California personal property tax assessments and appeals

Personal property tax filing

For most taxpayers, filing the annual business property statement (BPS) is basic. What most people do not consider are the volumes of state rules, regulations, and court cases that determine what is or is not taxable and whether the assessment derived from the BPS complies with California law.

Most companies do not have the time or resources to become formally educated in all nuances of property tax law. These are the companies who are uncertain if they are paying more than their fair share of property taxes.

What property is taxable in California?

All tangible personal property is taxable in California, unless the property is specifically exempted from personal property tax assessment.

Examples of exempted property include but is not limited to the following:

• Software

• Business Inventory

• Licensed Vehicles

• For Construction-in-Progress, the property must be physically in the jurisdiction of the county. Down payments, progress payments and engineering fees are not taxable if the equipment is not physically at the situs.

Important dates to remember

• January 1st: The lien date for the assessment. This is the valuation date for the personal property assessment at a specific situs in the County

• April 1st: Business Property Statements (Form 571-L) are due

• May 7th: Last day to file the Business Property Statement without penalty. If it is filed after this date, the Assessor will add a 10% penalty to the assessment

• May 1st – June 30th: The Assessor is processing the filed Business Property Statements and creating assessments for the year

• July- August: Taxpayers will be receiving their Unsecured Tax Bills

• August 31st: Last day to pay the Unsecured Tax Bill without penalty. If paid later, the Tax Collector will add a 10% late payment penalty

• September 15th: Appeal filing deadline for the following Counties (this may be extended to November 30th if the Assessor does not send a Notice of Assessed Value by August 2nd): Alameda, Alpine, Inyo, Kings, Placer, San Francisco, San Luis Obispo, Santa Clara, Sierra, Ventura, Mono County

• November 30th: Appeal filing deadline for all other CA Counties

Personal property tax assessments and appeals

The secured roll and the unsecured roll

California breaks the assessment roll into two parts: the secured roll and the unsecured roll.

On the secured roll, personal property and real property appear side-by-side, usually due to the owner of the building also being the owner of the personal property and fixtures. Behind this set-up is the ability of the state to put a lien on your real property if you don’t pay your personal property tax.

The unsecured roll is for personal property and fixtures that resides on land that is not owned by the taxpayer.

How is my property assessed?

The assessor takes the reported costs from the Business Property Statement and applies an inflation factor to bring the historical costs to today’s dollars. The inflation factor is from the U.S. Government Bureau of Labor Statistics and it can increase substantially more, and sometimes less, than 2% a year.

After the Assessor inflates the reported costs, they apply a depreciation factor based on the economic useful life of the equipment. For Machinery and Equipment, the Assessor typically depreciates the assets over a 15yr economic useful life.

Example: For the 2022 assessment year, if the assessor uses the Board of Equalization (link: https://www.boe.ca.gov/) guidelines on a property that was purchased in 2020 that had an original cost of $100,000 and a 15-year life, the assessment would be $96,000. (($100,000 (price) x 109 (inflation) = $109,000 x .88 = $96,000.)

We disagree with the County’s assessment. What can we do?

If the taxpayer believes the County’s assessment is incorrect, they can file an appeal with the Assessment Appeals Board (AAB). By statute, the appeal must be heard within 2 years of the date on the appeal application. In our experience, it takes the county roughly 1 to 1.5 years to schedule a hearing.

Prior to the hearing, an assessor will reach out in order to address the taxpayer’s issues. The county will typically send out an information request (which can be quite extensive). The taxpayer does not have to supply all the information requested; however, it behooves the taxpayer to supply enough information that supports their opinion of value in order to get the issues resolved prior to the hearing.

If the taxpayer and the Assessor cannot administratively address the appeal issues, the appeal will be heard at the Assessment Appeals Board. At the hearing, the burden of proof is generally on the taxpayer. This means that they will need to provide sufficient evidence which proves that the Assessor has incorrectly over assessed the property in question and what the correct assessment should be.

Personal property tax audits

Who gets audited?

Historically, California mandated that all taxpayers with an assessed value of $400,000 needed to be audited every 4 years. However, California has loosened these restrictions, so smaller taxpayers who have had a clean audit (no changes were made) are likely to avoid a future audit in 4 years-time. The burden is now shifted to larger taxpayers.

There isn’t a specific threshold, but in our experience, taxpayers with an assessed value over $2,000,000 will likely be audited every 4 years.

How far back can audit information requests go?

Usually four years, unless there are appeal issues relating to older asset values that need to be addressed.

How long does a property tax audit take?

Usually, audits take anywhere from 3-9 months to be finalized. Smaller taxpayers will usually have quicker audits because the county auditors are allocated more time to work on larger taxpayer’s audits.

By statute, the county must make any corrections to your assessment within 4 years of the original assessment. For example, if the current audit cycle is for tax years 2017-2021, the auditors need to make their changes prior to June 30, 2021, unless the taxpayer waives this right, or the county determines that fraud was committed.

We disagree with the audit results which resulted in an escape assessment. What can be done?

An escape assessment occurs if the auditor determines that property “escaped” taxation. The value, or the additional value of this property, is added to the assessment during the audit which results in additional taxes.

The taxpayer has the right to file an appeal on the audited results, including the original assessment and the land and building associated with the assessment. The appeal filing deadline is 60 days from the date on the “Notice of Enrollment” or the escape tax bill if you are in a county that does not send out a “Notice of Enrollment”.

Determining when the appeal filing period for escape assessments opens and closes can be daunting. The assessor is required to send a “Notice of Proposed Escape Assessment” to the taxpayer with 10 days to respond to the assessor prior to enrolling in the escape assessment.

The California State Board of Equalization has opined that filing on the “Notice of Proposed Escape Assessment” is outside of the filing period if a “Notice of Enrollment” of an escape assessment has not been issued and filing outside of the appeal filing period nullifies the appeal.

Want to be notified of our new and relevant CRE content, articles and events?