Many Californians are already feeling the effects of newly passed Proposition 19, also entitled the “Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act.” The Act essentially amended the California Constitution and dramatically changed the property tax reassessment landscape in the State. Although some do support the terms and conditions of Prop 19, there is an effort to repeal the newly passed legislation completely by certain organizations. One of these includes the Howard Jarvis Taxpayers Association (HJTA), which is a California-based nonprofit lobbying and policy organization that advocates for taxpayers and protections for Proposition 13.
How did Prop 19 Affect Property Tax Reassessments?
In order to understand why HJTA is repealing Prop 19, one must know the legislation’s significant features. Proposition 19 allows homeowners who are either over the age of 55, have a severe disability, or are a victim of a natural disaster or hazardous waste contamination to purchase a new residence whilst still retaining their initial property tax assessment from their prior home. In addition, the newly passed legislation allows eligible homeowners to transfer properties up to three times during their lifetime and retain their property tax assessment.
Prop 19 also allows homeowners to purchase a replacement property that costs more than the original property. If this occurs, the assessment will be adjusted based on the difference in fair market value between the two residences.
Most California residents do not oppose the terms stated above in Prop 19. It’s the effect Prop 19 has had on both Prop 58, Prop 193, and Prop 13 that some Californians and organizations including HJTA aggressively contest. Previously, Proposition 58 allowed property transfers between parents and their children by purchase, gift, or inheritance, but most importantly allowed the recipient to retain the original owner’s property tax assessment/basis. The only catch was that the property had to serve as the original owner’s personal residence, or the total assessed value of all transferred non-residential property did not exceed $1 million. This courtesy was also extended to certain transfers between grandparents and their grandchildren thanks to the passing of Proposition 193.
However, this all changed with the passage of Prop 19. The new Constitutional Amendment now limits the applicability of the parent-child and/or grandparent-grandchild exemptions transfers. Under Prop 19, the only Prop 13 tax base that can be transferred to one’s children is their original residence. In addition, the child or grandchild must live on the property and use it as their principal residence if they want to retain the same tax base. Not only that, but if an individual’s home is worth more than $1 million, then they may be required to undergo a partial or complete tax reassessment.
Repeal the Death Tax Act & What It Means
Ever since Proposition 19 has passed, there’s been fervent debate on both sides for why this piece of legislation should remain or be repealed. The Proposition’s positive effects for seniors, victims of natural disasters, and the severely disabled has provided many Californians much needed relief. However, some fiercely oppose Prop 19 and are already gathering support in an effort to repeal it completely. One of these organizations includes the Howard Jarvis Taxpayers Association with their initiative known as the “Repeal the Death Tax Act.”
The initiative’s goal is to repeal Proposition 19, what they refer to as “the Death Act,” and amend the State constitution. Their ultimate objective is to restore the ability of parents and grandparents to transfer property to their children or grandchildren upon death without triggering an expensive reassessment. HJTA claims voters were tricked into voting for the Proposition due to an expensive ad campaign that emphasized tax benefits for wildfire victims, seniors, and the disabled. According to the organization, advertising for the legislation failed to explain the measure would repeal protections within Proposition 58 and 193.
HJTA further goes on to claim that Proposition 19 has effectively reinstated a death tax in California–something citizens have repeatedly and emphatically rejected in the past. The organization states Proposition 19 puts generational wealth-building severely at risk, and that decades of hard work and progress will be set back dramatically as people will be forced to sell their homes, small businesses, and local rental properties.
The Howard Jarvis Taxpayers Association (HJTA) proposes in their initiative that Prop 19 should be repealed in order to reinstate rules for intergenerational transfers. The measure includes an inflation adjustment for properties in addition to the owner’s primary residence. In addition, the initiative also proposes that up to $2.4 million of assessed value would be excluded from reassessment upon transfer. This would be a significant tax benefit for families who may own properties for their small business or own a local rental property. Primary residences of any value would be excluded completely from reassessment.
HJTA will need 997,139 valid signatures of registered voters by April 29th, 2022 in order for the measure to be put on the ballot by November 2022.
The Bottom Line
It was anticipated by many the legality of Proposition 19 would be challenged in court. Although some oppose its contents, other Californian taxpayers significantly benefit from its passing—especially victims of wildfires and other natural disasters, seniors, and those who are disabled. In addition, there are legal workarounds that may become available over time that will allow parents and grandparents to transfer their property without a huge tax increase.
What will happen to Proposition 19 is still up in the air. However, if you currently have questions on how Proposition 19’s passing will impact your property upon passing, contact Botti & Morison Estate Planning Attorneys, Ltd. at (877) 585-1885. Both of our attorneys have decades of experience in estate planning, trusts, and elder law. With their knowledge, they can address any issue or concern you may have and provide prompt and effective solutions to remedy it.