ASSESSOR AUTHORITY OVER CHANGE IN OWNERSHIP DECISIONS.

An assessor or any person employed by the office of the county assessor must possess a valid assessment analyst certificate issued by the State Board of Equalization (SBE) in order to make decisions regarding change in ownership. [Cal. Rev. & Tax. Cd. §674(a) .] The SBE will not issue a certificate to an applicant who has not attained a passing examination grade and demonstrated to the SBE that he or she is competent to make such change in ownership decisions. If an applicant is denied a certificate, the applicant has a right to a review of the denial. In order to retain a valid certificate, every certified assessment analyst will complete at least 24 hours of SBE approved training in each one-year period or risk certificate revocation. [Cal. Rev. & Tax. Cd. §674(c) ; Cal. Rev. & Tax. Cd. §675 .] The assessment analyst certificate provisions will only apply in counties or cities and counties that have passed a resolution upon the recommendation of the assessor to require certification pursuant to such provisions. [Cal. Rev. & Tax. Cd. §680 .]

DIRECT REAL PROPERTY OWNERSHIP CHANGE IN OWNERSHIP REPORTING REQUIREMENTS

A change in ownership statement must be filed for each transfer of real property and on the death of the owner. Rev & T C §§480?480.2. The transferee must file a preliminary change of ownership report concurrent with recordation of any document effecting a change in ownership of the property. Rev & T C §§480.3?480.4.

PRACTICE TIP: If the transfer is excluded from reassessment, explain on the preliminary change of ownership report form (using an attachment, if necessary) what transfers are occurring, and why the transfers are excluded from reassessment. Although a claim for refund based on an erroneous change of ownership can always be filed, the property tax must be paid as a condition of filing the claim for refund, and it takes 1 year or longer to obtain a hearing date. Consequently, a preliminary change of ownership report form that clearly states the reasons for the exclusion and convinces the assessor of the basis for the exclusion will be of substantial benefit to the client.

Transfers on Death

The personal representative must file a change in ownership statement with the county recorder or assessor in each county in which the decedent owned real property before or at the time the inventory and appraisal is filed; in all other cases, including a transfer through a trust, the form is to be filed by the trustee or transferee within 150 days of the decedent’s death. Rev & T C §480(b).

PRACTICE TIP: Send a copy of the form, with the original to the assessor, with a self-addressed, stamped envelope, and ask for a date-stamped copy.

The change in ownership statement must be filed in order to file the property tax certification required under Prob C §8800(d).

PRACTICE TIP: Whenever a document is recorded that changes who manages the trust (e.g., a resignation of trustee and acceptance of nomination of successor trustee), no matter how innocuous, use a preliminary change of ownership report form. See Rev & T C §480.4. The recorder usually will insist on identification of the affected real property by assessor’s parcel number and often will require a reference (by instrument number and date) to the recorded deed that places title to the property in the trustee.

Statute of Limitations

The statute of limitations on supplemental assessments is 4 years (6 years for penalty assessments under Rev & T C §504) if a change in ownership statement is filed, or a preliminary change of ownership report is filed under Rev & T C §480.3, and unlimited if a statement or report is not filed. Rev & T C §75.11. The statute of limitations on escape assessments is 4 years if any document evidencing a change of title or ownership is recorded (8 years for penalty assessments under Rev & T C §504), and 8 years for any unrecorded change for which a statement or report was not filed. Rev & T C §532.

Form BOE-100-B, Statement of Change in Control and Ownership of Legal Entities, is used by the BOE to obtain information to determine whether a transfer of interest in a legal entity has triggered a change in control or ownership that results in the reassessment of the California real property owned by the entity, and whether an exclusion from change in ownership applies. Failure to file in either circumstance noted above will result in application of penalty pursuant to Revenue and Taxation Code section 482(b).

Whenever there is a change in ownership or a change in control of a legal entity and the legal entity owned an interest in California real property as of that date, the person or legal entity acquiring ownership control or the legal entity that has undergone a change in ownership must file a statement with the Board. (See Revenue and Taxation Code sections 480.1 and 480.2.)
When an entity is requested by the BOE to file regardless of whether or not a change in control or ownership of the legal entity has occurred or whether the legal entity owned an interest in real property.

The acquiring person or legal entity is required to file form BOE-100-B within 90 days of the change in control or the legal entity that has undergone a change in ownership must file. However, any person or legal entity that receives a form BOE-100-B must complete and file the BOE-100-B with the BOE. Note: If a written request to file is made by the BOE, form BOE-100-B must be filed within 90 days, regardless of whether a change in control or ownership of the legal entity has occurred. (See Revenue and Taxation Code sections 480.1 and 480.2.)

ADMINISTRATIVE REMEDIES.

Taxpayers must exhaust their administrative remedies when appealing the assessor’s determination that a change in ownership occurred by either: (1) filing with the appeals assessment board (AAB) a timely application for changed assessment that is also designated as a claim for refund as provided by Sec. 1603; or (2) filing a timely application for changed assessment with the AAB and a separate, timely claim for refund under Sec. 5907. The failure to seek such remedies will result in the taxpayer being precluded from challenging the new base year value. Further, the transfer of a life estate and remainder interests upon the death of the trustor of a revocable trust constitutes a change in ownership. Cal. Code Regs. 18 §462.060 remains valid and the creation of a life estate in real property is a change in ownership unless the estate is for the transferor or the transferor’s spouse, regardless of whether additional interests are also transferred. [California State Board of Equalization Letter to Assessors No. 2010/034, 07/12/2010.]

(25)Transfers of interest in corporations, partnerships, or limited liability companies or other legal entities. Except as discussed below or elsewhere on this page, the transfer of or purchase of ownership interests in legal entities, such as corporate stock, partnership, or limited liability company interests, is not considered a transfer of the real property of the legal entity. [Cal. Rev. & Tax. Cd. §64(a) ; Cal. Code Regs. 18 §462.180(c) .] When an owner of a majority ownership interest in a partnership gets all the remaining ownership interests in the partnership or otherwise becomes the sole partner, the purchase of the minority interests, subject to the application of the step?transaction doctrine, is not a change of ownership of the partnership’s real property. It is immaterial whether the partnership is a continuing or dissolved partnership. [Cal. Rev. & Tax. Cd. §64(c)(2) .] Interspousal transfers of ownership interest in legal entities are not changes of ownership. [Cal. Code Regs. 18 §462.220 .]

PARTNERSHIP TRANSFERS. The amendment of the statute providing that no change of ownership of partnership real property results from the acquisition by a majority partner of the ownership interests of minority partners reverses Zapara v. County of Orange, Cal. Ct. App., (1994) 26 Cal App 4th 464. An uncodified provision of L. 1995, ch. 497 (SB722) (§40) states that the amendment of the statute is declaratory of, not a change in, existing law.

In addition, a reorganization of members of an affiliated group of corporations or of farm credit institutions does not result in a change of ownership for reassessment purposes if the reorganization qualifies as an IRC § 368 reorganization and is accepted as a nontaxable event under California law. Transfers of property among members of an affiliated group of corporations similarly does not result in transfer of ownership.

?Affiliated group? means one or more chains of corporations connected through stock ownership with a common parent corporation if:

(1) 100% of the voting stock, exclusive of any share owned by directors, of each of the corporations, except the parent, is owned by one or more of the other corporations; and
(2) the common parent owns directly 100% of the voting stock, exclusive of any shares owned by directors, of at least one of the other corporations.

[Cal. Rev. & Tax. Cd. §64(b) ; Cal. Code Regs. 18 §462.180(b)(1) .]

Further, no change of ownership occurs from the transfers of stock, partnership interests, limited liability company interests, or any other interests in legal entities between legal entities or by an individual to a legal entity (or vice versa) that result solely in a change in the method of holding title and in which proportional ownership interests of the transferors and transferees, in each and every piece of property represented by the interests transferred, remain the same after the transfer. Also, no change of ownership results from a statutory conversion or merger of a partnership into an LLC or other partnership (or vice versa) when the law of the jurisdiction of the converted or surviving entity provides that it remains the same entity or it succeeds to the assets of the converting or disappearing entity without another act or transfer and the partners or members of the converting or disappearing entity maintain the same ownership interest in profits and capital of the converted or surviving entity that they previously held in the converting or disappearing entity. [Cal. Code Regs. 18 §462.180(d)(4) .]

