By Ian Doss | Manager - Real Estate & Marwan Saqr | Manager - Real Estate

California Proposition 15, more commonly referred to as the “Split Roll,” is a property tax on commercial and industrial properties for education and local government funding. The officially titled “Schools and Communities First Initiative” will be decided on the November 3rd ballot in California, and the impact on commercial and industrial property owners upon its potential passing will be drastic.

When it comes to its probability of passing, the initiative has been backed by Governor Newsom and the California Democratic establishment including vice presidential candidate Sen. Kamala Harris, most other California senators, assembly members, and mayors. The proponents of the initiative are well-funded with wide media reach, while the opposition has not been able to garner the financing nor the organized support it needs to mount a formidable opposition campaign.

With facts as they currently stand, we are confident that Proposition 15 will pass in November and property owners should begin to prepare for its implementation beginning fiscal year 2022.

A lot of the future property tax implications remain unclear. What is known is commercial and industrial owners will begin seeing their properties reassessed at their current “Fair Market Value” on a 3-year cycle. Most other property types will be exempt and remain protected, including:

  • Single Family Residential
  • Multi-Family Residences (Apartments)
  • Agricultural Properties
  • Commercial Properties valued less than $3 million
  • Small Business Personal Property Tax
  • The first $500,000 of Personal Property Assessment of larger businesses

The concern of many property owners and landlords that oppose the proposition is its impact on the economy since any property tax increase will likely be passed on to tenants by way of higher rents and cost of goods. Ultimately, this makes its way to the end consumer who will have to make up for these increases to keep businesses operational. Additionally, corporations might resort to job elimination, lower pay, and decreased benefits to compensate for higher taxes.

The determination of "Fair Market Value" will be complex and come with a great deal of uncertainty. Property tax consulting professionals anticipate that assessors will not have the manpower nor the time to cope with the changes required by Proposition 15. It will be interesting to see how they navigate the process, considering most of the skilled appraisers will be highly sought after in the private sector, leaving assessors with an inadequate workforce, resources, and experience. This will likely give way to errors and complications in what will surely be an overly-saturated assessment and appeal process.

Invoke Tax Partners delivers property tax solutions to owners of commercial real estate and business personal property in California and across the nation. With more than 200 years of combined property tax experience, our California Team is committed to tried-and-true methodologies and equipped with modern technology. We strive to create a meaningful partnership to invoke impactful tax savings your firm deserves. For more information contact me directly at 209.207.5011 or ian.doss@invoke.tax.