One of the several unintended consequences of Prop 13, the 1978 initiative that froze homeowner and commercial property tax rates, was creating a property tax system riddled with loopholes that give commercial property owners the ability to avoid paying billions in tax dollars for schools, libraries and critical neighborhood services. Specifically, the “change of ownership” loophole allows commercial property owners to avoid reassessment of their properties when they are sold. In 2006, billionaire computer founder Michael Dell bought the Fairmont Miramar Hotel in Santa Monica and found a way—via high-priced lawyers—to change up the deal to avoid a legal change in ownership. That move saved him about $1 million in property taxes each year, an option homeowners do not have themselves.
Earlier this year, Assemblymembers Tom Ammiano (San Francisco) and Raul Bocanegra (Los Angeles) coauthored AB2372, a bill that sought to close the “change of ownership” loopholes created by Prop. 13. The bill, which only changed the threshold for commercial property tax reassessment from 100% change in ownership to 90% and excluded publicly traded companies, was not meaningful reform. Because of this, the bill quickly gained support from many in the business community.
After quickly passing through the State Assembly, AB 2372 failed to make it out of the Senate Appropriations Committee just two weeks from the end of the legislative session.
Currently California Calls is one of 37 organizations which have joined together to research the impacts of Prop 13, current commercial property tax assessment policies, and corporate property tax loopholes in search of ways to bring real reform to California. Find out more about what the diverse group of labor, civil rights, housing, social justice and community groups are working on now, here.