There is no escaping property taxes, right?
According to the Sacramento County Assessor, “An “escape assessment” is a correction to a property’s assessed value on the local property tax roll. The correction is made because the Assessor’s Office discovered a property or a taxable event that should have been assessed but was not. Current and/or prior year tax rolls may be affected. The most common reasons for an escape assessment are overlooked or unreported new construction, a missed change of ownership… or the removal of an exemption.”
Why am I talking about escape assessments? I just finished up some property tax consulting work for an East Sacramento home owner who needed research for his property’s value over the past four years. I love this type of work because it’s exciting to analyze the market for a number of years to establish a value over time. In this situation the owner inherited the property in 2008 from a friend, but the Assessor’s Office was not informed at the time of the death of the original owner, which should have triggered a reassessment. When the Assessor discovered the death and change of ownership, they sent the new owner a “Notice of Proposed Escape Assessment”, which basically means the Assessor’s Office enrolled new assessments for the property for the past four years. The home owner can appeal the values within 60 days of the issuance of the notice. Since the owner disagreed with the value put on the tax roll by the Assessor for 2008-2011, he hired me to show what market value was during each of these respective years.
NOTE: In situations like this the owner can appeal property taxes for multiple years in the past, but that’s not the case in typical “decline in value” situations. If you have been overtaxed for the past several years, for example, but you did not formally dispute your property taxes at the time, then there is nothing you can do once the appeals deadline passes on November 30 of the given year. All you can do is wait until the next year to appeal your property taxes.
Does that make sense? Let me know if you have any questions.
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truly fascinating. thanks. do you know if there is any way for the low prop 13 tax rates to pass to beneficiaries upon inheritance, or does inheritance trigger new property taxes always?
Thanks. There are really so many rules when it comes to taxes and transfers. It’s very important to read up on what is allowed. The rule of thumb is when there is a change in ownership, there will be a reassessment of property value (or in other words a new Prop 13 value). But there are circumstances and certain types of transfers that do not fall under the category of a “change of ownership”. I am not a tax attorney of any sort, so I definitely refer others to read the fine print and consult an attorney or tax code specialist. Disclaimers out of the way, these links are helpful:
Rule 462.240. The Following Transfers Do Not Constitute a Change in Ownership. http://www.boe.ca.gov/lawguides/property/current/ptlg/rule/462-240.html
Rule 462.160. Change in Ownership—Trusts.
http://www.boe.ca.gov/lawguides/property/current/ptlg/rule/462-160.html
FAQ for Exclusion from Reappraisal under propositions 58/193 [Transfers Between Parent and Child; Grandparent and Grandchild]
http://www.boe.ca.gov/proptaxes/faqs/propositions58.htm
STATE BOARD OF EQUALIZATION—PROPERTY TAX Subchapter 4. Equalization by State Board (370–500)
http://www.boe.ca.gov/lawguides/property/current/ptlg/rule/461.html
The proposed escape assessment was sent to the escrow office that had moved sincethe time we oppened the escrow. Consequently, we did not receive the notices the assessors office had sent out. Now, six month has passes and the assessor office sent us a delequant tax bill. I feel we do not owe the tax because we were not aware of the notices. This was a prop 58 case.
Please help
Fred G.
Thanks
Fred, I just came across this comment from quite a while ago. I’m so sorry to have missed this one. I’m not sure what happened as I am in the habit of responding to all comments. This sounds like an unfortunate issue, and my guess is the Assessor would not budge and accept less money due to the escrow company dropping the ball. However, it may be prudent to at least waive the delinquent charges. I wish you the best.
the increased amount in real property valuation over the regular assessed valuation from a delayed reappraisal of the property and/or an erroneously applied homeowner’s exemption valuation reduction. secured property supplemental tax bill retroactively taxes the supplemental assessment of property on a pro- rata basis as a result of the assessor’s reappraisal of property
Thanks for your comment.
I just got an Escape Assessment (County of San Diego) owing to a “missed change in ownership” of my mobile home which closed 08/11/2011.
The three years net totals in the $46,000 range don’t tell me how much more I might have to pay nor do I know where begin to research as to value then and now in hopes I do not owe them. Any ideas where I might start?
Hi Sandra. Thanks for reaching out. I might recommend calling whoever sent you the letter to ask them for an explanation. I imagine it’s the Assessor in San Diego, and the phone number should be on the letterhead that was sent to you. You can always ask them how much the $46,000 in assessment is going to equal in payments, and they should be able to answer you. I know up here the tax rate is about $100-125 for every $10,000, so $46,000 would equal about $500-600 out of pocket. Let me know if you have any questions.
