Why this article is important: As wildfire seasons become more destructive in our changing climate, legislatures are trying to keep up. A new law extends Prop 13 benefits for homeowners rebuilding after 2025’s devastating wildfire season.
Prop 13
Proposition 13 — widely known as Prop 13 — limits property taxes to 1% of the property’s assessed value. The property’s assessed value equals the property’s base value (the property’s value at the time of purchase), plus an annual inflation factor determined by California’s consumer price index (CPI). [Calif. Revenue and Taxation Code §§50; 51]
In total, the property’s assessed value may increase no more than 2% each year or the inflation factor, whichever is lower. However, it may also change upon a reassessment by the county assessor. A reassessment occurs upon transfer of title, when a property is newly constructed, or undergoes a major rehabilitation. [Rev & T C §§51(a)(1)(D); 70(b)]
Typically, when a homeowner makes substantial improvements or rebuilds their property, the county assessor determines the new base year for property taxes by maintaining the base year value for the portion of assessed property which is unchanged. New construction in progress on the lien date is appraised at its full value on that date and each lien date thereafter until the date of completion. Once the construction is complete, the entire portion of property which is newly constructed is reappraised at its full value, becoming the property’s new base year value. [Rev & T C §71]
However, when a disaster strikes the home, the rules for reassessment are more lenient.
Relaxed Prop 13 tax rules are extended to homeowners rebuilding after a disaster proclaimed by the Governor for up to five years following the date of the disaster. [Rev & T C §70.5(a)]
When the property is reconstructed following a disaster, the county assessor will assess the property using the following formulas:
- When the full cash value of the reconstructed property does not exceed 120% of the full cash value of the property destroyed, then the adjusted base year value of the property before it was destroyed will be maintained as its base year value. [Rev & T C 70.5(b)(2)(A)]
- When the full cash value of the reconstructed property exceeds 120% of the full cash value of the property destroyed, then the amount of the full cash value which exceeds 120% is added to the adjusted base year value of the destroyed property. The sum of these amounts is the reconstructed property’s new base year value. [Rev & T C 70.5(b)(2)(B)]
- When the full cash value of the reconstructed property is less than the adjusted base year value of the original property, then that lower value is the reconstructed property’s new base year value. [Rev & T C 70.5(b)(2)(C)]
The full cash value of the property which was substantially damaged or destroyed is determined by the county assessor. [Rev & T C 70.5(b)(2)(D)]
Further, to qualify for the relaxed Prop 13 rules, the reconstructed property must be comparable to the original property, meaning it is similar in size, utility, and function. [Rev & T C 70.5(c)(2)]
A new law, passed by Assembly Bill 245, provides additional time — up to eight years following the disaster — when the property was damaged or destroyed due to the:
- Palisades Fire;
- Eaton Fire;
- Hurst Fire;
- Lidia Fire;
- Sunset Fire; or
- Woodley Fire. [Rev & T C §70.5(f)]
Each of these fires took place in the Los Angeles area on or after January 7, 2025 and before February 1, 2025. [Rev & T C §70.5(f)(1)]
The Mountain Fire and Franklin Fire, which occurred in Ventura and Malibu counties in November and December 2024 are also included, providing affected homeowners up to eight years to rebuild and maintain Prop 13 tax benefits. [Rev & T C §70.5(f)(3)]
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