But the following transfers of interest in a legal entity are considered as transfers of ownership that will trigger a reassessment:

If a corporation partnership, limited liability company, or other legal entity obtains control through direct or indirect ownership or control of more than 50% of the voting stock of a corporation or obtains a majority ownership interest of a partnership, limited liability company, or other legal entity, through the purchase or transfer of corporate stock, partnership, or limited liability company interest or ownership interest, including the purchase or transfer of 50% or less of the ownership interest through which control or a majority ownership interest is obtained. [Cal. Rev. & Tax. Cd. §64(c) ; Cal. Code Regs. 18 §462.180(d)(1) .]
Transfers by the original owner(s) (in one or more transactions) of shares or other ownership interests representing more than 50% of the total interests in an entity that was previously involved in an exempt transfer of property under Cal. Rev. & Tax. Cd. §62(a)(2) . This statutory provision exempts a transfer between an individual and entity or between entities that results only in the method of holding title to the property and in which the proportional interests of the transferor and transferee remain the same after the transfer. [Cal. Rev. & Tax. Cd. §64(d) ; Cal. Code Regs. 18 §462.180(d)(2) .]

Trusts: Irrevocable and Revocable

 1. Transfer of Property to Trust

Generally, a transfer of real property from trustor A into a trust is a change of ownership at the time of the transfer. Rev & T C §62(d)(1); 18 Cal Code Regs §462.160(b)(1).

2. Transfer of Property to Irrevocable Trust

Transfer of real property to an irrevocable trust in which trustor A is the sole present beneficiary is not a change in ownership. However, a similar transfer by trustor A to a trust naming A and B as beneficiaries would require reappraisal of the property to the extent that B is a beneficiary. Rev & T C §62(d)(1); 18 Cal Code Regs §462.160(b)(1).

3. Third Party Beneficiary

A transfer of property from A to C as trustee under a trust naming B as the sole beneficiary triggers reappraisal of the interest transferred to B. Rev & T C §§60, 61(h); 18 Cal Code Regs §462.160(a).

4. Reversion of Beneficial Interest Within 12 Years

The transfer of property from A to a trust for the benefit of B for a term of 12 years or less with a subsequent reversion to A will not require reappraisal of the property at either creation or termination of B’s beneficial interest. The beneficial interest transferred must exceed a term of 12 years to be deemed a change in ownership. Rev & T C §62(d); 18 Cal Code Regs §462.160(d)(3).

NOTE: A person who holds a beneficial interest to a property (i.e., the beneficial owner), as opposed to legal title, has the right to possess and use the property to the exclusion of all others. Mayhew Tech Ctr., Phase II v County of Sacramento (1992) 4 CA4th 497, 505.

5. Assignment of Beneficial Interest

When A, as beneficiary of a trust owning real property, assigns his or her beneficial interest to B, reappraisal of the property is triggered if the beneficial interest reverts back to A after a term exceeding 12 years. Rev & T C §60; 18 Cal Code Regs §462.001.

There is no reappraisal based on transfer of a future beneficial interest to B. Rev & T C §60; 18 Cal Code Regs §462.001. In that case, the property is reappraised at the time that B receives the interest in the property. Rev & T C §63; 18 Cal Code Regs §462.220.

6. Income Beneficiaries With Remainder

In a transfer of property from A to B as trustee of a trust naming A and C as income beneficiaries with a remainder to D, a reappraisal is triggered to the extent that C and D are present beneficiaries of the trust. Rev & T C §62(d)(1); 18 Cal Code Regs §462.160(b)(1). A is not the sole beneficiary of the trust.

EXAMPLE 1: Should A die, then A’s interest in the property is reappraised. Rev & T C §61(g); 18 Cal Code Regs §462.160(c).

EXAMPLE 2: If A and C die and the property goes to D, then the property is reappraised. Rev & T C §61(g); 18 Cal Code Regs §462.160(c). The interspousal exception will apply only if D is A’s spouse. Rev & T C §63; 18 Cal Code Regs §§462.160(b)(3), 462.220.

7. Transfer From Joint Tenants to Irrevocable Trust

No reappraisal is triggered following a transfer of real property from A and B as joint tenants to A and B as trustees and life beneficiaries of an irrevocable trust, with a remainder to C. The transfer does not involve a transfer of a present interest or beneficial use. Rev & T C §62(d)(1); 18 Cal Code Regs §462.160(b)(1). The property will be reappraised after the deaths of both A and B, as there is then a termination of the precedent interest when the right of possession vests in C. Rev & T C §61(g); 18 Cal Code Regs §462.160(c).

8. Transfer of Property to Revocable Trust

When A is both the transferor of property to a revocable trust and the trustor, there is no reappraisal of the property triggered. Rev & T C §62(d)(2); 18 Cal Code Regs §462.160(b)(2). If and when the trust becomes irrevocable (e.g., on the death of A), a reappraisal is triggered. Rev & T C §61(h); 18 Cal Code Regs §462.160(b)(2).

                a. Revocable Trust Involving Spouses

When spouses create a revocable trust and transfer real property into it, naming themselves as trustees and life beneficiaries, and granting a remainder to C, no reappraisal of the property is triggered because there has not been a transfer of a present interest or beneficial use of the property. Rev & T C §§60, 62(d); 18 Cal Code Regs §462.160(b)(2).

EXAMPLE 1: If both spouses revoke the trust, then again there is no reappraisal required, because no present interest or beneficial use has been transferred. The property is still held by both spouses. Rev & T C §§60, 62(d); 18 Cal Code Regs §462.160(d)(2).

EXAMPLE 2: If both spouses die without revoking the trust and the property transfers to C, then the reappraisal is triggered. The termination of the spouses’ precedent interest and the vesting of the right of possession in C are a change in ownership. Rev & T C §61(g); 18 Cal Code Regs §462.160(c).

EXAMPLE 3: If one spouse dies and then the other spouse revokes the trust, no reappraisal is warranted because there is no present interest transferred. Rev & T C §62(d); 18 Cal Code Regs §462.160(d)(2).

EXAMPLE 4: If one spouse dies and remainderman C dies prior to the surviving spouse, with the surviving spouse as sole heir of both, reappraisal of the property is not triggered. If the remainderman predeceases the surviving spouse, the present interest remains in the surviving spouse as life beneficiary. Rev & T C §60; 18 Cal Code Regs §462.160(d)(1).

Change of ownership exclusions.

Change of ownership does not include:

(1) Joint tenancies—The creation or transfer of a joint tenancy interest if all transferors, afterward are among the joint tenants (see Transfers in joint tenancies, below). [Cal. Rev. & Tax. Cd. §62(f) ; Cal. Code Regs. 18 §462.040(b)(1) .]

(2) Title holding method-Proportional Interests Unchanged—Any transfer between co-owners that results in a change of the method of holding title to the real property without changing the proportional interests of co-owners. [Cal. Rev. & Tax. Cd. §62(a)(1) ; Cal. Code Regs. 18 §462.040(b)(2) .]

(3) Legal entities—Any transfer between individual or individuals, a legal entity or entities that results only in the change in method of holding title to the real property where proportional ownership interests of transferors and transferees in each and every piece of real property transferred remain same after transfer (but see Transfers of interest in corporations, partnerships, or limited liability companies or other legal entities, below). The foregoing does not apply to a corporate reorganization specified in Cal. Rev. & Tax. Cd. §64(b) . [Cal. Rev. & Tax. Cd. §62(a)(2) ; Cal. Code Regs. 18 §462.160(d) ; Cal. Code Regs. 18 §462.180(b)(2) .]

(4) Perfection of title—Any transfer to perfect title to the property. [Cal. Rev. & Tax. Cd. §62(b) .]

(5) Trusts—Any transfer by trustor, or by the trustor’s spouse or registered domestic partner, both to the trust, so long as:

• transferor is a present beneficiary, or
• the trust is revocable; or
• any transfer by the trustee of these types of trusts back to the trustor; or

any creation or termination of the trust in which the trustor retains the reversion, and in which the interest of others does not exceed 12 years duration. [Cal. Rev. & Tax. Cd. §62(d) ; Cal. Code Regs. 18 §462.160(b) .]

(6) Security instruments—The creation, termination, or assignment of a security interest, or the substitution of a trustee under the security instrument. [Cal. Rev. & Tax. Cd. §62(c) .]

(7) Reserved estates—Any transfer by instrument reserving to the transferor an estate for years or for life; termination of the reserved estate is a change of ownership (except in case of a transfer in (4) above); or interspousal transfers; or registered domestic partners’ transfers. [Cal. Rev. & Tax. Cd. §62(e) ; Cal. Code Regs. 18 §462.060(b) .]

