Proposition 13 provides a tax advantage to California property owners by limiting the annual increase in a property’s assessed value to no more than 2% and pegging its initial base year value to its value when it was last sold or built. This constitutional amendment keeps property taxes relatively stable and predictable. However, this protection is not permanent. Certain events can trigger a full reassessment of the property to its current fair market value, which can lead to a substantial increase in the annual property tax bill.
Losing Prop 13 Due to Change in Ownership
The most frequent cause for a property to be reassessed at current market value is a “change in ownership.” According to California Revenue and Taxation Code §60, this is a transfer of a present interest in real property, including its beneficial use, where the value transferred is substantially equal to the value of the fee interest.1California Public Law. California Revenue and Taxation Code section 60 (2025) This means selling or gifting a property to another person triggers a reassessment. The same applies to most inheritances.
Further actions that qualify as a change in ownership include adding or removing individuals from the property’s title, such as when creating or dissolving a joint tenancy. Transferring property into a legal entity like a family trust or LLC can also cause a reassessment. Under Revenue and Taxation Code §64, if a single person or entity gains control of more than 50% of an entity that owns property, it is considered a change in ownership of the property itself.2FindLaw. California Code, Revenue and Taxation Code – RTC § 64
It is important to recognize specific statutory exclusions. Under Revenue and Taxation Code §63, transfers between spouses or registered domestic partners are not changes in ownership.3FindLaw. California Code, Revenue and Taxation Code – RTC § 63 Similarly, correcting a name on a title or placing a property into a revocable trust for the benefit of the original owner are excluded under §62.4FindLaw. California Code, Revenue and Taxation Code – RTC § 62
How New Construction Can Trigger Reassessment
Adding new structures or making significant improvements to a property can also lead to a reassessment, though usually not for the entire parcel. State law differentiates between “new construction” and regular maintenance. New construction that adds value, such as building an addition, adding a swimming pool, or completely renovating a home to a “like-new” condition, will trigger a reassessment.
According to Revenue and Taxation Code §70 and §71, when new construction occurs, only the newly added portion is reassessed at its current market value. For instance, if you add an 800-square-foot family room to a 1,200-square-foot home, the county assessor will determine the market value of that new 800-square-foot addition only. The original 1,200 square feet and the land beneath it will retain their existing Proposition 13 base year value.
This creates a blended assessment. The value of the new construction is added to the existing assessed value of the property, resulting in a higher overall tax bill in subsequent years. The original portion of the property continues to benefit from its protected base year value.
Proposition 19 Rules Affecting Prop 13 Benefits
The passage of Proposition 19 significantly altered the landscape for retaining Proposition 13 tax benefits, particularly for properties transferred between generations. Effective February 16, 2021, this proposition narrowed the parent-child and grandparent-grandchild exclusions that previously allowed families to pass down property without triggering a reassessment.
Under the new rules, for a child or grandchild to inherit a parent’s low tax basis, the property must become the child’s principal residence within one year of the transfer. If the property is used as a rental or a second home, it will be fully reassessed to current market value.
Furthermore, even if the principal residence requirement is met, the exclusion is now capped. The child can retain the parent’s tax basis only if the property’s market value at the time of transfer is not more than the parent’s assessed value plus $1 million. Any amount exceeding this cap is added to the taxable value.
This marks a substantial departure from the prior rules, which allowed parents to transfer a principal residence of any value and up to $1 million of assessed value of other properties without reassessment. Many inherited properties that would have previously kept their low tax basis are now subject to a partial or complete reassessment.
Notifying the County Assessor of Property Changes
When a change in ownership or completion of new construction occurs, property owners have a legal duty to notify the County Assessor. This is typically done by filing a Preliminary Change of Ownership Report (PCOR), a questionnaire that provides the assessor with details about the transfer, including the parties, purchase price, and terms.5FindLaw. California Code, Revenue and Taxation Code – RTC § 480.3 This form is usually completed during escrow and filed with the County Recorder along with the deed.
Failing to file the PCOR at the time of recording can result in a $20 fee. If a PCOR is not filed, the assessor’s office will mail a Change in Ownership Statement (COS) to the new property owner, which must be completed and returned within 90 days of the written request.
Failure to file the COS on time can result in a significant penalty, which is the greater of $100 or 10% of the taxes applicable to the property’s new base year value.6FindLaw. California Code, Revenue and Taxation Code – RTC § 482 The penalty is capped at $5,000 for properties eligible for a homeowners’ exemption and $20,000 for properties that are not, as long as the failure to file was not willful. The information on these forms allows the assessor to determine if the event triggers a reassessment and if any exclusions apply.
The Reassessment Process by the County
Once the County Assessor is notified of a potential reassessment event, either through a PCOR or a building permit, a formal review process begins. The assessor’s office analyzes the submitted documents to confirm that a change in ownership or qualifying new construction has occurred. If it has, the assessor must determine the property’s new base year value by appraising its fair market value as of the date of the event.
Following the appraisal, the property owner receives official notification, often titled a Notice of Supplemental Assessment, which details the new assessed value.7FindLaw. California Code, Revenue and Taxation Code – RTC § 75.31 For any increase in value, the county issues a supplemental tax bill. This bill covers the difference in taxes for the remainder of the fiscal year.
This supplemental bill is separate from the regular annual property tax bill. It reflects the prorated tax increase resulting from the new, higher valuation. After the initial supplemental bill, the new, higher assessed value becomes the basis for all future property tax calculations, subject to the standard 2% annual increase limitation.