PART THREE: Coronavirus Crisis in California Motivating State Politicians to Push Unpopular “Split-Roll”Commercial Property Tax

California Property Tax

California Property Tax

A Split-Roll property tax would force many California businesses, owned by business property owners and renters alike, to literally go out of business, or relocate to a state that actually  welcomes business investment and doesn’t believe in stifling businesses with egregiously high commercial property taxation.   

The California Legislative Analyst’s Office has repeatedly warned state and local politicians that if this new property tax ballot initiative passes the entire state will most likely experience increases with respect to business operating costs all across California… and that this is also likely to influence business owners in terms of deciding whether or not to spend good money after bad in this state, or to simply pack it up and call it a day… and relocate to another state.   This is, one might say, not an attractive picture to envision for such an important state as California. 

This Split-Roll tax that California politicians want does not include any form of accountability or watchdog measures to protect California taxpayers…  There are no cost controls, no fixed requirements to produce transparency in order to avoid corruption or illicit over-spending while no one  is minding the store! 

These Split-Roll property tax supporters, typically critics of property tax relief at all costs, even removed a stop-gap on administrative expenses — so government management staffers can waste this new tax cash on overhead such as salary increases, lavish benefits and vacations, and such… with no limits or checks and balances whatsoever.  Let’s face it, something is entirely wrong with this picture.

Moreover, this property tax initiative will change the official tax assessor’s process of review for all types of properties — from a solid objective system to an arbitrary up and down mess, as we had prior to 1978 in California.  That sort of arbitrary, unpredictable tax system will lead to subjective, unpredictable property assessments. Endless, expensive legal appeals; and a rising tide of overspending on the bureaucratic side.

Let’s face it, additional property tax revenue at this level is not even needed… California taxpayers have payed into and built a Mount Everest high mountain of state and local tax cash since Proposition 13 began.  More than $240 billion just this year alone!  Next year, our competent Governor Newsom predicts a budget surplus of $21 billion!

Since Proposition 13 passed in 1978, local tax revenue (adjusted for inflation) has gone up by nearly 55%. That equals approximately $90 Billion in new spending requirements, even after another 17 million residents are added to the mix, along with accelerated cost of living in California.

These property tax revenues are not needed to accomplish what must be accomplished in this state.  California has all-time high revenues coming in, plus a significant surplus.  The type of surplus, for example, Bill Clinton would have solidified, were it not spent by the spendthrift administration that followed him.  A similar surplus formula is in motion in California as well, since the state’s local inbound government revenue is at a record high level. 

In fact, when Proposition 13 was passed into law in 1978, allowing heirs of estates and trust beneficiaries to transfer parents property taxes, with a parent to child transfer, upon inheriting property from parents, hence inheriting property taxes at a low base rate – local property tax assessments were over $6 Billion!  In fact, California state economists now confirm that local property tax has increased by over $19 Billion over the past ten years; starting at $50 billion in 2008–2009 during the  recession, to nearly $69 billion by 2019.

At any rate, beneficiaries and heirs of estates were all of a sudden   able to keep parents property taxes instead of suffering devastating tax hikes from arbitrary reassessment.  In fact, being able to avoid  property tax reassessment altogether.  While maintaining parents’ low Proposition 13 property tax rate and in 1986 with the advent of Proposition 58, being able to retain that low tax base forever after any property tax transfer from parents, which estate attorneys still refer to as a parent to child transfer or “parent to child exclusion” — which you are also most likely familiar with by now.       

Point being — an egregious property tax increase in California in Nov. 2020 from a Split-Roll tax, through the decidedly deceptive stripping down of  the 1978 Proposition 13 tax cap protection for commercial property owners — avoiding property tax reassessment for business and commercial as well as manufacturing facilities, office buildings, malls, multi-rental properties, so on and so forth — and this type of property tax unraveling is just simply not needed by local California government revenue collectors, in order to maintain a sound economy going forward, for the state of  California.

>> Click Here: to Continue to Part Four…

 

PART TWO: Coronavirus Crisis in California Motivating State Politicians to Push Harder for “Split-Roll” Property Tax

California Property Tax Changes

California Property Tax Changes

Even without California’s ill-advised Split-Roll property tax measure looming over every renter and residential as well as commercial property owners’  head throughout the sunshine state — California has already been grappling with lopsided expenditures such as over-spending on state & local government  salary increases, healthcare benefits, and lavish vacation time… Rather than budgeting properly for public works that would actually be beneficial for regular every-day Californians rather than folks with elite government positions.

Residents of this state are already dealing with unusually high taxation (other than property taxes), and other challenging regulations that make it difficult as it is for California businesses to compete effectively in a number of important and popular industrial and commercial playing fields.  

Let’s face facts… an $11 billion Split-Roll property tax increase  on business and commercial property owners would, without question, prevent businesses based in California from hiring new employees;  and would make it more difficult to retain existing employees.  

And you can forget about Christmas bonuses and/or timely raises, not to mention maintaining proper levels of health coverage!  It’s obvious that stability and predictability provided by 1978 Proposition 13 property tax relief has helped businesses in California to compete on a national level regardless of the fact that doing business in California is expensive to begin with!

Even if correctly managed, tax assessments will mirror the ups and downs of  the real estate market in  California— resulting in volatility, the way things were prior to 1978 when Proposition 13 was passed into law.  During low economic times this would most likely end up leading the state into an even more severe loss of revenue. 

If you think back… during the 2008— 2009 recession, commercial property values dropped by over 35%, mainly due to the economic recession.  These abrupt and  unpredictable economic shifts are what motivated unease and unhappiness among California property owners before 1978, and ultimately led to the big win pushed by the Howard Jarvis Taxpayers Association and others, leading ultimately to the passage of  Proposition 13 in the first place. 

