Laws, Regulations & Annotations

Property Taxes Law Guide – Revision 2017

Revenue and Taxation Code

Property Taxation

Part 1. General Provisions

Chapter 1. Construction

Section 105

105. "Improvements." "Improvements" includes:

(a) All buildings, structures, fixtures, and fences erected on or affixed to the land.

(b) All fruit, nut bearing, or ornamental trees and vines, not of natural growth, and not exempt from taxation, except date palms under eight years of age.

History.—Stats. 1943, p. 1344, in effect August 4, 1943, deleted "Alfalfa, after the first year's planting" from the definition of "improvements." Stats. 1977, Ch. 539, in effect January 1, 1978, deleted ", except telephone and telegraph lines." from subdivision (a).

Improvements.—The term "improvements" is much more comprehensive than "fixtures", and while it includes fixtures it includes also many things that may not be classified as fixtures. Security Data, Inc. v. Contra Costa County, 145 Cal.App.3d 108.

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.

Fixtures.—In determining whether articles constitute fixtures, and therefore improvements, within the meaning of this section, the determining factor is whether there was an intention to make a permanent accession to the real property as reasonably manifested by outward appearances. Neither the status of the party by whom the articles have been installed, nor the length of the lease under which the party is in possession of the real property, is controlling. The fact that the fixtures are removable pursuant to express or implied contract between the landlord and tenant does not necessarily negative the element of permanence, nor is the contract binding upon the taxing authorities. Trabue Pittman Corp. v. Los Angeles County, 29 Cal.2d 385; Simms v. Los Angeles County, 35 Cal.2d 303. In determining whether an article is a fixture, there are three tests: the manner of its annexation, its adaptability to the use and purpose for which the realty is used, and the intention of the party making the annexation. The manner of annexation and the use to which the realty is put are relevant in determining the crucial element of intention to make the article a permanent part of the realty. Great expense or difficulty in removal are indicative of intended permanence. Morse Signal Devices v. Los Angeles County, 161 Cal.App.3d 570; Allstate Insurance Co. v. Los Angeles County, 161 Cal.App.3d 877; Security Pacific National Bank v. Los Angeles County, 161 Cal.App.3d 877; Crocker National Bank v. City and County of San Francisco, 49 Cal.3d 881.

The central office equipment of a telephone company installed in a building owned by the company and especially designed for its use constitutes an improvement. This includes such items as headsets, operators' stools, etc., which, although readily detachable, are usable only with the attached items with which they constitute a single unit. The equipment located in small leased offices is not to be regarded as improvements, notwithstanding the attachment of switchboard legs and equipment to floors or walls by screws or bolts. The exemption of telephone and telegraph lines from the definition of improvements in this section has reference only to the lines outside the central office buildings. Southern California Telephone Co. v. State Board of Equalization, 12 Cal.2d 127.

Bank vaults and vault doors, including those installed by lessees, have been held to constitute improvements. San Diego Trust & Savings Bank v. San Diego County, 16 Cal.2d 142; Trabue Pittman Corp. v. Los Angeles County, 29 Cal.2d 385. Similarly, tellers' cages, partitions, coupon booths and counters installed by a lessee bank have been held to be improvements taxable to the owner of the building in which they were installed. Trabue Pittman Corp. v. Los Angeles County, supra.

Where bank safe-deposit boxes are not physically attached to the building by any means and were readily removable within the vault room and from one branch office of a bank to another, they are not improvements and cannot be taxed as real property. United States National Bank of San Diego v. Los Angeles County, 234 Cal.App.2d 195.

The classification of a bank's fixtures as improvements when similar property of others was intentionally and deliberately misclassified as personalty did not invalidate general county and city taxes but did invalidate special assessment district charges levied only upon realty and which, accordingly, resulted in the imposition of an unequal burden on the bank's property. Simms v. Los Angeles County, 35 Cal.2d 303.

The lessor's right under a lease to remove shipyard facilities does not fix their status as personalty for tax purposes and preclude the assessor from classifying the property as improvements to realty in accordance with the physical facts of their annexation to the land. Kaiser Co., Inc. v. Reid, 30 Cal.2d 610.