(8) Lessor’s interest—Any transfer of a lessor’s interest in the taxable real property subject to a lease with a remaining term, including renewal options of 35 years. [Cal. Rev. & Tax. Cd. §62(g) .]

(9) Collective investment funds—Any purchase, redemption or transfer of the shares or other units of participation of a group trust, pooled fund, etc. or other collective investment fund established by a financial institution. [Cal. Rev. & Tax. Cd. §62(h) .]

(10) Housing cooperatives—Any transfer of stock or membership in a housing cooperative financed under one mortgage insured under National Housing Act §§ 221(d)(3)-(4) or 236, or financed or assisted under Housing Act of 1949, §§ 514–516 or Housing Act of 1959, § 202, or by direct loan from the California Housing Agency; the government lender or insurer must approve the regulatory or occupancy agreements; the transfer must be to a housing cooperative, or person or family qualifying for the purchase because of limited income; any later transfer to a noneligible person or a family is a change of ownership. [Cal. Rev. & Tax. Cd. §62(i) .]

(11) Co-ownerships—Certain transfers between co-owners during the period March 1, 1975 to March 1, 1981; the property must be held by them as co-owners for all or part of the period, and be eligible for homeowner’s exemption. [Cal. Rev. & Tax. Cd. §62(j) .]

(12) Religious orders—Any transfer of property or interest between a corporation sole, religious corporation, or public benefit corporation and a holding corporation defined in Cal. Rev. & Tax. Cd. §23701h ; transferee and transferor must be regulated by canons of same religious order. [Cal. Rev. & Tax. Cd. §62(k) .]

(13) Correction deeds—Transfers to correct or reform a deed, if the original relationship between the grantor or grantee is not changed. [Cal. Rev. & Tax. Cd. §62(l) ; Cal. Code Regs. 18 §462.240(f) .]

(14) Intrafamily transfers—Intrafamily transfer of eligible dwelling unit from

• parent or parents, or
• guardian or guardians to minor child or children, or
• between or among minor siblings or
• to a trust for the sole benefit of such persons as the result of a court decree or order due to the death of parent or parents (see Interspousal exclusion; intrafamily transfer exclusion, below). [Cal. Rev. & Tax. Cd. §62(m) ; Cal. Code Regs. 18 §462.240(g) ; Cal. Code Regs. 18 §462.040(b)(5) .] A similar rule applies in the case of disabled children or wards where eligibility conditions for dwelling and combined income of parties to the transfer are met. [Cal. Rev. & Tax. Cd. §62(n) ; Cal. Code Regs. 18 §462.240(h) .]

(15) Subleased exempt real property—The transfer of a possessory interest in exempt real property subject to a sublease with a remaining term, including renewal options, exceeding one-half the period of the remaining term of the leasehold. [Cal. Rev. & Tax. Cd. §62(o) .]

(16) Interspousal exclusion—The transfer is one to which the interspousal exclusion applies (see Interspousal exclusion; intrafamily transfer exclusion, below). [Cal. Rev. & Tax. Cd. §63 ; Cal. Code Regs. 18 §462.020(b)(3) ; Cal. Code Regs. 18 §462.220 .]

(17) Registered domestic partners exclusion—Any transfer between registered domestic partners (see Interspousal exclusion; intrafamily transfer exclusion, below). [ Cal. Rev. & Tax. Cd. §62(p)(1) ; Cal. Code Regs. 18 §462.020(b)(3) ; Cal. Code Regs. 18 §462.220 ; Cal. Code Regs. 18 §462.240(l) .]

BROAD EXCLUSION. The SBE wrote county assessors that Cal. Code Regs. 18 §462.240(k) should be applied to carry out the Legislature’s intent of affording all surviving registered domestic partners the same protections as surviving spouses. This is accomplished by excluding from change of ownership the transfer of separate property upon the death of a registered domestic partner to the surviving registered domestic partner—whether by intestate succession, trust, will, or estate plan such as a joint tenancy. Proof of a current Declaration of Domestic Partnership filed with the Secretary of State is sufficient to prove “surviving domestic partner” status. [California State Board of Equalization Letter to Assessors No. 2004/023, 04/26/2004.]

(18) Mobilehome parks—Transfers a mobilehome park or of rental spaces in a mobilehome park (see Mobilehome parks—transfer to tenants, below). [Cal. Rev. & Tax. Cd. §62.1 ; Cal. Rev. & Tax. Cd. §62.2 ; Cal. Code Regs. 18 §462.240(i) ; Cal. Code Regs. 18 §462.240(j) .]

(19) Recordation of a certificate of sale relating to property sold subject to the right of redemption—Recordation of a certificate of sale pursuant to Cal. Civ. Proc. Cd. §729.040(a) , relating to property sold subject to the right of redemption, for the period in which the right of redemption exists. [Cal. Rev. & Tax. Cd. §62.11 .]

(20) Floating home marina—Transfers of floating home marina to a nonprofit corporation, stock cooperative corporation, limited equity stock cooperative, or other entity formed by the tenants of a floating home marina for the purpose of purchasing the floating home marina does not constitute a change in ownership. [Cal. Rev. & Tax. Cd. §62.5 ; Cal. Code Regs. 18 §462.240(k) .]

(21) Cotenancy exclusion—The transfer is one to which the cotenancy exclusion applies (see Cotenancy exclusion, below). [Cal. Rev. & Tax. Cd. §62.3 ; Cal. Code Regs. 18 §462.020(b)(5) .]

(22) Local registered domestic partners exclusion for transfers occurring January 1, 2000 to June 26, 2015— Any transfer between registered domestic partners occurring between January 1, 2000 to June 26, 2015, inclusive (see Interspousal exclusion; intrafamily transfer exclusion, below). [Cal. Rev. & Tax. Cd. §62(q)(1) .]

(23) Parent-to-child transfer of stock in a qualified corporation— Effective October 9, 2019, any parent to child transfer of stock in a qualified corporation that results in a change in ownership of a qualified property owned by the qualified corporation, provided that the transfer of stock is due to the death of a parent or parents. A qualified corporation means a corporation created between March 1, 1975, and November 6, 1986, that owns qualified property, and whose only stockholders in the corporation have been the parents and their children. For this purpose, qualified property means a parcel of land that contains the principal place of residence of the parents prior to their death that has been the continuous place of residence of a child of those parents since the creation of the qualified corporation whose full cash value immediately prior to the date of death of the last surviving parent did not exceed $1 million. [Cal. Rev. & Tax. Cd. §62(r) ; California State Board of Equalization Letter to Assessors No. 2020/002, 01/15/2020 .]

(24)Cotenancy exclusion. A change in ownership does not include a transfer of a cotenancy interest in real property from one cotenant to the other that takes effect upon the death of the transferor cotenant if all of the following conditions apply:

(1) the transfer is solely by and between two individuals who together own 100% of the real property in joint tenancy or as tenants in common;
(2) as a result of the death of the transferor cotenant, the deceased cotenant’s tenancy in common or joint tenancy interest in the real property is transferred to the surviving cotenant, that results in the surviving cotenant holding a 100% ownership interest in the real property immediately after the transfer, thereby terminating the cotenancy;
(3) for the one-year period immediately preceding the transfer, the real property was co-owned by the transferor and the transferee, and both cotenants have been the owners of record of that real property;
(4) the real property constituted the principal residence of both cotenants immediately preceding the transferor cotenant’s death;
(5) the transferor and the transferee continuously resided at that residence for the one-year period immediately preceding the transfer;
(6) the transferee has signed, under penalty of perjury, an affidavit affirming that he or she continuously resided with the transferor at the residence for the one-year period immediately preceding the transfer. [Cal. Rev. & Tax. Cd. §62.3(a) ; Cal. Rev. & Tax. Cd. §62.3(e) .]

The exclusion does not apply to any transfer of real property interests for which another separate exclusion in Chapter 2, Change in Ownership and Purchase, i.e., Cal. Rev. & Tax. Cd. §60 to Cal. Rev. & Tax. Cd. §69.5 , applies. [Cal. Rev. & Tax. Cd. §62.3(c) .]

“Cotenancy interest” means an interest in real property held only as tenants in common or joint tenants. [Cal. Rev. & Tax. Cd. §62.3(d)(1) .]

“Principal residence” means a dwelling eligible for either the homeowners’ exemption or the disabled veterans’ exemption. [Cal. Rev. & Tax. Cd. §62.3(d)(2) .]

