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WHAT
ARE PROPOSITIONS 58 & 193?
They are constitutional
initiatives passed by California voters. They provide property tax
relief by preventing reassessment when real property transfers between
parents and children (Proposition 58) and from grandparents to grandchildren
(Proposition 193).
WHY
WERE THEY ENACTED?
California voters considered it fair to exclude reassessment between
parents and children and also from grandparents to grandchildren.
Propositions 58 and 193 make it easier to “keep the property
in the family.”
HOW
DO THESE PROPOSITIONS WORK?
Under Proposition 58, if the parent or child who acquires the property
files a claim, which is approved by the Assessor, the reassessment
will be excluded. Under Proposition 193, if the grandchild who acquires
the property files a claim, which is approved by the Assessor, the
reassessment will be excluded. If the property was already reassessed,
the reassessment will be reversed. In these situations, a corrected
tax bill will be issued, and/or a refund will be processed.
WHO
ARE CONSIDERED CHILDREN?
1. Any child born of the parent(s).
2. Any stepchild of the parent(s) and the spouse of that stepchild
while the relationship of stepparent and stepchild exists. The relationship
exists until the marriage on which the relationship is based is
terminated by divorce or, if the relationship is terminated by death,
until the remarriage of the surviving stepparent.
3. Any son-in-law or daughter-in-law of the parent(s). The relationship
of parent and son-in-law or daughter-in-law exists until the marriage
on which the relationship is based is terminated by divorce or,
if the relationship is terminated by death, until the remarriage
of the surviving son-in-law or daughter-in-law.
4. Any statutorily adopted child who was adopted before the age
of 18.
WHO
ARE CONSIDERED GRANDCHILDREN?
Under Proposition 193 the same relationship requirements for children
apply to grandchildren, step-grandchildren and grandchildren-in-law.
The parents of the grandchild(ren) who would qualify for a Proposition
58 exclusion from the grandparents must be deceased.
WHEN
ARE THESE PROPOSITIONS EFFECTIVE?
Proposition 58 applies to transfers occurring on or after November
6, 1986.
Proposition 193 applies to transfers occurring on or after March
27, 1996.
Ordinarily, the claim must be filed within three years of the date
of transfer, or date of death, but before transfer to a third party.
However, the claim will also be considered timely if it is filed
within six months after the mailing of the Notice of Assessed Value
Change. New legislation effective January 1, 1998 (Senate Bill 542),
allows claims to be filed after the above deadlines, subjec t to
certain conditions. The property must not have transferred to a
third party. In addition, the exclusion may only be applied to future
tax years. It cannot be applied retroactively back to the date of
transfer.
WHERE
ARE CLAIM FORMS AVAILABLE?
They are distributed at Assessor’s Public Service Counter,
in Room 225 of the Hall of Administration, and in regional offices.
If you need additional information, call (213) 893-1239.
PROPOSITION 58/193 LEGAL REFERENCE:
Section 63.1 of the Revenue and Taxation Code and Article XIII A
Section 2(h) of the California Constitution.
PROPOSITION 58/193 ELIGIBILITY REQUIREMENTS:
1. Transfers of real property between parents and children, and
between children and parents are excluded from reassessment.
Transfers of real property from grandparents to grandchildren are
excluded from reassessment. Transfers from grandchildren to grandparents,
however, are NOT excluded from
reassessment.
2. The seller’s or decedent’s principal residence is totally
excluded from reassessment. In addition, $1,000,000 of the seller’s
or decedent’s other real property is also excluded.
There is a qualification to this rule under Prop 193. If the grandchild
had received property in the past that was excludable under Section
63.1 of the R & T Code as a principal residence, any principal
residence that the grandchild receives from the grandparent is considered
“other real property” that is subject to the $1,000,000
limitation.
3. There is no value limit for excluding the seller’s or decedent’s
principal residence from reassessment. A Homeowners’ Exemption
or Disabled Veterans’ Exemption must have been granted to the
seller or decedent. This residence need not be the principal residence
of the person who acquires the property.
4. The $1,000,000 exclusion, for real property other than the seller’s
or decedent’s principal residence, applies to the assessed
value of property immediately before transfer. In other words, real
property other than the principal residence, with an assessed value
up to $1,000,000 is excluded from reassessment. The sales price
or actual “current market value” does not affect the $1,000,000
limit. The $1,000,000 exclusion that is available to grandchildren
for property other than a principal residence received from their
grandparents is the same $1,000,000 exclusion which they have remaining
available from their parents under Proposition 58.
5. The total value of property (or properties) which a parent may
transfer to all children without reassessment is $1,000,000 of assessed
value, for property other than the principal residence.
This limit is cumulative over time. After property (or properties)
with $1,000,000 of assessed value is transferred without reassessment,
all future transfers will be reassessed (except the transfer of
the principal residence if it has not already been transferred).
The $1,000,000 limit applies only to transfers of properties within
the State of California. Transfers of properties in other states
are not included in establishing the $1,000,000 limit.
6. The $1,000,000 exclusion is a limit for each parent separately.
Community property of married parents would have a $2,000,000 limit.
Proposition 193 specifies that a grandchild can have excluded only
$1,000,000 of property transferred from his or her father AND his
parents (paternal grandparents) and $1,000,000 of property transferred
from his or her mother AND her parents (maternal grandparents).
7. Transfers by sale, gift, devise or inheritance qualify for the
exclusion.
8. Transfers between parents and children as individuals, from grandparents
to grandchildren as individuals, between joint tenants, from trusts
to individuals, or from individuals to trusts may qualify for the
exclusion.
Transfers of ownership interests in legal entities do not qualify
for the exclusion. Transfers through the medium of a trust, however,
may qualify for the exclusion.
9. Currently, the person who acquires the property must file the
claim within three years of the date of transfer, but before transfer
to a third party; or within six months after the date of mailing
of a Notice of Assessed Value Change, issued as a result of the
transfer of property for which the claim is filed, whichever is
later. There are limited exceptions to these deadlines under new
legislation (Senate Bill 542) which affects 1998-99 fiscal year
taxes and thereafter. The property, however, must not have transferred
to a third party.
Homeowner’s Guide to Proposition 58 and Proposition 193
South Bay Brokers
1640 So. Pacific
Coast Hwy.
Redondo Beach, CA 90277
(310) 375-0583
(310) 375-9616 Fax
2501 No. Sepulveda Blvd., 2nd Floor
Manhattan Beach, CA 90266
(310) 546-7611
(310) 545-0515 Fax
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