Election day is just around the corner. On November 3rd, voters will vote on local and state propositions and one proposition to take into consideration is Proposition 15. Did you know the proposition will provide about $8 billion and $12.5 billion increase on tax every year? Let’s take a deep dive below where we have outlined a helpful guide to provide a better understanding of what Prop 15 is and how it may affect your business and the community around you.
What is Proposition 15?
- California proposition 15
- Tax on commercial and industrial properties for Education, K through 12 and community college, and Local Government Funding Initiative (2020)
- Require large commercial and industrial properties to be taxed based on current market value as opposed to purchase price. Proposition 15 will provide new funding for local governments and schools. The commercial and industrial properties will be reassessed every three years to ensure that the tax is based on the market value
- Residential and commercial property have similar assessment rules, assessing property at purchase price. With Proposition 15 approved, it will introduce a new concept: “split roll” tax. What is this “split roll?” Glad you asked. Here is the breakdown below.
- “Split roll” commercial and industrial properties will be evaluated based on market value, whereas residential properties tax will continue to be valued at purchase price.
- Proposition 15 will revoke California Prop 13 (property tax limitation)
- Prop 13: voted into the California State Constitution in June 1978. This is an anti-tax initiative which assesses all real property on base year value, limit the rate of increase on assessment up to 2%, and maximized the increase on commercial property to 1% of assessed value.
Who are exempt from Prop 15?
- Proposition 15, if passed, would increase property tax on commercial property that is worth more than $3 million
- Properties that are exempt from Prop 15 include commercial or industrial properties worth less than $3 million, residential properties, agricultural land, and owners of commercial or industrial business operating in a residential property
- Measure will exempt up to $500,000 of personal property and small business under single ownership from taxation
How much revenue would Prop 15 acquire?
- Fiscal impact: The legislative analyst found that if Proposition 15 is approved, that the new tax assessment will provide $6.5 billion to $11.5 billion in funding to local governments and schools.
Who will pay most for the tax increase?
- The way proposition 15 is implemented, not all companies would be affected. It would mainly affect large businesses and industrial properties group, but will also affect those property holders that own multiple properties that total to over $3 million. According to the fiscal analyst, if Proposition 15 is passed, the tax increase will be about $8 billion and $12.5 billion every year. The biggest change that Proposition 15 will generally increase taxes for large businesses that held assessment values that were established decades ago.
CONCLUSION
Proposition 15 would be the biggest change in property change and will greatly affect the large commercial and industrial properties. This proposition will also be one of the most expensive for large businesses and begin a new tax assessment system in California. Are you ready to vote? It is crucial that you stay up to date with new taxes being proposed and how it may affect your business.