A transfer of a cotenancy interest in real property from one cotenant to the other takes effect upon the death of the transferor cotenant under any of the following circumstances:

(1) pursuant to the transferor cotenant’s will or trust, upon the death of the transferor cotenant;
(2) through intestate succession from the transferor cotenant;
(3) by operation of law, upon the death of the transferor cotenant. [Cal. Rev. & Tax. Cd. §62.3(c) .]

For purposes of the cotenancy exclusion, both of the following apply:

(1) “Cotenancy interest” means an interest in real property held only as tenants in common or joint tenants; and
(2) “Principal residence” means a dwelling eligible for either the homeowners’ exemption or the disabled veterans’ exemption. [Cal. Rev. & Tax. Cd. §62.3(d) .]

(25)Transfers of interest in corporations, partnerships, or limited liability companies or other legal entities. Except as discussed below or elsewhere on this page, the transfer of or purchase of ownership interests in legal entities, such as corporate stock, partnership, or limited liability company interests, is not considered a transfer of the real property of the legal entity. [Cal. Rev. & Tax. Cd. §64(a) ; Cal. Code Regs. 18 §462.180(c) .] When an owner of a majority ownership interest in a partnership gets all the remaining ownership interests in the partnership or otherwise becomes the sole partner, the purchase of the minority interests, subject to the application of the step–transaction doctrine, is not a change of ownership of the partnership’s real property. It is immaterial whether the partnership is a continuing or dissolved partnership. [Cal. Rev. & Tax. Cd. §64(c)(2) .] Interspousal transfers of ownership interest in legal entities are not changes of ownership. [Cal. Code Regs. 18 §462.220 .]

PARTNERSHIP TRANSFERS. The amendment of the statute providing that no change of ownership of partnership real property results from the acquisition by a majority partner of the ownership interests of minority partners reverses Zapara v. County of Orange, Cal. Ct. App., (1994) 26 Cal App 4th 464. An uncodified provision of L. 1995, ch. 497 (SB722) (§40) states that the amendment of the statute is declaratory of, not a change in, existing law.

In addition, a reorganization of members of an affiliated group of corporations or of farm credit institutions does not result in a change of ownership for reassessment purposes if the reorganization qualifies as an IRC § 368 reorganization and is accepted as a nontaxable event under California law. Transfers of property among members of an affiliated group of corporations similarly does not result in transfer of ownership.

“Affiliated group” means one or more chains of corporations connected through stock ownership with a common parent corporation if:

(1) 100% of the voting stock, exclusive of any share owned by directors, of each of the corporations, except the parent, is owned by one or more of the other corporations; and
(2) the common parent owns directly 100% of the voting stock, exclusive of any shares owned by directors, of at least one of the other corporations.

[Cal. Rev. & Tax. Cd. §64(b) ; Cal. Code Regs. 18 §462.180(b)(1) .]

Further, no change of ownership occurs from the transfers of stock, partnership interests, limited liability company interests, or any other interests in legal entities between legal entities or by an individual to a legal entity (or vice versa) that result solely in a change in the method of holding title and in which proportional ownership interests of the transferors and transferees, in each and every piece of property represented by the interests transferred, remain the same after the transfer. Also, no change of ownership results from a statutory conversion or merger of a partnership into an LLC or other partnership (or vice versa) when the law of the jurisdiction of the converted or surviving entity provides that it remains the same entity or it succeeds to the assets of the converting or disappearing entity without another act or transfer and the partners or members of the converting or disappearing entity maintain the same ownership interest in profits and capital of the converted or surviving entity that they previously held in the converting or disappearing entity. [Cal. Code Regs. 18 §462.180(d)(4) .]

But the following transfers of interest in a legal entity are considered as transfers of ownership that will trigger a reassessment:

If a corporation partnership, limited liability company, or other legal entity obtains control through direct or indirect ownership or control of more than 50% of the voting stock of a corporation or obtains a majority ownership interest of a partnership, limited liability company, or other legal entity, through the purchase or transfer of corporate stock, partnership, or limited liability company interest or ownership interest, including the purchase or transfer of 50% or less of the ownership interest through which control or a majority ownership interest is obtained. [Cal. Rev. & Tax. Cd. §64(c) ; Cal. Code Regs. 18 §462.180(d)(1) .] Transfers by the original owner(s) (in one or more transactions) of shares or other ownership interests representing more than 50% of the total interests in an entity that was previously involved in an exempt transfer of property under Cal. Rev. & Tax. Cd. §62(a)(2) . This statutory provision exempts a transfer between an individual and entity or between entities that results only in the method of holding title to the property and in which the proportional interests of the transferor and transferee remain the same after the transfer. [Cal. Rev. & Tax. Cd. §64(d) ; Cal. Code Regs. 18 §462.180(d)(2) .]

(26)Transfers in joint tenancies. The creation, transfer, or termination of joint tenancies is a change of ownership except as discussed below, or if it involves an exempt transfer of interest under Cal. Rev. & Tax. Cd. §62 , or if it is an interspousal transfer. On a change of ownership only the interest or portion transferred to another owner by an owner will be reappraised. [Cal. Rev. & Tax. Cd. §65 ; Cal. Code Regs. 18 §462.040 .]

No change of ownership occurs on the creation or transfer of a joint tenancy interest if all the transferors, after the creation or transfer, are among the joint tenants. A transferor who is also a transferee is an original transferors for purposes of determining the property to be reappraised on later transfers; the same applies to their spouses. [Cal. Rev. & Tax. Cd. §65(b) ; Cal. Code Regs. 18 §462.040(b)(1) .] All other initial and subsequent joint tenants are considered to be other than original transferors. To create original transferor status, a transaction must occur that either changes title to joint tenancy or adds an additional person to title as one of the joint tenants. The purchase of property as joint tenants does not create original transferor status. The elimination of a joint tenant does not create original transferor status in any of the remaining joint tenants. [Cal. Code Regs. 18 §462.040(b)(1) .]

Spouse or domestic partner of original transferor: If the original transferor’s spouse or domestic partner acquires an interest in the joint tenancy property either during the period that the original transferor holds an interest or by means of a transfer from the original transferor, such spouse or domestic partner is considered to be an original transferor. [Cal. Code Regs. 18 §462.040(b)(1)(A) .]

Termination of original transferor’s interest: The transfer terminates the original transferor’s interest in a joint tenancy and the interest vests in whole or in part in the remaining original transferors, except that, upon the termination of the interest of the last surviving original transferor, there shall be a reappraisal of the property as if it had undergone a 100% change in ownership. [Cal. Code Regs. 18 §462.040(b)(1)(B) .]

Termination of other than original transferor’s interest: The transfer terminates a joint tenancy interest held by an other than original transferor in a joint tenancy and the interest is transferred either to an original transferor, or to all the remaining joint tenants, provided that one of the remaining joint tenants is an original transferor. The original transferor status of any remaining joint tenants ceases when a joint tenancy is terminated. [Cal. Code Regs. 18 §462.040(b)(1)(C) .]

Reapparaisal: On termination of a joint tenancy interest described in Cal. Rev. & Tax. Cd. §65(b) (see discussion above), the entire portion of the property held by the original transferor before the creation of the joint tenancy will be reappraised unless it vests, in whole or in part, in any remaining original transferor. On the termination of interest of the last surviving original transferor, the interest then transferred, and all other interests in property held by all original transferors that were previously excluded will be reappraised. [Cal. Rev. & Tax. Cd. §65(c) .]

On termination of an interest held by other than the original transferor in a joint tenancy that had original transferors as joint tenants, there will be no reappraisal if the entire interest is transferred to the original transferor or all remaining joint tenants, provided that one of the remaining joint tenants is an original transferor. The “original transferor” status terminates when the joint tenancy is terminated. [Cal. Rev. & Tax. Cd. §65(d) .]

Interspousal or registered domestic partner exclusion: A change in ownership does not occur if the transfer is one to which the interspousal exclusion, or the registered domestic partner exclusion applies. [Cal. Code Regs. 18 §462.040(b)(3) .]

De minimis exclusion: A change in ownership does not occur if the transfer is of a joint tenancy interest of less than 5% of the value of the total property and has a value of less than $10,000. When the value of accumulated interests transferred during an assessment year equals or exceeds 5% of the value of the total property or $10,000, then only that percentage of the property represented by the transferred accumulated interests will be reappraised. The accumulated interests transferred do not include any transfer of an interest that is otherwise excluded from a change in ownership. [Cal. Rev. & Tax. Cd. §65.1(a) ; Cal. Code Regs. 18 §462.040(b)(4) .]

