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Proposition 13: Property Tax Roll-Over in Eminent Domain Cases




by:
Arthur J. Hazarabedian
California Eminent Domain Law Group, APC - Glendale Office

 
August 21, 2014

Previously published by California Eminent Domain Law Blog

In 1978, California’s Proposition 13 created security for home owners by limiting property taxes to one percent of the property’s value with a maximum two percent increase for inflation of the property value in a year. The property tax is reassessed when the property is being sold or if certain improvements on the property increase the property’s value.

In 1982, Proposition 3 was passed to protect those who are forced to purchase a replacement property when their property has been taken through the process of eminent domain. By freezing the base value of the property tax, those who are inclined to replace their property are ensured that the property tax they used to pay for their condemned house is rolled over to their new property.

The recent issued case of Olive Lane Industrial Park, LLC v. County of San Diego, heard in the California Fourth District Court of Appeals, dealt with the interpretation of Prop 3 and 13. In this case, Olive Lane lost its industrial park to the County of San Diego through the process of eminent domain. It eventually purchased a replacement property and asked for the County Tax assessor to transfer the property base value of the previously owned land. The tax assessor denied their petition on the basis that the 4-year statute of limitations under the state tax code had expired. Although the purchase of the new property occurred before the statute of limitations expired, Olive Lane had not requested the transfer of the base value for the property until five and a half years after the eminent domain process concluded.

The court noted that the state tax code was unclear in cases like Olive Lane where a property is purchased before the statute of limitations expires but the petition for base value transfer is made after the statute of limitation passes. The court turned to Proposition 3 to help answer the matter. Proposition 3, which now is incorporated in the article XIIA of the California Constitution, does not specify time period in which to initiate or complete a transfer request. Therefore, the court held that the statute of limitations is non-mandatory; the purpose of Proposition 3 was to treat eminent domain cases as outside a typical purchase of property.

The court also noted that the statutory purpose of the proposition was to allow those whose property has been taken through eminent domain to maintain the same base value for their new property, upholding an important constitutional right.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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Author
 
Arthur J. Hazarabedian
California Eminent Domain Law Group, APC
 
Glendale Office
Practice Area
 
Eminent Domain
 
California Eminent Domain Law Group, APC Overview