. Kern County, 170 Cal.App.2d 218.

Flight equipment of air carrier.—Taxation of aircraft owned by a domiciliary airline and used in the Korean airlift was found to violate the federal constitution in a decision by the California Supreme Court for which there is no majority opinion. Flying Tiger Line, Inc. v. Los Angeles County, 51 Cal.2d 314, cert. denied 359 U.S. 1001.

The "home port" doctrine was held applicable to aircraft owned by a foreign airline and flown solely in foreign commerce between sovereign nations and, consequently, apportioned county and city property taxes levied thereon were invalid. Scandinavian Airlines System, Inc. v. Los Angeles County, 56 Cal.2d 11, cert. denied 368 U.S. 899.

Gold.—Local taxation of gold held by a licensed refiner does not conflict with federal laws governing the acquisition and use of gold. American Smelting & Refining Co. v. Contra Costa County, 271 Cal.App.2d 120, appeal dismissed 396 U.S. 273.

School financing may be unconstitutional.—Taxpayers, who charged that the present method of public school financing, which is based on district-wide property taxes, discriminates against the poor and denies them equal protection of the laws, had adequate grounds on which to bring an action since, as a practical matter, a district with a large tax base can produce quality education with a small burden on its taxpayers, while a poor district cannot hope to accomplish anything but a mediocre program at a substantial burden to its taxpayers. Upon rehearing the court emphasized that this was not a final decision on the merits and that, if the trial court should determine that the existing system is unconstitutional, it must provide for an orderly transition to a constitutional system of school financing. The present system is to remain operable until an appropriate new system can be effected. Serrano v. Priest, 5 Cal.3d 584.

Vessel.—Liberian vessel in California port for nine years from the date of lay-up with apparent refusal to engage in foreign commerce held to have lost its status as one engaging in foreign commerce and to be subject to imposition of county property tax. Continental Dredging Co. v. Los Angeles County, 366 F.Supp. 1133.

Cargo containers of shipping company.—In view of the dictate of the section, no specific statutory authority is necessary to levy tax on cargo containers used exclusively for transportation of cargo for hire in interstate and foreign commerce on an "average presence" basis. Sea-Land Service, Inc. v. Alameda County, 12, Cal.3d 772.

Indians.—Personal property belonging to any Indian or Indian tribe and located on land that is held in trust by the United States is not subject to state taxation. Bryan v. Itasca County, 426 U.S. 373. Indian tribe's commercial property located off its reservation was subject to local ad valorem real and personal property taxes. The tribe was similarly situated with foreign sovereigns which owned property outside their territorial jurisdictions and which were subject to the same taxes. Salt River Pima-Maricopa Indian Community v. Yavapai County, 50 F.3d 739.

Situs.—On taxable situs of property see Section 14 and annotations to former Article XIII, Section 10 thereunder.