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Property Tax Appeals on the County LineBy Gordon Hall7 min read

Decline in Value (Prop 8) in Plain Words: R&T Code Section 51 and Full Cash Value

Decline in value (Prop 8) in plain words: section 51 taxes the lower of factored base year value or full cash value on January 1, reviewed each year.

Vaulted living room with two sofas, an ottoman and a dining table by the window

Decline in value, which both counties also call Proposition 8 or "Prop 8", is the rule in California Revenue and Taxation Code section 51 that taxes a home each year on the lower of two numbers: its factored base year value, or its full cash value, meaning market value, on the January 1 lien date. When the market value on January 1 falls below the factored base year value, the lower figure is the taxable value for that year. The relief is temporary: the Assessor looks at the value again every January 1 until the market value rises back above the factored base year value.

An appraisal can document full cash value as of a lien date. Whether a value is reduced is decided by the Assessor in a review, or by the assessment appeals board in an appeal.

What are the two numbers in section 51?

Base year value is the value set when the property last changed ownership or was newly constructed. The San Bernardino County Assessor's Proposition 8 page explains that it is either the market value from 1975 or the value set at the last change in ownership or new construction, under Proposition 13.

Factored base year value is that base year value compounded each year by an inflation factor. Section 51 ties the factor to the California Consumer Price Index and says the increase for any year may not exceed 2 percent of the prior year's value. It is the number the tax rules would use if the market never fell.

Full cash value is market value as section 110 defines it: the amount of cash or its equivalent the property would bring if exposed for sale in the open market, where neither buyer nor seller could take advantage of the other and both know the property's uses and any enforceable restrictions on them. Section 51 measures it as of the lien date, set at 12:01 a.m. on January 1 by section 2192.

Taxable value is whichever of the two is lower. The county's assessed value, the figure enrolled under these rules, is not an appraisal. Neither is an online estimate, which is a statistical figure from records, not an opinion of value as of a stated date.

What does section 51 count as a decline?

Section 51 says full cash value is measured taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property, or other factors causing a decline in value. In plain words:

  • Damage and destruction. Physical harm to the property. Damage from a disaster, misfortune or calamity has its own rules in the statute and its own valuation date, the date of the event, so ask the county which route applies.
  • Depreciation. Wear on the building: an aging roof, failing systems, deferred maintenance on the lien date.
  • Obsolescence. Loss in value from something outdated in the property or from conditions outside it.
  • Removal of property. Part of the property taken away, such as a structure demolished.
  • Other factors. Most often, the market: similar homes selling for less around January 1 than the factored base year value implies.

The California Constitution, Article XIII A, section 2, allows the full cash value base to be reduced to reflect substantial damage, destruction, or other factors causing a decline in value. Section 51 is how the Legislature carries that out.

Why is a decline-in-value reduction temporary?

Section 51 says that once a value has been reduced for a decline, the property must be reappraised at full cash value on each later lien date until that value exceeds the factored base year value, and that the Assessor may not make that annual review depend on the owner filing an assessment appeal. The San Bernardino County Assessor's page describes the effect: decline-in-value reassessments are temporary but last at least one year, the assessed value may move up or down with the market each January 1, and it never rises above the factored base year value.

For a formal appeal, the State Board of Equalization's residential appeals guide adds that a decline-in-value appeal applies only to the year in which it is filed and does not carry forward. Each year has its own January 1, and each year is its own question.

What are the two routes to a decline-in-value review?

An informal review is a request that the Assessor's office look again at the value, with the owner's information, before any formal appeal. An assessment appeal is a formal request to the county's appeals board to change the value the Assessor enrolled, decided after a hearing.

  • Upland, Montclair, Rancho Cucamonga and Chino. The San Bernardino County Assessor-Recorder-County Clerk encourages an informal review first, and its Proposition 8 page describes the application form an owner submits to the Assessor's office. Formal appeals go to the San Bernardino County Assessment Appeals Board through the Clerk of the Board.
  • Claremont, La Verne and Pomona. The Los Angeles County Office of the Assessor has a decline-in-value review page, and formal appeals go to the Los Angeles County Assessment Appeals Board.

Application and filing periods are set by each county. They are not stated here; confirm the current period on the county's own page. The guide to property tax appeals on the Los Angeles and San Bernardino county line sets the two counties side by side.

Where does an appraisal fit in a Prop 8 question?

The San Bernardino County Assessor's page says the most effective documentation for a decline-in-value review includes details on sales of comparable properties. An appraisal is that documentation in a form built to be checked: an independent opinion of full cash value with an effective date, the date the opinion of value applies to, set at the January 1 lien date, and comparable sales chosen for that date. The lien date explained covers why that date governs, and what the report shows an assessment appeals board walks through the rest of the report.

In Upland the pocket matters as much as the date. A Euclid Avenue District house, a postwar tract south of the 210, a north Upland view home and a San Antonio Heights horse lot each sell to different buyers, so a decline-in-value appraisal draws its sales from the right pocket and explains any exception. West Upland meets Claremont at the county line; a Claremont sale used for an Upland house needs its location difference explained. The Upland area page describes those pockets.

The appraisal does not decide anything. It may show a full cash value above or below the factored base year value, and nothing is said about the value before the work is done. The Assessor or the board decides.

Next step

If you are weighing a decline-in-value review or an appeal for a house in Upland, Claremont or a neighboring city, read how the property tax appeal appraisal is scoped, or call (909) 324-6122. The fee is set by the scope of the assignment and quoted before work begins, and it does not depend on the value. More on the subject is collected under property tax appeals on the county line.

Sources

Gordon Hall, California Certified Residential Real Estate Appraiser, BREA No. AR003877 (lookup: https://www2.brea.ca.gov/breasearch/faces/party/view.xhtml?id=23601). Reports are prepared in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP). Nothing here is legal or tax advice; admissibility is always the court's decision.

Frequently asked questions

What does Prop 8 mean for property tax?

Prop 8, or decline in value, is the rule in California Revenue and Taxation Code section 51 that taxes real property on the lower of its factored base year value or its full cash value as of the January 1 lien date. When market value on January 1 is below the factored base year value, the lower figure is the taxable value for that year.

What is the difference between factored base year value and full cash value?

Factored base year value is the value set at the last change in ownership or new construction, compounded each year by an inflation factor that section 51 caps at 2 percent of the prior year's value. Full cash value is market value as defined in section 110: what the property would bring on the open market between informed parties, neither able to take advantage of the other.

How long does a decline-in-value reduction last?

It is reviewed every year. Section 51 requires the Assessor to reappraise the property at full cash value on each later lien date until that value exceeds the factored base year value. The San Bernardino County Assessor describes these reassessments as temporary, lasting at least one year, and never above the factored base year value.

Do I need an appraisal for a decline-in-value review?

Not necessarily. Owners can present their own information. The San Bernardino County Assessor says the most effective documentation includes details on sales of comparable properties, and an appraisal is one way to present that evidence as an independent opinion of full cash value as of January 1. The Assessor or the appeals board decides the value.

Gordon Hall

Mr. Cali Appraisals

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