As I have written about before, Proposition 13 has been in the cross-hairs of California legislators for quite some time. Once something is deemed a tax “loophole”, it is only a matter of time before the “loophole” is closed. In this case, the “loophole” are statutes interpeting Propositioin 13 that allow a taxpayer to purchase 100% of a business that owns real property without causing the purchase to be considered a “change of ownership” for property tax reassessment purposes–as long as nosingle owner acquires more than a 50% interest. Most notabaly, computer giant Michael Dell purchased the Fairmont Miramar hotel and was able to structure the purchase so as to ensure that there was no reassement–a move which saved him more than a million dollars a year in property taxes.
Traditionally, the Howard Jarvis Taxpayers Association has been a staunch defender of Proposition 13. Recently, however, they announced that they would no longer voice opposition to a bill authored by Assemblyman Tom Ammiano (D-San Francisco). Ammiano’s bill, AB 2372, basically states that when 100% of the ownership in a legal entity changes within a 3-year period there has been a change of ownership. While public traded companies are expressing concern, this rule should not to prove too onerous on family owned businesses. In fact, it makes it a bit easier for families to make large gifts of business interests to their children without triggering a reassessment.