Reasonable cause to believe that parties intended to create joint tenancy: The assessor may consider persons holding joint title to property, such as tenants in common, to be joint tenants and original transferors if there is reasonable cause to believe that the parties intended to create a joint tenancy and each person was a transferor among the persons holding title. Reasonable cause means a sales contract, a deed, Affidavit of Death of Joint Tenant, a trust, will, estate plan, or other written document indicating that a joint tenant was a transferor among the joint tenants, unless circumstances causing the application of the step-transaction doctrine exist. [ Cal. Code Regs. 18 §462.040(d) .]

Step transaction doctrine: County assessors may apply the step transaction doctrine to transactions where a property owner transfers his or her property to a second party, and then the second party transfers the property back to the original owner, often on the same day and with the apparent intended consequence of recording a change in ownership that would establish a new base year value at a lower current market value. The step transaction doctrine may be applied using the end result test, the interdependence test, or the binding commitment test; only one test needs to be satisfied for the step transaction doctrine to apply. The existence of a business purpose for any of the transfers does not necessarily prevent application of the step transaction doctrine in a particular situation; rather, it is a factor, along with all other facts and circumstances, that should be considered when analyzing the entire transaction to determine whether the step transaction doctrine should be applied. [California State Board of Equalization Letter to Assessors No. 2009/041, 09/14/2009.]

Transfer of unit or lot in co-op, apartment project, condominium or planned unit development, shopping center, industrial park. If a unit or lot within a cooperative housing corporation, community apartment project, condominium, planned unit development, shopping center, industrial park, or other residential, commercial, or industrial land subdivision complex with common areas or facilities is bought or changes ownership, only the unit or lot transferred or share in a common area reserved as appurtenant to the unit or lot will be reappraised. Increase in taxes resulting from such reappraisal will be applied by the owner of the property to the tenant-shareholder, lessee or occupant of such individual unit or lot only, and not prorated among all other units or lots. [Cal. Rev. & Tax. Cd. §65.1(a) ; Cal. Rev. & Tax. Cd. §65.1(b) .]

Upon a written request by a county assessor, the owners of a cooperative housing corporation, community apartment project, condominium, planned unit development, or other residential subdivision complex, with units or lots consisting of specified dwellings and common areas or facilities, that transfer ownership interests without using recorded deeds must file a report describing the property with the assessor. The report is due on the first February 1 that follows an assessor request, and on or before each February 1 thereafter. [Cal. Rev. & Tax. Cd. §480.8(a)(1) .] If the report is not filed, the assessor may send a change in ownership statement to every owner, tenant-shareholder, or occupant of each individual unit or lot. [Cal. Rev. & Tax. Cd. §480.8(b)(1) .] Furthermore, if the report is not filed, owners and shareholders are subject to penalties. [Cal. Rev. & Tax. Cd. §480.8(b)(2) .]

Employee benefit plans. A change in ownership does not include any of the following:

(1) ) the creation, vesting, transfer, distribution or termination of a participant’s or beneficiary’s interest in an employee benefit plan;
(2) any contribution of real property to an employee benefit plan; or
(3) any acquisition by an employee benefit plan of the stock of the employer corporation by which the employee benefit plan obtains direct or indirect ownership or control of more than 50% of the voting stock of the employer corporation. [Cal. Rev. & Tax. Cd. §66 .]

For purposes of the foregoing exclusion, the terms “employer,” “employee benefit plan,” “participant,” and “beneficiary” are defined as they are defined in the Employee Retirement Income Security Act of 1974. [Cal. Rev. & Tax. Cd. §66 .]

Eminent domain or other government action. A change in ownership does not include acquisition of replacement property for comparable property if the person acquiring the property was displaced by an eminent domain proceeding, public entity acquisition, or governmental action resulting in inverse condemnation. [Cal. Constitution Art. XIIIA §2(d) ; Cal. Rev. & Tax. Cd. §68(a) ; Cal. Code Regs. 18 §462.500 .]

The adjusted base year value of the property acquired is the lower of the fair market value of the property acquired or the value that is the sum of the: (1) adjusted base year value of the property from which the person was displaced; and (2) the amount, if any, by which the full cash value of the property acquired exceeds 120% of the amount received by the person for the property from which the person was displaced. [Cal. Rev. & Tax. Cd. §68(a) . ]

A person acquiring replacement property as a result of having been displaced from property by any of the above described government actions must request assessment under Cal. Rev. & Tax. Cd. §68 , i.e., must request transfer of the base year value of the replaced property to the replacement property. [Cal. Rev. & Tax. Cd. §68(b)(1) .] A change in the adjusted base year value of the replacement property resulting from such a request is effective on the first day of the month following the month in which the property is acquired. The change in value is treated as a change in ownership for the purpose of placing supplemental assessments on the supplemental roll. The assessor must appraise the replacement property in accordance with the provisions of Cal. Rev. & Tax. Cd. §68 rather than the provisions of Cal. Rev. & Tax. Cd. §75.10 . [Cal. Rev. & Tax. Cd. §68(b)(2) .]

A request for reassessment under Cal. Rev. & Tax. Cd. §68 made after four years following the date the property was acquired by eminent domain or purchase, or the date the judgment of inverse condemnation becomes final, is subject to Cal. Rev. & Tax. Cd. §68(c) . [Cal. Rev. & Tax. Cd. §68(b)(1) .] Under that provision, a request for assessment that is made after four years following the date the property was acquired by eminent domain or purchase, or the date the judgment of inverse condemnation becomes final, applies to the lien dates for the last four fiscal years with appropriate roll corrections, refunds, or cancellations. Under an assessment granted pursuant to that request, the assessor must adjust the base year value of the replacement property acquired and make annual adjustments for inflation, and any subsequent new construction occurring with respect to the subject real property. For a discussion of Cal. Rev. & Tax. Cd. §68(c) , including the California Court of Appeal decision that was part of the reason for its enactment, see California State Board of Equalization Letter to Assessors No. 2016/008, 01/27/2016; for a discussion of that decision, i.e., the decision in Olive Lane Industrial Park, LLC, et al. v. County of San Diego, Cal. Ct. App., Dkt. No. D063337, 07/18/2014, 174 Cal Rptr 3d 577 (2014), see ¶ 31,330.10.

Purchase and purchased defined: “Purchased” or “purchase” means change in ownership for consideration. [Cal. Rev. & Tax. Cd. §67 .]

Mobilehome parks—transfer to tenants. A change in ownership does not include any transfer after 1984 of a mobilehome park to a nonprofit corporation, stock cooperative corporation, limited equity stock corporation, or other entity formed by tenants of the mobilehome park for the purpose of purchasing it. [Cal. Rev. & Tax. Cd. §62.1(a) ; Cal. Rev. & Tax. Cd. §62.1(c) ; Cal. Code Regs. 18 §462.240(i) .] Individual tenants who were renting at least 51% of the spaces in the mobilehome park before the transfer must participate in the transaction through the ownership of an aggregate of at least 51% of the voting stock of, or other ownership or membership interests in, the entity that acquires the park. [Cal. Rev. & Tax. Cd. §62.1 .]

The transferee entity has up to one year after the transfer date to reach the 51% tenant-participation goal. An individual tenant must notify the county assessor of the intention to comply with this goal. Escape assessments can be made if the transferee entity does not comply within one year. [Cal. Rev. & Tax. Cd. §62.1(a)(1) .]

If a transfer of a mobilehome park has been excluded from change in ownership as described above, and the park has not been converted to a condominium, stock cooperative ownership, or limited equity cooperative ownership, any transfer of shares of voting stock of, or other ownership or membership interests in, the entity that acquired the park will be a change of ownership of a pro rata portion of the real property of the park unless the transfer is for the purpose of converting the park to condominium or cooperative ownership, or limited equity cooperative ownership, or is excluded from change of ownership as discussed above. The term “pro rata portion” means the total real property of the mobilehome park multiplied by the number of shares of voting stock transferred (or other ownership or membership interests transferred) over the total number of outstanding shares of voting stock (or other ownership or membership interests) in the entity that acquired the park. Any pro rata portion or portions of real property changing ownership can be assessed separately. [Cal. Rev. & Tax. Cd. §62.1(b) .]

