California Young Lawyers Association

The Known and Unknown of Property Tax and Real Property Transfers: a Discussion on Proposition 19

By Joseph E. Gruber, Jr.

I. Introduction

On November 3, 2020, California voters passed Proposition 19: Property Tax Transfers, Exemptions, and Revenue for Wildfire Agencies and Counties Amendment. Proposition 19 amended the California State Constitution to create a dramatic shift in property tax laws. Proposition 19 now imposes two major changes to property tax related to the transfer of real property:

  • It alters exclusions to the reassessment of real property[1] for the application of property taxes for more vulnerable communities: people over the age of 55, those who are severely disabled, and those who have lost homes due to a wildfire or other natural disasters; and
  • It limits the applicability of the parent to child and grandparent to grandchild property tax reassessment exclusions for transfers of personal residences and eliminates these exclusions for inheritors and transferees of commercial and non- personal residence residential properties.

It is important to note that Proposition 19 is a constitutional amendment and legislation, regulations, and guidance from statewide and local officials will be necessary. This article will serve to summarize the prior law and educate readers on the changes in the law, to the extent such changes are known.[2] These new rules reflect a strong deviation from prior law and are important for attorneys to understand in order to properly advise their clients and obtain tax benefits for their clients when available.

II. Former Law Before Proposition 19

In 1978, California Voters passed Proposition 13, a constitutional amendment that limits the values county assessors use to calculate property taxes concerning real property. The assessors calculate these taxes as follows:

  • Upon a change of ownership (i.e. a sale, conveyance, or transfer of real property), the assessor’s office will reassess the initial taxable value of the property as the fair market value of the property on the date of transfer (“base year value”);
  • Each year, the assessor will apply modest increases to the base year value (“factored base year value”);
  • Property tax percentages are then applied to the factored base year value.

The modest increases applied to establish the factored base year value are less than the rate of appreciation, which limits the total amount of property tax owed on the property. Previously, California law provided exceptions to the reassessment of real property relating to a select number of property transfers, which are discussed in this section. However, Proposition 19 has since modified these exceptions.

a. Former Propositions 60, 90, and 110: Transfers by Individuals Over the Age of 55 and Severely Disabled

Former Propositions 60, 90 and 110 enabled individuals over the age of 55 or individuals who were severely and permanently disabled to sell their principal place of residence and transfer their factored base year value to their new residence provided that: (1) the new residence was of equal or lesser value of the original property,[3] (2) was purchased within two years of the original sale, and (3) was located in the same county as the original property.[4] Former Proposition 90 expanded Former Proposition 60 by allowing individuals to transfer their base value from a replaced home to a replacement home in one of several reciprocating counties, providing all other elements of Former Proposition 60 were met.[5] Former Proposition 110 also allowed for the same intercounty transfers. The reciprocating counties were: Alameda, Riverside, San Mateo, Ventura, Los Angeles, San Bernardino, Santa Clara, Orange, San Diego, and Tuolumne.

b. Former Propositions 50 and 171: Disaster Relief

Previously, individuals affected by disasters that the Governor proclaimed a state of emergency could transfer their factored base year value for any piece of real property provided a replacement property was obtained within the same county within five years of the disaster.[6] The replacement property could have any value, however, any value of the replaced property that exceeded 120% of the replacement property would be reassessed.

Individuals also had the ability to transfer their factored base year value of their principal residence affected by disasters that the Governor proclaimed a state of emergency to replacement properties of equal or lesser value7 located in different counties, provided local ordinances allowed for such transfers. The reciprocating counties were: Contra Costa, Glenn, Los Angeles, Modoc, Orange, San Diego, San Francisco, Santa Clara, Solano, Sonoma, Sutter, Ventura, and Yuba. To qualify for this intercounty transfer, the replacement property had to be obtained within three years of the proclaimed disaster.

c. Former Propositions 58 and 193: Parent to Child and Grandparent to Grandchild Exclusion

Former Proposition 58 excluded certain transfers between parents and children from being considered a change of ownership. Under Former Proposition 58, individuals could transfer, either by gift or sale, their principal residence to their parent or child and have their factored base year value transferred with it. Because there were no value limitations for the transfer of the principal residence, this was an effective tool for property tax savings to assist in the passing of generational wealth.8 For real property that did not qualify as a personal residence, each individual could transfer up to $1 million of factored base year value (not market value) during their lifetime, provided such transfers were amongst parents and children.9 Under Former Proposition 193, the same benefits could be achieved in transfers between grandparents and grandchildren provided that all of the parents/children who could have qualified for the parent to child transfer no longer qualified.10

III. Current Law After Proposition 19

Proposition 19 altered the property tax exceptions to changes of ownership, discussed in Section II, above. Proposition 19 has eliminated many of the property tax rules that allowed individuals to transfer their factored base year values to a replacement value including the parent to child and grandparent to grandchild exclusion. While the practical application of the new rules remains fluid and largely unknown, some counties have issued guidance on how they will treat certain transfers of real property.

a. Transfers by Individuals Over the Age of 55 or Disabled[11]

Proposition 19 expands the ability for individuals over the age of 55 and those who are severely and permanently disabled to transfer their factored base year value to their new home.[12] Proposition 19 allows a qualified individual to transfer the factored base year value of their prior principal residence to a new residence that is purchased or built within two years of the sale of their previous residence.

Rather than being limited to finding a replacement property within the same county or within reciprocating counties, individuals can now transfer their factored base year value to any county in the state.

