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Property Assessment Appeals can reduce your property taxes

  Sanjiv Gupta CPA  Published 
Property Assessment Appeals can reduce your property taxes

People often ask us, "how can they reduce their property taxes?".

One of the easiest way is by appealing the assessed value of their homes in California.

We discuss the concept of Proposition 13, which limits how much taxes can be raised on properties so that government does not take advantage of citizens. 

We will than look at the process of appealing the assessed value, and emphasizes that this has saved homeowners money in recent years.

Under California law (Proposition 13), a property's assessed value generally is established when the property changes ownership or when it is newly constructed. The California constitution limits property tax assessment increases to no more than 2% per year to account for inflation, which has averaged about 2.5% in recent years.

Proposition 13 limits how much taxes can be raised on properties so that government does not take advantage of citizens. The law “requires that the assessed value of each property be based on its market value at the time it is purchased. This ensures that there is equity in taxation, and informs us about the relative tax burden and its cost to the taxpayer.

People appealing their assessed value must first file a protest with the county assessor who will review and make a decision regarding it. If there is no satisfaction after this, they may file an appeal within 30 days of receiving the notice. The appeals at this stage are heard by  the local committee of review, which consists of three or five people who make determinations regarding the assessed value. If this does not result in satisfaction, an appeal may be filed to the State Board of Equalization (BOE). Here it is done by mail and hearings are conducted either with video conferencing or before a representative. The BOE may be contacted by mail, telephone or fax.

People are allowed to challenge their property valuation for many reasons including incorrect interpretation of the law, inaccurate description of the real estate and invalid exemptions. There is a specific form that has to be filled in, which consists of information such as location, size and present use (i.e.: residence, warehouse etc.). If the appeal is not successful, one can file a supplemental petition with additional information. 

The process of filing an appeal has been changing recently by the BOE, which shortened its time periods for people to file appeals and get hearings. It offers workshops that are free to educate homeowners about tax assessment appeals. The agency hopes  to save time and money by reducing the number of people needing hearings. It is trying to educate the public about its services, including posting information on its website in multiple languages, creating a telephone hotline that offers recorded general information and a webpage where taxpayers can schedule a hearing via video conferencing instead of going in person.

The State Board of Equalization (BOE) is an independent government organization that provides tax assessment services for residences, commercial and industrial properties. It was created in order to provide equalization on property assessments. The Board consists of five members who are elected by the people to four-year terms.

Each member of the board must be a U.S. citizen for at least seven years and has resided in the state for at least three years in order to run for office. All members of the Board come from different geographical areas within California and represent all races/ethnicities. The term of each Governor is January 5 through December 31, which means the term of office is not the same for each Governor.

The BOE performs a variety of duties including: 1) conditionally approving or disapproving proposed property tax changes, 2) reducing assessments on property that has recently experienced a large decrease in value, 3) reducing assessments on property recently built, 4) processing business personal property returns and making business personal property assessments, 5) performing oversight of the county assessors and 6) preparing state equalization rates.

The BOE considers factors in determining how much tax is owed by taxpayers. It has an extensive staff whose duties include developing property tax rules, maintaining the property tax roll, assessing properties for taxation purposes, conducting hearings and billing taxpayers. The BOE also assists taxpayers with issues they might have regarding property taxes.

A taxpayer may request a hearing after filing an initial written appeal or supplemental petition if he/she disagrees about any of these items: 1) the assessed value assigned to a property, 2) the taxable assessed value of a property, 3) the classification or allocation of a basis on a property and 4) the exclusion from taxation of a portion of a basis. 

A written appeal should include an explanation from the taxpayer about why he/she thinks that his/her assessment is incorrect. It must include information about the market value of the property that is being contested, along with any sales data. A taxpayer may need to include evidence in the form of documents, maps or photographs about why he/she believes his/her assessment was incorrect. Sales information for properties near his/her own are often used as evidence if comparable properties have larger assessments on them. 

If a taxpayer files an appeal after the first Board of Supervisors hearing, he/she must include information about why his/her case was not resolved correctly by this earlier hearing. A taxpayer may have to wait another year before filing another written appeal if he/she does not provide enough reasons why the first BOE hearing should be reconsidered.

The BOE considers many factors when deciding whether to change an assessment. These factors include: 1) the physical condition of the property, 2) how much it would cost to replace or repair the property and 3) the replacement value of the improvements on a property. 

A taxpayer may appeal his/her assessment for any of these reasons: 1) a property has recently experienced a large decrease in value and 2) new construction was done on his/her property. A taxpayer must file this type of appeal within one year of the tax roll becoming effective. 

The BOE considers many factors when deciding whether to reduce assessments for newly built properties or recently experienced large decreases in value. These factors include: 1) whether the new construction is similar to other properties in the area, 2) when construction was done relative to when other properties were built in the area and 3) any changes in market conditions when considering property values for comparable properties in the area.