After an exclusion under Cal. Rev. & Tax. Cd. §62.1(a) , the assessor may not levy any escape or supplemental assessment with respect to any change in ownership of a pro rata portion of the real property of the mobilehome park that occurred between January 1, 1989, and January 1, 2002, for which the assessor did not levy assessment before January 1, 2000. However, the assessor must correct the base year value of the pro rata portion of the park property to reflect the change in ownership commencing with the January 1, 2002, lien date. A mobilehome park must provide necessary information to correct the base year value as requested by the assessor. [Cal. Rev. & Tax. Cd. §62.1(b)(4) .] Any outstanding taxes levied between January 1, 2000 and January 1, 2002 as a result of the pro rata change in ownership will be cancelled. However, there can be no refund of taxes levied that were paid before January 1, 2002. [Cal. Rev. & Tax. Cd. §62.1(b)(4) .]

Transfer of mobilehome park to entity formed by tenants by entity acquiring park: Change of ownership does not include any transfer after 1988 of a mobile home park to a nonprofit corporation, stock cooperative corporation, tenant-in-common ownership group, or other entity, including a governmental entity, if within 18 months after the transfer, the mobilehome park is transferred by them to a nonprofit corporation, stock cooperative corporation, or other entity formed by the tenants of the mobilehome park in a transaction excluded from change in ownership, or at least 51% of the mobilehome park rental spaces are transferred to the individual tenants of those spaces in a transaction excluded from a change of ownership. [Cal. Rev. & Tax. Cd. §62.2(a) ; Cal. Code Regs. 18 §462.240(j) .]

The exclusion also applies to similar transfers of a mobile home park if a subsequent transfer is made within 36 months of an initial transfer. In applying the 36-month limit to the subsequent transfer to an individual tenant, of a rental space in a mobilehome park that was initially transferred to a holding group, the time limit for the intermediate owner to transfer the mobilehome park to the owners association or to the individual tenants without triggering reassessment of the park is extended to 42 months from 36 months if a purchase contract is executed and a bona fide purchase escrow is opened with a licensed escrow agent and the following two conditions are met:

(1) the escrow is opened before the expiration of the 36-month time period; and
(2) the escrow closes on a date no later than six months after the end of the 36-month time period.

[Cal. Rev. & Tax. Cd. §62.2(a)(2) ; Cal. Code Regs. 18 §462.240(j) .]

The exclusion further applies to similar transfers of a mobilehome park located in an area of Los Angeles County that was declared a disaster area because of the 1994 Northridge earthquake if the initial transfer is made between October 1, 1991 and October 31, 1991 and the subsequent transfer is made within 76 months of the initial transfer. [Cal. Rev. & Tax. Cd. §62.2(a)(2)(B) ; Cal. Code Regs. 18 §462.240(j) .]

NO REFUND. The statute specifically provides that no refunds will result from the exclusion for mobilehome park transfers within a disaster area.

With respect to any transfer of any mobilehome park, the individual tenants who are renting at least a majority of the spaces in the mobilehome park before the transfer to the entity formed by the tenants for the acquisition of the park must participate in the transaction through ownership of an aggregate of at least a majority of voting stock of, or other ownership, or membership interest in, that entity. These rules do not apply if any fees charged the mobilehome park tenants in connection with either the first or second transfer exceed 15% of the total consideration paid for the mobilehome park in the first transfer, plus any accrued interest and taxes. [Cal. Rev. & Tax. Cd. §62.2(b) .]

If the assessor is notified in writing at the time the transferee files the change in ownership statement that the transferee intends to qualify the transfer as a transfer to an entity formed by tenants the mobilehome park will not be reappraised pending satisfaction of the above conditions. If the transferee fails to satisfy those conditions, the assessor will reappraise the mobilehome park and levy escape assessments or supplemental assessments, as appropriate. [Cal. Rev. & Tax. Cd. §62.2(d) .]

Mobile home parks—transfers of rental spaces: A change of ownership does not include any transfer or transfers of rental spaces in a mobilehome park to individual tenants of rental space, provided (1) at least 51% of rental spaces are purchased by the individual tenants renting their spaces prior to the purchase; and (2) the individual tenants of these spaces form, within one year after the first purchase of rental space by an individual tenant of a resident organization, as described in Cal. Health & Safety Cd. §50781(k) to operate and maintain the park.

If an individual tenant or tenants notify the county assessor of the intention to comply with the conditions set forth above, any mobilehome park rental space which is purchased by an individual tenant in that mobilehome park during that period will not be reappraised by the assessor. However, if all of the conditions set forth above are not satisfied, the county assessor will levy escape assessments for the spaces so transferred. This rule applies only to those rental mobilehome parks that have been in operation for five years or more. [Cal. Rev. & Tax. Cd. §62.1(b) .]

Interspousal exclusion; intrafamily transfer exclusion. The terms “purchased” and “change in ownership” do not include the purchase or transfer of real property between spouses, including but not limited to:

transfers to trustee for the beneficial use of the spouse, or the surviving spouse of a deceased transferor, or by the trustee of the trust to the spouse of the trustor;
transfers to a spouse that take effect on the death of the spouse;
transfers to the spouse or former spouse in connection with a property settlement agreement or decree of dissolution of a marriage or a legal separation;
the creation, transfer, or termination, solely between spouses of any co-owner’s interest;
the distribution of legal entity’s property to a spouse or former spouse in exchange for the interest of the spouse in the legal entity in connection with a property settlement agreement or a decree of dissolution of a marriage or a legal separation [Cal. Constitution Art. XIIIA §2(g) ; Cal. Rev. & Tax. Cd. §63 .]

Also, change of ownership does not include any transfer between registered domestic partners (as defined in the Family Code), including:

(1) transfers to a trustee for the beneficial use of a registered domestic partner, or the surviving registered domestic partner of a deceased transferor, or by a trustee of such a trust to the registered domestic partner of the trustor;
(2) transfers that take effect upon the death of a registered domestic partner;
(3) transfers to a registered domestic partner or former registered domestic partner in connection with a property settlement agreement or decree of dissolution of a registered domestic partnership or legal separation;
(4) the creation, transfer, or termination, solely between registered domestic partners, of any co-owner’s interest;
(5) the distribution of a legal entity’s property to a registered domestic partner or former registered domestic partner in exchange for the interest of the registered domestic partner in the legal entity in connection with a property settlement agreement or a decree of dissolution of a registered domestic partnership or legal separation. [ Cal. Rev. & Tax. Cd. §62(p)(1) ; Cal. Code Regs. 18 §462.020(b)(3) ; Cal. Code Regs. 18 §462.220 ; Cal. Code Regs. 18 §462.240(l) .]

Similarly, change of ownership does not include any transfer between local registered domestic partners where the transfer of property occurred on or after January 1, 2000 to June 26, 2015, including:

(1) transfers to a trustee for the beneficial use of a local registered domestic partner, or the surviving local registered domestic partner of a deceased transferor, or by a trustee of such a trust to the local registered domestic partner of the trustor;
(2) transfers that take effect upon the death of a local registered domestic partner;
(3) transfers to a local registered domestic partner or former local registered domestic partner in connection with a property settlement agreement or decree of dissolution of a local registered domestic partnership or legal separation;
(4) the creation, transfer, or termination, solely between local registered domestic partners, of any co-owner’s interest;
(5) the distribution of a legal entity’s property to a local registered domestic partner or former local registered domestic partner in exchange for the interest of the local registered domestic partner in the legal entity in connection with a property settlement agreement or a decree of dissolution of a local registered domestic partnership or legal separation. [ Cal. Rev. & Tax. Cd. §62(q)(1) .]

A “local registered domestic partner” means a registered domestic partnership established by a city, county, city and county, or special district in which both of the following conditions are met: (1) the registrants were of the same sex at the time of registration and (2) the registrants were not in a registered domestic partnership with, or married to, any other person at the time of the transfer. [Cal. Rev. & Tax. Cd. §62(q)(3) .] Any transferee whose property was reassessed in contravention must obtain a reversal of the reassessment upon application to the county assessor of the county in which the property is located, no later than June 30, 2022. [Cal. Rev. & Tax. Cd. §62(q)(2) .]

Also exempt are transfers of separate property inherited by a surviving domestic partner, by intestate succession upon the death of a registered domestic partner. [Cal. Code Regs. 18 §462.220 ; Cal. Code Regs. 18 §462.240(k) ; California State Board of Equalization Letter to Assessors No. 2004/023, 04/26/2004.]