The ability to transfer one’s factored base year value is also no longer limited to the value restrictions referenced above (i.e 100%/105%/110% of the replaced property). But the individual will be subject to partial reassessment where the replacement property’s fair market value exceeds the replaced property’s fair market value. Individuals can take advantage of this reassessment exclusion up to three times during their lifetimes.

b. Transfer by Individuals Displaced by Wildfires or Disasters[13]

Proposition 19 eliminates the differentiation of the replaced properties due to disasters in intracounty replacements and intercounty replacements and makes the rules for replacement consistent throughout the state. Commencing on April 1, 2021, individuals can transfer their factored base year value only from their principal residences that were destroyed by a wildfire or disaster that the Governor proclaimed a state of emergency to a replacement property purchased or built within two years of the disaster. The replacement property may be located anywhere in California. The transfer of factored base year value can occur for a replacement property of any value, however, any amount in excess of 100% of the fair market value of the replaced property will be reassessed.

c. Parent to Child and Grandparent to Grandchild Transfer Exclusions[14]

The most dramatic change created by Proposition 19 is the alteration of the parent to child and grandparent to grandchild exclusions for a principal residence and the elimination of these exclusions for all other property. The changes went into effect on February 16, 2021 and transfers of real property must have occurred on or prior to February 15, 2021 in order to receive the benefits under Propositions 58 and 193. This does not necessarily mean that the deeds for the real property must be recorded by February 15, 2021. If the deed was notarized, or other sufficient indicia exists to rebut the presumption that the recordation of a deed is the transfer date, on or before February 15, 2021, such transfers should qualify for the prior laws’ benefits.

Inheritances that occur on or before February 15, 2021 should also qualify.[15] Make sure to contact your local assessor to see how they are treating the application of Proposition 58 and 193 as they may vary county to county.

To qualify for the new parent to child exclusion, the real property transferred must be the principal residence of both the transferor and, as a departure from previous law, the transferee[16]. Additionally, the value of the home is no longer uncapped and the exclusion will be applied only for a certain amount: the current factored base year value plus $1,000,000.00[17]. If the fair market value of the property exceeds that amount, the excess will be reassessed. Below is a formula to illustrate the application of the new parent to child exclusion:

Step 1: Factored Base Year Value + $1,000,000 = Excludable Amount. If this amount is below the fair market value of the property, no reassessment will occur and the Factored Base Year Value will be transferred to the transferee.

Step 2: Fair Market Value – Excludable Amount = Reassessed Portion. This is the amount in excess of the exclusion that will be added to the Factored Base Year Value.

Step 3: Factored Base Year Value + Reassessed Portion = New Base Year Value.

Proposition 19 also requires the transferee to file for the homeowners’ exemption within 1 year of transfer and, as mentioned above, the elimination of the exclusion for any other property.[18] The grandparent to grandchild exclusion can still be applied, provided the property transferred is the principal residence for both parties, subject to the same financial limitations (assessed value + $1,000,000), and all of the parents/children who could have qualified for the parent to child transfer have died.[19]

IV. Final Thoughts

Proposition 19 has caused significant changes to property tax law for individuals over the age of 55, disabled individuals, individuals affected by wildfires and disasters, and for transfers amongst parents and children and grandparents and grandchildren. Attorneys should be cautious when counseling their clients about the benefits afforded under Proposition 19 and the deviation from prior laws. Remember, Proposition 19 is a constitutional amendment, additional authority and guidance is sparse. Every attorney should continue to stay updated on Proposition 19 to ensure they properly comply with the law requirements to obtain the maximum benefits for their clients.


[1] For the purposes of this article, all references to property mean real property including houses, multi-tenant, commercial, farms, ranches, etc.

[2] As a disclaimer, do not rely on this article for any legal interpretation or official guidance. It is possible that additional law will be implemented by the time of publishing or shortly thereafter. The situation with Proposition 19 is currently fluid and will likely remain this way until appropriate statutes and regulations are implemented and case law is available to interpret such guidance. Remain vigilant in updating your knowledge and information on this subject.

[3] Equal or lesser value is defined as 100% of the value of the replaced property if the replacement property is purchased or built prior to the sale of the replaced property; 105% of the value of the replaced property if the replacement property is purchased or replaced within one year of sale of the replaced property; and 110% of the value of the replaced property if the replacement property is purchased or replaced within one year of sale of the replaced property.

[4] Cal. Rev. & Tax. §69.5

[5] Id.

[6] Cal. Rev. & Tax. §69

[7] Equal or lesser value is defined as 105% if the replacement property is purchased or replaced in the first year following the disaster of the replaced property; 110% if the replacement property is purchased or replaced in the second year following the disaster of the replaced property; and 115% if the replacement property is purchased or replaced in the third year following the disaster of the replaced property.

[8] Cal. Rev. & Tax. §63.1(a)(1)(A)

[9] Cal. Rev. & Tax. §63.1(a)(2)

[10] Cal. Rev. & Tax. §63.1(a)(3)(A)

[11] This section addresses the changes in laws explained in section II(a) of this article.

[12] See Letter to Assessors No. 2020/061-Proposition 19

[13] This section addresses the changes in laws explained in section II(b) of this article.

[14] This section addresses the changes in laws explained in section II(c) of this article.

[15] See Letter to Assessors No. 2021/008-Proposition 19 Intergenerational Transfer Exclusion Guidance and Questions and Answers

[16] Clear guidance has not been provided yet to determine what actions, i.e. length of residency, are required to claim this exclusion.

[17] Commencing on February 16, 2023 and continuing on every other February 16, this amount will be adjusted by the percentage change in the House Price Index for California for the following year.

[18] See Letter to Assessors No. 2021/008-Proposition 19 Intergeneration Transfer Exclusion Guidance Questions and Answers

[19] See Letter to Assessors No. 2021/008-Proposition 19 Intergenerational Transfer Exclusion Guidance and Questions and Answers

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