Proposition 13 stabilized the property tax revenue system by capping property taxation at 2% plus nailing down property owners’ right to avoid property tax reassessment… with other stabilizing influences,   rules and iron clad regulations favoring the taxpayer for the first time.

Much to most beneficiaries’ surprise, it also became possible for estates to entertain certain options, where none existed previously; such as beneficiaries who were intent on retaining inherited property from parents now being able to buyout siblings that wanted to sell their property shares… Through a loan to an irrevocable trust, working alongside CA Proposition 58. 

Trust loans have become popular throughout California, to resolve heated sibling “inherited-property conflicts”, working in tandem with CA Proposition 58,  once those beneficiaries looking to keep inherited property actually qualified – enabling their co-beneficiaries to buyout siblings’ shares of a home usually… typically called a “beneficiary buyout of sibling property shares”.

While at the same time the siblings keeping the home were now able to legally avoid property tax reassessment, by using a trust loan to buyout a sibling’s share of an inherited house – or, as realtors call it, “a transfer of property between siblings” or “sibling to sibling property transfer” – whereas regular middle class folks simply refer to the process as “getting cash from a trust loan to buyout siblings’ shares in inherited property”.  Most people prefer to keep things simple.  As we do.

It  was unthinkable that the bad old days would even have even a remote chance of returning…  Until now. 

>> Click Here: to Continue to Part Three…

PART TWO: Why is California the Only State Where Trust Loans Can Equal Low Property Taxes for Life?

CALIFORNIA TRUST LOANS

CALIFORNIA TRUST LOANS

Newbies in the trust loan and Proposition 58 property transfer and inheritance process learn the rules & regulations from their trust lender of choice – more often than not choosing the Commercial Loan Corp in Newport Beach, statistics tell us, for whatever reason…  Avoiding property tax reassessment on an inherited property, with the CA Proposition 58 & 13 property tax transfer – subsequently  inheriting parents property taxes – establishing significant tax relief for residential and/or business real estate.

Folks that are new to this process also learn very quickly, when they start wondering what it might cost of they used their own cash (if they actually have that much in the bank), that there is more to using a trust loan than at first appears, with respect to tax savings, but also saving of process costs and fees as well. That is often the most interesting part…

Those beneficiaries looking for a loophole, where they can possibly avoid the cost of a trust loan – find out rather quickly, and abruptly, that it will cost them nearly twice as much using their own money – and that a trust loan used in this way is literally the only way to provide themselves with enough cash to enable each heir or beneficiary the ability to receive an equal portion of the assets of a trust or estate inheritance.

They all find out that in fact this is not only the best way to go – it’s the only way to go! They all discover that this trust loan process  allows siblings to keep a family home without all the stress and cost of spending their own funds, without an expensive real estate law firm or pricey 6% realtor, they find out they can now transfer at a much lower cost – and with much lower property taxes.

And, at the same, beneficiaries discover this approach allows beneficiaries looking to sell out to get the cash they wanted from a sale, yet without having to go through all that stress and trouble and expense to sell their inherited property to a typically greedy buyer looking to negotiate them down to a much lower selling price. The obligatory price negotiation.  So you wind up spending more – and profiting less.

All around, this is a much more affordable way to go. Well, look at the numbers – you have a realtor you need to pay 6% to, right? You have a real estate attorney you need to pay $500 per hour to, correct? Plus, other incidental fees and outlays. And in the end, selling to a buyer, you wind up with far less cash in your pocket than you would going down the trust loan / Proposition 58 avenue. 

People new to trusts being used in this fashion, understand right away that their ability to keep parents property taxes and to transfer parents property taxes means they will be inheriting property taxes as a basic Proposition 13 property tax transfer, parent to child transfer,  or parent to child exclusion, that will end up saving them tens of thousands of dollars, if not hundreds of thousands of dollars, in the long run. 

Trust loans, working alongside CA Proposition 58 makes it possible for beneficiaries to sell shares of inherited property, called a beneficiary buyout of sibling property shares, while avoiding property tax reassessment.  generally buying out a sibling’s share of an inherited house – or, as real estate lawyer refer to it, “the transfer of property between siblings” or “sibling to sibling property transfer” – by lending money to an irrevocable trust – typically from an irrevocable trust loan lender, commonly called trust lenders, specializing in trust loans.          

In fact, on average, beneficiaries typically save more than $6,200 annually in property taxes – year after year, basically forever – simply by taking advantage of the tax break afforded by Proposition 58, and preserving parents low Proposition 13 property tax base – a basic CA Proposition 58 & 13 property tax transfer. Never forgetting that the trick is to choose the right trust lender… and the right real estate or estate attorney to guide you through the process.

The convenient thing about a trust lender like Commercial Loan Corp is that with a company like them, you don’t need to depend the extra money on a lawyer, as you get all those extra services in a package, basically at no extra cost.

So if you’re in that position right now, and need to make some wise decisions, as to sell or not to sell, as Shakespeare might have put it – start educating yourself with dense but well organized official gov. info, and Click Here: California State Board of Equalization Website.  You can also Click Here: for a top notch niche Proposition 58 info site Or  for  well vetted, easy to understand and highly specialized information on  trust loans, Proposition 13 & Prop 58 ~ Click Here  However, there are only a few first-class Websites like this. You might also look further  here, on this site, with one of the many blog articles or interviews that address what you want to look into, and apply it to your own scenario,  starting with: Transferring Property Taxes in California  (Click Here)