In addition, a change in ownership shall not include any interspousal transfer or any transfer between registered domestic partners including, but not limited to:

transfers of ownership interests in legal entities [Cal. Code Regs. 18 §462.220(a) ];
transfers of ownership interests in legal entities resulting in one spouse or registered domestic partner obtaining control [Cal. Code Regs. 18 §462.220(b) ];
transfers of ownership interests in legal entities by “original co-owners” which would otherwise be cumulated or counted for purposes of Cal. Rev. & Tax. Cd. §64(d) [Cal. Code Regs. 18 §462.220(b) ];
transfers to a trustee for the beneficial use of a spouse or registered domestic partner, or the surviving spouse or registered domestic partner of a deceased transferor, or by a trustee of such a trust to the spouse or registered domestic partner of the trustor [Cal. Code Regs. 18 §462.220(d) ];
transfers which take effect upon the death of a spouse or registered domestic partner [Cal. Code Regs. 18 §462.220(e) ];
transfers to a spouse or registered domestic partner or former spouse or registered domestic partner in connection with a property settlement agreement, including post-dissolution amendment thereto, or decree of dissolution of a marriage or registered domestic partnership, or legal separation [Cal. Code Regs. 18 §462.220(f) ];
the creation, transfer, or termination, solely between spouses or registered domestic partners, of any co-owner’s interest [Cal. Code Regs. 18 §462.220(g) ]; or
the distribution of property of a corporation, partnership, or other legal entity to a spouse or registered domestic partner or former spouse or registered domestic partner having an ownership interest in the legal entity, in exchange for the interest of such spouse in the legal entity in connection with a property settlement agreement, or decree of dissolution of a marriage or registered domestic partnership or legal separation. [Cal. Code Regs. 18 §462.220(h) .]

The purchase or transfer of a principal residence of the transferor in case of transfers between the parents or children is not a purchase or change of ownership, nor is the purchase or the transfer of the first $1 million of the full cash value of all other real property between the parents or children. This rule applies to voluntary transfers and those resulting from court order or judicial decree. [Cal. Constitution Art. XIIIA §2(h) .] The $1 million exclusion does not apply to any property in which the eligible transferor’s interest was received through the creation or transfer or transfers excluded from change in ownership under Cal. Rev. & Tax. Cd. §62(f) (the creation or transfer of a joint tenancy interest if the transferor, after the creation or transfer, is one of the joint tenants) or Cal. Rev. & Tax. Cd. §65(b) (transfer of a joint tenancy interest if the transferor or transferors are among the joint tenants after such creation or transfer) unless the transferor qualifies as the original transferor. In the case of transferors electing to combine their separate $1 million exclusions, the combined amount of the separate exclusions applies to any property jointly sold or transferred by the electing transferors, provided that, in no case will the amount of the full cash value of real property of any one eligible transferor excluded under the election exceed the amount of the transferor’s separate unused exclusion on the date of joint sale or transfer. [Cal. Rev. & Tax. Cd. §63.1(b) .] The assessor may report quarterly to the SBE all purchases or transfers other than of principal residences for which a claim for exclusion is made with such information as the SBE may require to monitor the $1 million limitation. [Cal. Rev. & Tax. Cd. §63.1(f) .]

A purchase or transfer between parents and their children means either a transfer from a parent or parents to a child or children of the parent or parents, or a transfer from a child or children to a parent or parents of the child or children. The date of any transfer between parents and their children under a will or interstate succession is the date of the decedent’s death, if the decedent died on or after November 8, 1986. [Cal. Rev. & Tax. Cd. §63.1(b) .]

For the purposes of the definition of “children,” the relationship of stepparent and stepchild is considered to exist until the marriage on which the relationship is based is terminated by divorce, or, if terminated by death, until the remarriage of the surviving stepparent. The relationship of parent and son-in-law or daughter-in-law is considered to exist 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. [Cal. Rev. & Tax. Cd. §63.1(c) .]

The exclusion may not be claimed unless the eligible transferee, the transferee’s legal representative, the trustee of the transferee’s trust, or the executor or administrator of the transferee’s estate files a claim with the assessor that includes a written certification from the transferee’s legal representative, the trustee of the transferee’s trust, or the executor or administrator of the transferee’s estate that the transferee is a parent, child, or grandchild of the transferor, and that the transferor is his or her parent, child or grandparent. [Cal. Rev. & Tax. Cd. §63.1(d)(1)(A) ; California State Board of Equalization Letter to Assessors No. 2011/005, 01/19/2011.]

Foster children are also included in the definition of “children.” The relationship between a foster child and foster parent is deemed to exist until death; however, for purposes of a transfer occurring on the date of death, the relationship is deemed to exist on the date of death. [Cal. Rev. & Tax. Cd. §63.1(c)(3)(E) .] However, exclusion does not apply to a purchase or transfer of a principal residence from a foster child to the child’s biological parent if the transferor child received that principal residence (or interest therein) from a foster parent through a previously excluded purchase or transfer. [Cal. Rev. & Tax. Cd. §63.1(a)(1)(B) .] A person claiming the foster child exclusion must provide legal substantiation regarding the foster child status of the child. [Cal. Rev. & Tax. Cd. §63.1(d)(1)(E) .]

“Full cash value” includes the full value of any new construction in progress, determined as of date immediately before date of a purchase by or transfer to any eligible transferee of the real property. [Cal. Rev. & Tax. Cd. §63.1(c)(5) .]

“Real property” is as defined in Cal. Rev. & Tax. Cd. §104 ; it does not include any interest in a legal entity. The term includes an interest in any of the following:

(1) a unit or lot within a cooperative housing corporation as defined inCal. Rev. & Tax. Cd. §61(i) ;
(2) a pro rata ownership interest in a mobilehome park, as defined in Cal. Rev. & Tax. Cd. §62.1(b) ;
(3) a pro rata ownership in a floating home marina, as defined in Cal. Rev. & Tax. Cd. §62.5(c) . [Cal. Rev. & Tax. Cd. §63.1(c)(8) .]

“Transfer” includes, and is not limited to, any transfer of the present beneficial ownership of property from an eligible transferor to an eligible transferee through the medium of an inter vivos or testamentary trust [Cal. Rev. & Tax. Cd. §63.1(c)(9) .]

The exclusion claim is applied on a pro rata basis when the full cash value exceeds the exclusion. A claim for exclusion from reassessment must be filed. In the case of a qualifying transfer between parents and children, the claim must be filed within three years following the date of the transfer. The claim must be filed prior to the transfer of ownership of the property to a third party or within three years following the qualifying transfer, whichever is earlier. A claim that is not filed within the above periods will be deemed timely if it is filed within six months after the assessor mails a notice of supplemental or escape assessment as a result of the purchase or transfer of the property for which the claim is made. If the qualifying transfer is a result of the death of the parent or the child, the date of death is considered as the date of qualifying transfer. An exclusion claim filed after the time limits have expired is timely, but any exclusion will apply beginning with the lien date of the assessment year in which the claim is filed, and the adjusted full cash value of the property in the assessment year is the adjusted base year value of the property in which the transfer or purchase took place, factored for inflation and any subsequent new construction; however, this does not apply to property transferred to a third party. For purposes of these provisions, a transfer of real property to a parent or child of the transferor is not considered a transfer to a third party. All transferors and transferees must sign the claim form for the parent-child transfer exemption from change-in-ownership reassessment. [Cal. Rev. & Tax. Cd. §63.1(d) ; Cal. Rev. & Tax. Cd. §63.1(e) .] A processing fee of up to $175 may be imposed by the assessor on an eligible transferee who after receiving two notifications fails to file a timely application as specified in the first notification but subsequently claims the exclusion—the failure to file a timely certified claim for exclusion does not limit any exclusion from being granted but the fee authorization can offset the extra costs of reversing a reassessment. [Cal. Rev. & Tax. Cd. §63.1(j) ; Cal. Constitution Art. XIIIA §2(i) ; Cal. Rev. & Tax. Cd. §63.1(h) .]

The transfer of a principal residence of the transferor in case of transfers between grandparents and their grandchild or grandchildren is not a purchase or change of ownership, nor is the purchase or the transfer between them of the first $1 million of the full cash value of all other real property, but only if both parents of that grandchild or those grandchildren are deceased at the time of the purchase or transfer. (For purposes of the foregoing exclusions, a son-in-law or daughter-in-law of the grandparent that is a stepparent to the grandchild need not be deceased on the date of the transfer.) The exemption will not apply if the grandchild had previously benefited from an exempt transfer of principal residence (or an interest therein) from his or her parents. The full cash value of property, other than a principal residence, that was transferred to the grandchild pursuant to an exempt transfer from his or her parents and the full cash value of a principal residence that did not qualify for this exclusion because the grandchild had previously benefited from an exempt transfer of a principal residence from his or her parents, will be applied toward the $1 million full cash value limit. [Cal. Constitution Art. XIIIA §2(h) ; Cal. Rev. & Tax. Cd. §63.1(a)(3) .] The claim requirements for this exclusion are the same as those for exempt transfers between parents and children discussed above. [Cal. Rev. & Tax. Cd. §63.1(d) ; Cal. Rev. & Tax. Cd. §63.1(e) ; California State Board of Equalization Letter to Assessors No. 2011/005, 01/19/2011 .]

