The “Split Roll” Initiative recently qualified for the November 2020 ballot, and is numbered Proposition 15. If passed, many commercial and industrial property owners would lose their “Prop. 13 protection,” and their properties would then be assessed at market value.
This article is the first in a multi-part series discussing Prop. 15. In this first part, we will start with the basics of Prop. 15.
When is the Vote on Prop. 15 and is it Likely to Pass?: Californians will vote on Prop. 15 on November 3, 2020. In order for Prop. 15 to pass, only a simple majority is required. It is unclear whether it has sufficient support. In an April 2020 poll, 53% of likely voters were in favor of Prop. 15 (Source: Public Policy Institute).
What Properties Would Lose “Prop. 13 Protection?”: Generally, commercial and industrial properties would lose “Prop. 13 protection,” and would be reassessed to market value.
What Properties Would Remain Protected?: Generally, residential property and property used for commercial agricultural production would keep “Prop. 13 protection,” and would therefore not be subject to market value reassessment.
When Can Reassessment Begin?: Reassessments statewide would begin with 2022-23 fiscal year. Note: There can be deferral until 2025-26 for properties at least 50% occupied by small businesses (to be discussed in more detail in a subsequent article).
Potential Exemption For Properties Less Than $3 Million: In general, commercial and industrial properties worth less than $3 Million would not lose “Prop. 13 protection.” However, this exemption does not apply if even one owner of the property holds interests in California commercial or industrial real properties which, in the aggregate, exceed $3 Million (including the subject property).
Does Prop. 15 Increase the 1% Base Tax Rate of Prop. 13?: No, it does not. The 1% base tax rate remains in place, including for commercial and industrial properties.
How Often Will Properties be Reassessed to Market Value?: At least once every 3 years.
How Much Tax Revenue Would be Raised and How Would it be Used?: The state fiscal analyst estimates that Prop. 15 would generate between $8 Billion – $12.5 Billion per year – an approximate 7% increase in California’s annual tax revenues of approximately $145 Billion. The additional tax revenue would be first allocated to offset implementation costs and increased property tax deductions. The vast majority of the increased revenues would be earmarked as follows: 60% to local governments; and 40% to schools (K-12 – 35.6% and community colleges – 4.4%).