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New property transfer tax undoes protections approved by voters; ‘An enormous tax increase on California families’

NORTHERN CALIFORNIA RECORD

Saturday, November 23, 2024

New property transfer tax undoes protections approved by voters; ‘An enormous tax increase on California families’

Legislation
Shelleysusan

Shelley

The controversial Proposition 19 ballot measure, narrowly approved by voters Nov. 3, was presented as a way to help seniors and wildfire agencies, but will also raise taxes when parents pass a house or small business onto their children.

The referendum dismantles Proposition 58, which voters passed in 1986 to establish tax protections when families transfer business or residential properties from one generation to another, Susan Shelley, VP, communications with the Howard Jarvis Taxpayers Association (HJTA), told the Northern California Record.

“We’re very saddened by it, because I don’t think the voters knew they were voting for the end of the parent-child tax break on property transfers,” Shelley said. “It’s an enormous tax increase on California families.”

It was this election’s closest ballot proposition decision, passing 51% to 49%.

The measure takes effect February 16, 2021, but before making drastic changes to avoid the tax hike, Shelley advised seeking advice from a financial or legal professional.

People also can contact their legislators and push for a repeal in 2022, Shelley said. “I think people should know they should call their elected representatives in Sacramento and tell them to fix this,” Shelley said. “They could put Proposition 58 back on the ballot.”

Under that measure, parents could transfer a primary residence and up to $1 million of other property to their children, and it would be excluded from reassessments.

The Proposition 19 campaign ads weren’t designed to make people aware of what they were actually voting for, Shelley said. Roughly $60 million in contributions was put forth by realtor associations at a time of historically low housing inventory.

“Realtors did not emphasize it is a property tax increase for when property transfers from parents to children,” Shelley said. “Realtors wanted to create more sales. With a higher tax bill that they can’t afford, people could be incentivized or penalized into selling their homes.”

In cases where people are forced to sell, residential or commercial tenants also may get evicted.

Shelley noted that the measure, which was put on the ballot by the Legislature’s Assembly Constitutional Amendment 11, was sped through the usual processes with little public review.

“We were very pleased with how many people supported Proposition 13 tax protections [by opposing Proposition 15],” Shelley said. “We hope the Legislature will pay attention to that, and be aware of the fact that the people of California are really tapped out.”

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