By Jeff Prang
Los Angeles County Assessor
Last month, I attended with you a new constitutional amendment to Proposition 13 that threatens the ability of middle-income families and the working class to leave their homes to their children without forcing them to pay a huge property tax.
I am revisiting this topic this month because my office has received numerous inquiries about this challenging new law and it is important to understand the issues.
Not to be too specific, Proposition 19 could actually, by modest means, encourage working class families to sell their homes, family businesses, and other property in order to avoid a huge inadvertent tax burden as the property is subject to revaluation.
Prop. 19 was approved by voters by a narrow margin last November, and yes, it is causing chaos among taxpayers and appraisers across the country.
To make matters even stricter, some of the toughest regulations will apply as early as February 16.
Let’s take a look back: Under current law, parents (Proposition 58) and grandparents (Proposition 193) could transfer residential and commercial real estate to their children and grandchildren without a tax increase because the houses would not be revalued and the original tax base would be transferred.
According to the Legislative Analyst’s Office, between 60,000 and 80,000 property owners across the state have taken advantage of these tax savings annually to avoid an estimated $ 10 billion revaluation value.
In 2018, a Los Angeles Times investigation found that Hollywood stars Beau and Jeff Bridges owned a beautiful Malibu home with access to a semi-private beach and panoramic views of the Pacific from their famous father, famous actor Lloyd Bridges of Sea Hunt had inherited. The Times investigation found that the brothers rented the home for $ 16,000 per month but withheld their father’s annual property tax payment of approximately $ 5,000. This was possible because they had inherited their parents’ house under Proposition 58, which was informally referred to as the “Lebowski Gap”.
According to the new law and before the transfer, the house must now be the parents’ main residence and become the main residence of the children / child after the transfer. This should close the “Lebowski” gap.
While the measure was apparently intended to address the Lebowski Gap, the measure is affecting a wider spectrum of the public and includes working and middle-income families whose family assets are modest real estate investments, re-emphasizing the ability Passing on newly found generational wealth.
In essence, this new law threw the baby out with the bath water.
It is now estimated that Prop. 19 will hit 40,000 to 60,000 families with higher property taxes each year and will result in hundreds of millions of dollars a year coming out of taxpayers’ pocket books, according to the Legislative Analyst’s Office. Prop. 19 practically cancels sentences 58 and 193.
The simple fact is that this was put to the vote at the end of the legislature and would have benefited greatly from further study and reflection.
Because of this rush to the ballot box, the constitutional amendment is flawed, confusing and directly at odds with the intent of the measure.
It was touted as the initiative that would provide urgently needed help to the elderly, the severely disabled, and victims of fire and natural disasters, while generating revenue for forest fire protection agencies and counties.
Just look at the official title of the measure: “The Law for the Protection of Seniors, Disabled People, Families and Victims of Forest Fires or Natural Disasters.” And it has some positive aspects for the elderly and the disabled.
As I said earlier, starting February 16, parents and grandparents will no longer be able to transfer property to their children or grandchildren without triggering the possibility of an increase in property taxes, unless certain conditions are met.
The good news is that there is a solution to this regressive tax, which is to encourage lawmakers to draft laws that serve as a corrective constitutional amendment to Prop. 19.
This corrective constitutional amendment will restore the ability of these families to leave their homes and other property to their children, which is currently offered under Prop. 58 and 193.
I’m working with the California Assessors’ Association and state lawmakers to do just that with a real sense of urgency.
I have to say that the implementation of Prop. 19 without clarifying the legislation is a challenge and creates great confusion and uncertainty for both the public and the administrators.
I will keep you posted, but in the meantime, I recommend checking my website for the latest information on Prop. 19. [email protected]
lacounty.gov/prop 19. See you soon.
Further information on Prop. 19 or other tax saving programs can be obtained from the appraiser.
lacounty.gov or by calling 213-974-3211. Los Angeles County Assessor Jeff Prang has served since 2014. After taking office, Prang implemented extensive reforms to ensure that the strictest ethical guidelines based on fairness, accuracy and integrity were followed in his office, which is the largest of his kind in the nation of 1,400 and forms the basis for a property tax system that generates $ 17 billion annually.