Senate BillNo. 558


Introduced by Senator Nguyen

February 26, 2015


An act to amend Section 110 of the Revenue and Taxation Code, relating to taxation.

LEGISLATIVE COUNSEL’S DIGEST

SB 558, as introduced, Nguyen. Property taxation: assessment: full cash value.

The California Constitution generally limits ad valorem taxes on real property to 1% of the full cash value of that property. For purposes of this limitation, existing property tax law defines “full cash value” as the assessor’s fair market value valuation of real property as shown on the 1975-76 tax bill under “full cash value” or, thereafter, the appraised value of that real property when purchased, newly constructed, or a change in ownership has occurred. Existing property tax law generally defines this “full cash value” of property as the property’s “fair market value,” and defines these terms to mean the amount of cash or its equivalent that property would bring if exposed for sale in the open market, as provided.

This bill would make a nonsubstantive change to that latter definition.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

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SECTION 1.  

Section 110 of the Revenue and Taxation Code
2 is amended to read:

3

110.  

(a) Except asbegin delete isend delete otherwise provided in Section 110.1, “full
4cash value” or “fair market value” means the amount of cash or
P2    1its equivalent that property would bring if exposed for sale in the
2open market under conditions in which neither buyer nor seller
3could take advantage of the exigencies of the other, and both the
4buyer and the seller have knowledge of all of the uses and purposes
5to which the property is adapted and for which it is capable of
6being used, and of the enforceable restrictions upon those uses and
7purposes.

8(b) For purposes of determining the “full cash value” or “fair
9market value” of real property, other than possessory interests,
10being appraised upon a purchase, “full cash value” or “fair market
11value” is the purchase price paid in the transaction unless it is
12established by a preponderance of the evidence that the real
13property would not have transferred for that purchase price in an
14open market transaction. The purchase price shall, however, be
15rebuttably presumed to be the “full cash value” or “fair market
16value” if the terms of the transaction were negotiated at arms length
17between a knowledgeable transferor and transferee neither of which
18could take advantage of the exigencies of the other. “Purchase
19price,” as used in this section, means the total consideration
20provided by the purchaser or on the purchaser’s behalf, valued in
21money, whether paid in money or otherwise. There is a rebuttable
22presumption that the value of improvements financed by the
23proceeds of an assessment resulting in a lien imposed on the
24property by a public entity is reflected in the total consideration,
25exclusive of that lien amount, involved in the transaction. This
26presumption may be overcome if the assessor establishes by a
27preponderance of the evidence that all or a portion of the value of
28those improvements is not reflected in that consideration. If a single
29transaction results in a change in ownership of more than one
30parcel of real property, the purchase price shall be allocated among
31those parcels and other assets, if any, transferred based on the
32relative fair market value of each.

33(c) For real property, other than possessory interests, the change
34of ownership statement required pursuant to Section 480, 480.1,
35or 480.2, or the preliminary change of ownership statement
36required pursuant to Section 480.4, shall give any information as
37the board shall prescribe relative to whether the terms of the
38transaction were negotiated at “arms length.” In the event that the
39transaction includes property other than real property, the change
40in ownership statement shall give information as the board shall
P3    1prescribe disclosing the portion of the purchase price that is
2allocable to all elements of the transaction. If the taxpayer fails to
3provide the prescribed information, the rebuttable presumption
4provided by subdivision (b) shall not apply.

5(d) Except as provided in subdivision (e), for purposes of
6determining the “full cash value” or “fair market value” of any
7taxable property, all of the following shall apply:

8(1) The value of intangible assets and rights relating to the going
9concern value of a business using taxable property shall not
10enhance or be reflected in the value of the taxable property.

11(2) If the principle of unit valuation is used to value properties
12that are operated as a unit and the unit includes intangible assets
13and rights, then the fair market value of the taxable property
14 contained within the unit shall be determined by removing from
15the value of the unit the fair market value of the intangible assets
16and rights contained within the unit.

17(3) The exclusive nature of a concession, franchise, or similar
18agreement, whether de jure or de facto, is an intangible asset that
19shall not enhance the value of taxable property, including real
20property.

21(e) Taxable property may be assessed and valued by assuming
22the presence of intangible assets or rights necessary to put the
23taxable property to beneficial or productive use.

24(f) For purposes of determining the “full cash value” or “fair
25market value” of real property, intangible attributes of real property
26shall be reflected in the value of the real property. These intangible
27attributes of real property include zoning, location, and other
28 attributes that relate directly to the real property involved.



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