Laws, Regulations & Annotations
Property Taxes Law Guide – Revision 2016
Revenue and Taxation Code
Part 0.5. Implementation of Article XIII A of the California Constitution
Chapter 2. Change in Ownership and Purchase
68. "Change in ownership" exclusion; replacement property. For purposes of Section 2 of Article XIII A of the Constitution, the term "change in ownership" shall not include the acquisition of real property as a replacement for comparable property if the person acquiring the real property has been displaced from property in this state by eminent domain proceedings, by acquisition by a public entity, or by governmental action which has resulted in a judgment of inverse condemnation. The adjusted base year value of the property acquired shall be the lower of the fair market value of the property acquired or the value which is the sum of the following:
(a) The adjusted base year value of the property from which the person was displaced.
(b) The amount, if any, by which the full cash value of the property acquired exceeds 120 percent of the amount received by the person for the property from which the person was displaced.
The provisions of this section shall apply to eminent domain proceedings, acquisitions, or judgments of inverse condemnation after March 1, 1975, and shall affect only those assessments of that property which occur after June 8, 1982.
Persons acquiring replacement property between March 1, 1975, and January 1, 1983, shall request assessment under this section with the assessor on or before January 1, 1987. Persons acquiring replacement property on and after January 1, 1983, shall request assessment within four years of the date the property was acquired by eminent domain or purchase or the date the judgment of inverse condemnation becomes final.
Any change in the adjusted base year value of the replacement property acquired, resulting from the application of the provisions of this section, shall be deemed to be effective on the first day of the month following the month in which the property is acquired. The change in value shall be treated as a change in ownership for the purpose of placing supplemental assessments on the supplemental roll pursuant to Chapter 3.5 (commencing with Section 75). The assessor shall, however, appraise the replacement property acquired in accordance with the provisions of this section rather than the provisions of Section 75.10. The provisions of Chapter 3.5 shall be liberally construed in order to provide the benefits of this section and Section 2 of Article XIII A of the California Constitution to affected property owners at the earliest possible date.
History.—Added by Stats. 1982, Ch. 1465, in effect January 1, 1983. Stats. 1983, Ch. 662, in effect September 7, 1983, substituted "value which is the sum of the following" for "adjusted base year value of the property from which the person was displaced" after "or the" in the second paragraph, and added subsections (a) and (b) thereto. Stats. 1985, Ch. 186, effective January 1, 1986, added the fifth paragraph.
Note.—Section 1 of Stats. 1983, Ch. 662, provided that the Legislature finds and declares that it is the intent of the people in enacting subdivision (d) of Section 2 of Article XIII A of the California Constitution to permit taxpayers to use the base year value of the property from which the taxpayer was displaced as the base year value of the property acquired, in cases where the full cash value of the property acquired is no more than 20 percent greater than the value received by the taxpayer for the property from which the taxpayer was displaced.
In cases where the full cash value of the property acquired is more than 20 percent greater than the value received by the taxpayer for the property from which the taxpayer was displaced, the Legislature finds and declares that the intent of the provisions of subdivision (d) of Section 2 of Article XIII A is to permit taxpayers (1) to carry forward the base year value from the property displaced for the portion of the value of the acquired property which is not more than 20 percent greater than the sum received for the property from which the taxpayer was displaced, and (2) to add to the base year value the full cash value of the acquired property in excess of this amount. The Legislature finds this incremental value is appropriately added because this portion of the property is of greater utility than the property from which the taxpayer was displaced. Sec. 3 thereof provided that no appropriation is made by this act for the purpose of making reimbursement pursuant to these sections. Sec. 4 thereof provided that the provisions of this act shall remain in effect unless and until they are amended or repealed by a later enacted act.
Construction.—Taxpayer's sale of property to a private party did not qualify as replacement property for purposes of the eminent domain exclusion from change in ownership. Duea v. County of San Diego (2012) 204 Cal.App.4th 691.
Retroactive Application of Base Year Value.—Revenue and Taxation Code section 68 allows for retroactive application of the base year value, stating the transferred base year value for the replacement property shall be effective on the first day of the month following the month in which the property is acquired. Olive Lane Industrial Park, LLC v. County of San Diego (2014) 227 Cal.App.4th 1480.
Eminent Domain Replacement Property—Time for Acquisition.—The time limitation in Revenue and Taxation Code section 68 is also set forth in an administrative regulation that states the four-year period commences upon the recording of the condemnation order (Property Tax Rule 462.500, subdivision (g)). Olive Lane Industrial Park, LLC v. County of San Diego (2014) 227 Cal.App.4th 1480.
Eminent Domain Replacement Property—Time for Acquisition and Filing.—Revenue and Taxation Code section 68 implicitly allows application of the eminent domain replacement property exclusion in a prospective manner when a taxpayer acquires the property within the four-year period but misses the four-year filing deadline. This interpretation, which maintains the four-year deadline with respect to acquisition of the property but provides prospective relief for claims filed after the four-year period, accommodates the public policy interest in placing reasonable time limits on the exercise of constitutional rights, while also effectuating the plain language of California Constitutional article XIII A, section 2, that a change in ownership does not occur when property is acquired to replace condemned property. Thus, a taxpayer who acquired an eminent domain replacement property within the four-year timeline set forth in Revenue and Taxation Code section 68, but failed to file the claim with the county within the four-year period was nevertheless entitled to have a request for prospective relief considered by the assessor. Olive Lane Industrial Park, LLC v. County of San Diego (2014) 227 Cal.App.4th 1480.