Assessors seek clarity of inheritance and other Prop 19 impacts

| April 1, 2021 | 0 Comments

LOS ANGELES County Assessor Jeff Prang.

California’s 58 county assessors are seeking clarification on the implementation of a new property tax measure with the hope to delay a provision that makes it more costly for children to inherit some homes from their parents.

Narrowly approved by voters last November, Proposition 19 partially took effect on Feb. 16, but according to Los Angeles County Assessor Jeff Prang, many homeowners are not yet aware of its impact.

To learn more about how the measure potentially impacts local residents, we asked Prang to explain his concerns.

Prang says the new measure makes “significant changes” to the California Constitution regarding tax benefits. “Homeowners who meet certain criteria now have expanded tax-saving options, but children who inherit property may face increases in property taxes,” he told the Chronicle last month.

Basis transfer

Essentially, Prop. 19 does two things. “First, Prop. 19 allows homeowners over 55, disabled, or victims of natural disasters to transfer their property tax basis with them when they sell their home and purchase a new one anywhere within the state — up to three times. They can also transfer that tax basis to a home of greater value. Previously, eligible homeowners could only transfer their property tax rate to a home of equal or lesser value and only in a limited number of counties. This is effective April 1,” says Prang.

Tax the children

The second part of Prop. 19 went into effect Feb. 16 and imposes limits on the intergenerational transfer of the assessed value of the family property.

“Previously, parents could transfer their primary residence, and up to $1 million in additional property, to their children without a change in the assessed value, even if the children used it as a rental,” explains Prang. But now, only a parent’s principal residence may be transferred to the children, and that home must then become the principal residence for the children, or — maybe — one of them, within one year of the transfer.

“If these conditions are not met, the home will be reassessed,” Prang explains.

Lebowski loophole

Supporters of Prop. 19 celebrated its victory as a way to eliminate what was dubbed the “Lebowski loophole,” which is a reference to a 2018 Los Angeles Times report that found actor Jeff Bridges and a sibling had inherited a Malibu home which they leased for $16,000 a month while maintaining their parent’s annual property tax of about $5,000.

Does Prop. 19 appropriately address that loophole? Prang says yes. “But it imposes a one-size-fits-all approach and impacts a broad range of homeowners that includes middle-income families with modest real estate investments,” he counters.


That’s not the only issue. According to Prang, there are numerous ambiguities in the measure. As just one example, he points to language that suggests that, if a parent transferred property to his or her children, and there were multiple children, all of the children would have to live there to claim the transferred property tax rate. “Absurd perhaps, but the language is confusing,” he says.

With these issues in mind, Prang supports legislation to clarify the voter-approved measure: “I am working with the State Board of Equalization, the California’s Assessors’ Association, and state legislators to craft legislation addressing major issues.

“Until legislation is adopted, there will be uncertainty and confusion for many property owners,” Prang concludes.

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Category: Real Estate

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