Bank owned electronic computer systems are fixtures where special design of a building and system are interrelated, it is difficult and expensive to remove the system, and the system is physically connected to the property by many wires. Bank of America v. Los Angeles County, 224 Cal.App.2d 108. Computer components owned by bank and placed in bank's building were not fixtures but personalty where the building was a general purpose office building, the components were not essential to the purpose for which the building was constructed and used, and their location and use in the building were not materially associated with that purpose; where it was never intended that the bank and the components would remain in the building permanently; where each of the components was mounted on wheels and could readily be unplugged and moved without substantially disturbing the computer room; where the entire system was moved out of the building without substantial difficulty, expense, or time; and where the components were not "destroyed" when they were moved. Security Data, Inc. v. Contra Costa County, 145 Cal.App.3d 108. Standardized, general purpose computers and components, placed in general purpose office buildings, and connected to a power source by means of standardized plugs, and to each other by means of standardized cables, are personal property regardless of whether or not their use is essential to operation of the business in which they are employed. Minor structural alterations to the realty, such as movable partitions or flooring, supplemental air conditioning units, and 220 volts wiring do not alter the character of such property from personalty to reality. Security Pacific National Bank v. Los Angeles County, 161 Cal.App.3d 877. Bank electronic data processing equipment not physically attached to the building by permanent connections but merely by standardized "quick-disconnect" plugs inserted into the power source was not a fixture but personalty where neither the equipment nor the building was designed or modified for each other, and those factors showing a lack of annexation and adaptability were not outweighed by other objective manifestations of permanence, i.e., the interrelation between the purpose and structural form of the building and the capacity and physical characteristics of the equipment, and the equipment's weight and size. Crocker National Bank v. City and County of San Francisco, 49 Cal.3d 881.

Pipe lines underlying public streets (City of Pasadena v. Los Angeles County, 182 Cal. 171), and fences along a railroad right of way (Santa Clara County v. Southern Pacific Co., 118 U.S. 394) are improvements.

A sign and a night depository constituting trade fixtures, owned by a bank and installed on a leased premises were properly classified as improvements under this section and real property under section 104 even though assessed to the lessee and placed on the unsecured roll. Ventura County v. Channel Islands State Bank, 251 Cal.App.2d 240.

A permanently affixed interior household connection to a cable television system installed by the system owner who neither owns nor controls the connection constitutes a fixture and is assessable to the owner of the realty rather than to the system owner. Tele-Vue Systems, Inc. v. Contra Costa County, 25 Cal.App.3d 340. Minor components of installed burglar alarm systems were taxable to the installer, even though they were fixtures permanently attached to subscribers' premises, where the installer owned or controlled them and also owned the major components of the system. Morse Signal Devices v. Los Angeles County, 161 Cal.App.3d 570.

An electric transmission line and substation constructed for, and leased to a tax-exempt utility district with an option to purchase, where possession, control and risk of loss were in the district constituted improvements to the district's real property and were not assessable to the contractor whose interest in the improvements was non-possessory. Collins Electrical Co. v. Shasta County, 24 Cal.App.3d 864.

Where items which might otherwise be classified as personalty are attached to and designed for use in conjunction with items which are fixtures, the entire unit is deemed to be a fixture. Allstate Insurance Co. v. Los Angeles County, 161 Cal.App.3d 877; Security Pacific National Bank v. Los Angeles County, 161 Cal.App.3d 877.

A movable IBM data processing unit, five feet high, sixfeet long and two feet eight inches wide, mounted on wheels and connected to the bank building only by an electrical cable that plugs into a wall socket, was properly classified as personal property and not a fixture. Exchange Bank v. Sonoma County, 59 Cal.App.3d 608.

Constructive annexation.—"Constructive annexation" and "unit for use", as applied to property taxes and whereunder an item placed on real property, but not physically fastened or otherwise attached to it, may be deemed "constructively annexed" to it and therefore part of the fixture if the item is used in such a way that it constitutes a "unit for use" with another item which is a fixture, are applicable only in instances in which the use of the nonattached item is significantly associated with the purpose for which the building in question is used. Security Data, Inc. v. Contra Costa County, 145 Cal.App.3d 108.

Levees and fills.—The levees of a canal (Kern Valley Water Co. v. Kern County, 137 Cal. 511) and an earthen tideland fill (San Pedro etc. R. R. Co. v. City of Los Angeles, 180 Cal. 18) do not constitute improvements.

Canals.—A concrete lined canal is an improvement. San Francisco v. San Mateo County, 17 Cal.2d 814.

Vines.—Strawberry plants are not vines. Monterey County v. Madolora, 171 Cal.App.2d 840.

Converted vessels.—The use of the special wharf area, developed as a tourist attraction by the city, manifested the intent to make the Queen Mary a permanent addition to realty. Specialty Restaurants Corporation v. Los Angeles County, 67 Cal.App.3d 924.

Note.—See note under Constitutional Provisions, Art. XIII, § 27, entitled "Taxation of bank safe deposit boxes."