California Proposition 8, the Post-Disaster Taxation Act (1978)
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Proposition 8 was partly a response to Proposition 13, which voters had approved in June 1978. Proposition 13 changed provisions in the California Constitution regarding how property is evaluated in California for property tax purposes. Proposition 13 requires county assessors to use 1975-76 property values as the basis for determining real property assessments in 1978-79 and subsequent years. The 1975-76 values may be increased by an inflation factor of no more than 2 percent per year. However, if the property is "newly constructed", or if ownership of the property changes, the assessment is based not on the property's value in 1975-76, but on its value at the time of construction or change in ownership.
Proposition 8 amended Section 2 of Article XIII A to provide:
- Real property reconstructed after a disaster, as declared by the Governor, shall not be considered "newly constructed" for property tax purposes if the fair market value of such property, as reconstructed, is comparable to its fair market value prior to the disaster.
- There shall be a reduction in full cash value of real property for property tax purposes to reflect substantial damages, destruction or other factors causing a decline in value.
"Proposition 8 reductions"
When property values in an area decline because of a declining real estate market, property tax assessors are obliged to conduct "decline in value reviews" to ensure that the tax assessed value of a property is set at a lower rate if the value of the property has declined. When a property is assigned a lower value as the result of such a review, this is known as a "Proposition 8 reduction".
In Monterey County in 2009, more than 90,000 homes were given a Proposition 8 reduction.
The official summary of Proposition 8 said:
This proposition would affect the determination of assessed value in three ways:
1. Allowed adjustments to 1975-76 property values. Proposition 13 specifies that the county assessors' determination of 1975-76 assessments can now be increased if these values were "not already assessed up to the 1975-76 tax levels."These adjusted values then would constitute the basis for computing future assessments.
This constitutional amendment substitutes the term "full cash value" for "tax levels."The Legislative Counsel advises us that this terminology change is a clarifying amendment to the Constitution, and as such it would not have any direct fiscal effect.
2. Treatment of "reconstructed" property. The Legislative Counsel advises us that, as used in Proposition 13, the term "newly constructed" real property covers additions or renovations to real property as well as newly built structures. Thus, property which has not been sold since 1975, but is substantially "reconstructed" following a flood, fire or other disaster would have to be reassessed at its new market value.
This proposal specifies that real property which is reconstructed after a disaster shall not be reassessed at its new market value if (1) it is in a disaster area, as proclaimed by the Governor and (2) its value is comparable to the fair market value of the original property prior to the disaster. This would prevent the assessed value of such property from being increased by more than the 2 percent annual inflation factor.
3. Property which has declined in value since 1975. Proposition 13 does not allow the assessor to reduce the assessed value of property which declines in value while it is still owned by the same taxpayer. This proposal would allow the assessor to make such reductions when it has been substantially damaged or its value has been reduced by "other factors" such as economic conditions.
The fiscal estimate provided by the California Legislative Analyst's Office said:
- "In the absence of a major disaster, the adoption of this proposal would have a minor impact on local property tax revenues statewide. It should have no significant impact on state revenues or costs."