By the Numbers: Thousands may be eligible for property-tax reductions

Paul Sieving is the author of By the Numbers, a feature of the Nevada City Advocate.

The state’s 58 counties are taking different approaches to the possibility of a spike in Prop. 8 enrollments

Propositions and taxable property values

Prop. 13: Limits the property tax rate to 1% plus voter-approved bonded indebtedness, and defines taxable value as the lower of the property's Factored Base Year Value (FBYV) or market value on lien date, Jan. 1. Factored Base Year Value is the market value of the property when it was acquired by the current owner, plus the value of any new construction, plus an inflation factor of no more than 2% per year. Taxable value can increase more than 2% in one year if the property experiences a change in ownership, new construction or received a temporary reduction in taxable value in a prior tax year.

Prop. 8: Amends Prop. 13 to provide for a decline in property value. It requires the assessor to enroll the lower of either: 1) the Factored Base Year Value, or 2) the market value as of the annual lien date Jan. 1. Prop. 8 reductions in value are temporary reductions that recognize that the market value has fallen below its Prop. 13 value.

Prop. 13 keeps them from rising too fast, while Prop. 8 allows a reduction in taxes if property values take a dramatic fall. Due to the recent market conditions, it looks like property purchased between 2003 and 2008 in Nevada County might be eligible for a Prop. 8 tax break.

The state’s 58 counties are taking different approaches to the possibility of a spike in Prop. 8 enrollments.

Some are proactive and others are relatively passive, requiring the property owners to initiate a Decline in Value reduction. Staff cuts and increased workloads at the Assessor’s Office can affect the expedience of the process. Once a Prop. 8 reduced value has been enrolled, that property must be reviewed each year to determine whether its market value is less than its Prop 13. factored value.

Prop. 8 values can change from year to year as the market fluctuates. When the market value of the Prop. 8 property increases above its Prop. 13 factored value, the assessor will once again enroll its Prop. 13 value.

Properties enrolled under Prop. 8 provisions are not subject to the 2% annual increase limitation that applies to those enrolled under Prop. 13 provisions.

In order to make an initial determination, it’s a good idea to call your Realtor® as the Assessor’s office may be somewhat overworked as explained above. In either case, the initial determination will look at what price was paid for the property, the current assessed value and the current market value.

Please feel free to contact me for an initial determination. I will gather some comparable market data that will establish eligibility and support a request to the Assessor’s Office for enrollment in Prop. 8. 

Paul Sieving is a Realtor® with CENTURY 21 Gold Dust Realty, has been Chair of the MLS Committee and a Director of NCAOR and Board Chair of the Grass Valley Chamber of Commerce. Comments and questions are welcome at Paul@PaulSieving.com or 530-274-0906.