AMENDED CLAIMS. The State Board of Equalization (SBE) has issued a letter to county assessors (LTA) regarding the parent-child and grandparent-grandchild exclusion from the “change of ownership” rules governing transfers of principal residence found in Propositions 58 and 193. The LTA was issued to reiterate the statutory filing requirement and the filing of amended claim forms within that timeframe. An exclusion may be granted as of the date of transfer if the proper claim form is received prior to the following dates: (1) within three years after the date of transfer or before a transfer to a third party; (2) within six months after the date of supplemental or escape assessment issued as a result of the real property transfer for which the claim is filed. Although the statute requires that a claim form must be filed in accordance with the instructions and deadlines, there is no authority expressly allowing or prohibiting amendments to previously filed claim forms. Such a need may arise however, for example, where a decedent has multiple children and the property distribution cannot be known with certainty prior to the filing of the claim form, or where a claim form was filed in anticipation of property being distributed to one child but is subsequently actually distributed to a different child. Thus, the SBE has advised taxpayers who fall into either of these situations that they should mark their claim as “Protective Claim” or “Amended Claim” and attach a letter of explanation as to why they have marked the claim in that manner. (See California State Board of Equalization Letter to Assessors No. 2013/030, 05/29/2013.)

Revocable transfer on death deeds. For property tax purposes, execution and recordation of, or revocation of, a revocable transfer on death (TOD) deed of real property is not a change in ownership of the property and does not require the filing of a preliminary change of ownership report, but the transfer of real property on the death of the transferor by a revocable transfer on death deed is a change in ownership of the property (for a discussion of change of ownership reports, see ¶ 32,610). [Cal. Prob. Cd. §5656 ; California State Board of Equalization Letter to Assessors No. 2016/006, 01/20/2016.] Thus, during the transferor’s life, the recordation of a revocable TOD deed does not affect the ownership rights of the transferor. The recording does not convey any right, title, or interest in the property. The date of change in ownership is the date of the transferor’s death. If the beneficiary is the spouse, registered domestic partner of the transferor, or local registered domestic partner of the transferor, the transfer may be excluded under Cal. Rev. & Tax. Cd. §63 (Interspousal transfers) (see Interspousal exclusion; intrafamily transfer exclusion, above), Cal. Rev. & Tax. Cd. §62(p) (relating to the exclusion from a change in ownership for transfers between registered domestic partners) (see Change of ownership exclusions, above), or Cal. Rev. & Tax. Cd. §62(q) (relating to the exclusion from a change in ownership for transfers between local registered domestic partners) (see Change of ownership exclusions, above. If the beneficiary is a parent, child or grandchild of the transferor, the transfer may be excluded under the parent-child or grandparent-grandchild exclusion if all the requirements of the particular exclusion are met and a claim is filed with the county assessor (see Interspousal exclusion; intrafamily transfer exclusion, above). Since a change in ownership resulting from a revocable TOD deed occurs upon date of death, the cotenancy exclusion underCal. Rev. & Tax. Cd. §62.3 may apply if the decedent transferor and the beneficiary were co-owners of the real property and all the other requirements of that section are met (see Cotenancy exclusion, above). After January 1, 2021, unless the revocable TOD deed provisions in the Probate Code are amended, any revocable TOD deed that is properly executed during the 5-year period beginning on January 1, 2016, will remain valid until the property owner dies or revokes the deed. [California State Board of Equalization Letter to Assessors No. 2016/006, 01/20/2016.]

For a brief discussion of revocable TOD deeds, a non-probate method for conveying certain real property on death that goes into effect for a 5-year period beginning on January 1, 2016, see California State Board of Equalization Letter to Assessors No. 2016/006, 01/20/2016.

Change in ownership involving transfers of community property held in the name of one spouse. In response to a 2014 decision by the California Supreme Court, In re Marriage of Valli, Cal. S. Ct., 58 Cal. 4th 1396 (2014) (Valli), which overruled In re Marriage of Brooks and Robinson, Cal. Ct. App. (4th App. Dist.), 169 Cal. App. 4th (2008) (Brooks), the SBE issued to county assessors a letter that discusses change in ownership determinations involving transfers of community property held in the name of one spouse and that supersedes the SBE’s advice in change in ownership annotations 220.0044, 220.0278, and 220.0267 (each in California Property Tax AnnotationNo. 220.0000, 00/00/0000) (the SBE intends to delete each of the foregoing annotations). The letter discusses and includes the following:

(1) the community property presumption;
(2) the title (deed) presumption;
(3) the law and analysis of Valli; and
(4) an example and practical application of Valli. [California State Board of Equalization Letter to Assessors No. 2018/014, 02/12/2018.]

Community property presumption: The general rule, also known as the community property presumption, is that property acquired during marriage is community property, unless evidence establishes that a specifically enumerated statutory exemption applies. Married persons may effect a transmutation of community property to separate property (or vice versa) “in writing by an express declaration that is made, joined in, consented to, or accepted by the spouse whose interest in the property is adversely affected.” [California State Board of Equalization Letter to Assessors No. 2018/014, 02/12/2018.]

Title (deed) presumption: When, during a marriage, property is acquired in the name of only one spouse or property is transferred to a legal entity in which spouses own unequal interests, the title presumption (also known as the deed presumption), found in Cal. Evid. Cd. § 662 and Cal. Code Regs. 18 §462.200(b) , also may apply. The title presumption provides that the owner of the legal title to property is presumed to be the owner of the full beneficial title and that this presumption may be rebutted only by clear and convincing proof. When both the community property presumption and the title presumption apply, the SBE previously opined that in certain circumstances, the title presumption prevailed over the community property presumption. That opinion was based on Brooks. [California State Board of Equalization Letter to Assessors No. 2018/014, 02/12/2018.]

Law and analysis of Valli: Before Valli, Brooks and the SBE’s subsequent annotation based on Brooks (Annotation 220.0044) limited the statutory transmutation requirements by excluding one spouse’s acquisition of property from a third party with community funds from those requirements. However, the California Supreme Court wholly rejected this interpretation in Valli. Thus, as the California Supreme Court stated clearly in Valli, in cases solely involving spouses’ interests, the title presumption “does not apply when it conflicts with the transmutation statutes.” To summarize, an assessor’s responsibility is to determine assessment of property based on beneficial ownership. Valli instructs that in determining beneficial ownership as between spouses, community property remains community property unless that property is transmuted to separate property pursuant to the transmutation statutes. In other words, when there is a conflict between the community property presumption and the title presumption, the community property presumption is controlling. [California State Board of Equalization Letter to Assessors No. 2018/014, 02/12/2018.]

Example and practical application: A change in ownership does not necessarily occur when a married couple transfers community property to a legal entity created during marriage but owned solely by one spouse. For example, a husband and wife who own real property as community property, record a deed to transfer the property to a limited liability company (LLC) in which the husband is the sole owner, and note on the Preliminary Change of Ownership Report that this is a transfer between parties in which proportional interests of the transferor(s) and transferee(s) in each and every parcel being transferred remain exactly the same after the transfer (i.e., the proportional ownership interest exclusion from change in ownership under Cal. Rev. & Tax. Cd. §62(a)(2) ). The LLC’s operating agreement is silent on whether the husband’s membership interests are community property or his separate property. The assessor must determine whether the transfer of community property from the husband and wife qualifies for an exclusion from change in ownership pursuant to Cal. Rev. & Tax. Cd. §62(a)(2) . Under the title presumption, the husband would presumptively own the LLC as his separate property unless rebutted by clear and convincing proof. Pursuant to Valli, however, the community property presumption is controlling. Thus, unless there exists an express written declaration transmuting the community property character of the LLC ownership interests into the husband’s separate property, the LLC interests should be considered owned 50% by each spouse. Consequently, the transfer of real property by the husband and wife to the LLC should be excluded from change of ownership. [California State Board of Equalization Letter to Assessors No. 2018/014, 02/12/2018.]