COVID-19 Property Tax Relief

How California’s Proposition 8 Can Help Commercial Real Estate Owners

Every Property Taxpayer should make a focused effort to pursue property tax relief due to the negative impacts on property value caused by COVID-19.

In California, there is a solution to help ease the property tax burden many owners of commercial real estate and business personal property are faced with. One approach, especially relevant to office, retail and hospitality property types, are the “Decline in Value” assessment appeal rights granted under Proposition 8 passed by California voters in 1978.

A successful Prop 8 assessment appeal will lower the 2021/22 property tax and set a temporary reduced assessment as of the January l, 2021 lien date.

Whenever the current assessed value exceeds the current fair cash value or market value for a property in California, a Prop 8 appeal is warranted and highly recommended … The process starts with a No-Cost Property Tax Assessment Review of your California properties. Any reduction achieved through a Prop 8 assessment appeal is annual and temporary. Should the real estate market recover the Prop 13 Base Year assessment is restored including the 2% inflation factor. The option of a Prop 8 appeal should compel every real estate owner to be proactive and review the property tax assessment and taxable value of their real estate annually. Any adjustments achieved through a successful Prop 8 assessment appeal will lower the 2021/22 property tax burden on the subject property and establish a temporary property assessment reduction only for the January 1, 2021 lien date.

A typical Prop 8 appeal would begin by gathering and compiling all available public records, comparable market sales data, ADRs, RevPars, vacancy/collection loss, expense ratios, market rents, market capitalization and multiplier rates. Then there would be a review of the subject’s actual revenue generating ability during calendar year 2020 reconciled with market data and the subject property’s actual performance during that same time frame. This information would determine a proper market/assessed value for the property.

Once deemed warranted, a formal appeal will be filed with the Assessment Appeals Board during the open filing period starting on July 2, 2021. Here is where the case will be discussed and a fair valuation will be negotiated with Assessors for a possible agreement. If an agreement isn’t reached, then a property valuation report would be presented in support of an opinion of value. Once a successful appeal is achieved, refund analysis, computation and tracking commence.

Note: The Burden of Proof is upon the taxpayer and the assessor’s value is presumed correct. (Exception being single-family owner-occupied properties). What this means is any assessed value the assessor applies to the tax roll is presumed correct and the taxpayer must appeal and present to the Assessment Appeals Board acceptable evidence demonstrating otherwise during a formal hearing.

A Prop 8 appeal can be a highly valuable approach to property tax relief on properties impacted by the pandemic. Retaining the service of an experienced property tax consultant eliminates the time and hassle experienced by beginners while achieving maximum savings. Please do not leave tax dollars on the County’s table!

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