My Ex and I had a home together, when we split up I bought her out and took her off the title of the home. Now my City hit me with almost a $700 Escaped Assessment. I find this ridiculous as all I did was remove her from the title. The City says I gained 50% more of the property, but how do they know what percentage I had in this property anyway? I could have already been writing off 99% of it and only gained 1% by removing my Ex’s name from title.
Dave, I’m sorry to hear about your situation. If I were in your shoes I would feel exactly the same. First off, below is what the tax code says about a change of ownership. I thought this would be a definitive way to show they are possibly giving you a new assessment because of a change in the interest of the ownership of the property. Usually a refinance does not trigger a new assessment, but maybe if you removed her from title as a part of the refi, that triggered it. I’m not certain on that point. It sounds like you can go round and round and parse whether you had 50% or 1% of the ownership, but it would seem if you are now the sole owner, they are looking at the situation as if you now own 100% of the property. The big key here is they are assessing you as the 100% owner of the property based on a certain date. From a property tax standpoint, you can look back at that date and then dispute the assessment if it seems too high. Of course the bigger issue is that this is an issue in the first place. I’m sure you’ve already reached out to the Assessor to explain your situation. I might encourage you to ask them for documentation to support that removing your ex-wife is a change of ownership. Just be sure they know your situation, and that your situation fits the language of what they are saying. I wish there was something I could do to help, but it sounds like a change of ownership based on the paragraph below. I hope I’m wrong, and I hope you can find a loophole. If you do, please comment back. If there ends up being something I can do, I am around. Best wishes Dave. I saw your other comment too about a lower interest rate. Congrats on that.
“Rule 462.001. Change in Ownership—General. Reference: Sections 60–67, Revenue and Taxation Code.
A “change in ownership” in real property occurs when there is a transfer of a present interest in the property, including the transfer of the right to beneficial use thereof, the value of which is substantially equal to the value of the fee interest. Every transfer of property qualified as a “change in ownership” shall be so regarded whether the transfer is voluntary, involuntary, by operation of law, by grant, gift, devise, inheritance, trust, contract of sale, addition or deletion of an owner, property settlement, or any other means. A change in the name of an owner of property not involving a change in the right to beneficial use is excluded from the term “transfer” as used in this section.”
This code came from the following link:
http://www.boe.ca.gov/lawguides/property/current/ptlg/rule/462-001.html
I should point out that I secured a new loan at a better interest rate when I removed my Ex from the title.
Congrats Dave. I’m happy for you. My bad on saying “ex-wife” (yep, I assumed). Thanks.
And she was not my Ex Wife, she was my Ex Girlfriend of 20 years.
My parents, who are both still alive, apparently have owned a property since 1974. I found the original deed and it doesn’t look like anything was ever recorded. I think they’ve been paying property taxes all this time?? But if they were to finally record the deed now, will there be any escape assessment? And does the fact that they got this property prior to prop 13 passing affect anything?
Hi Annie. That’s an interesting situation. It almost seems like it would have had to record in order to pay property taxes, but who knows. It’s hard to say if there would be any back-taxes due, but I will say if taxes were not paid, the government is a big fan of collecting money. I think the beginning point for you may be calling the Assessor to ask general questions without identifying the particular property. Have you checked Tax Records to see if they are on title? That may also prove helpful. You are welcome to send me an email with the property address or parcel number, and I can tell you who is on title (as long as the property is located in California).
Hi Thanks for your reply! I called in to the recorders office with the property info and they confirmed that it’s my parents’ friends (they’re the ones who gave the parents the property) who are still on the deed. I think the agreement was that my parents could have the property as long as they would keep paying the property taxes, but I think the bills were still addressed to their friends. I think they kept up with paying the taxes. My parents can just record the deed to make it official? Or will they be hit with all these supplemental and escape taxes??
That’s a tricky situation, Annie. I’m honestly not sure what will be done since that’s outside of the scope of what I do. Theoretically if someone is on title and has not paid taxes, they will owe for those taxes. However, if your parents are not on title, I’m not sure how that is going to play. I know about escape assessments as a valuation professional. This sounds like something more specific that should best be answered by an Assessor, attorney, the California Board of Equalization (who has some great Q&As online), and maybe even a conversation between your parents and their friends is in order. I wish I had a quick answer for you.
OK thank you for your answer! I will look at that website and also tell my parents to talk to their friends.
Hi,
I and my sister on the deed title in 1984, California. My sister died in 2006. I called the county assessor to inform my sister death in January 2015. They reassessed the home for 4 prior years 2012, 2013, 2014 and 2015 with escape assessment to the current ma ket value.
Even my sister is on the title, she did not put any down payment for the home. I paid all down payment, property taxes, mortgages, insurances myself. In 1986 was on diagnosed as mental depression until death in 2006.
Can I avoid escape assessment because my sister did not pay and 0% interest in the home. She did not work. I had all her mental record treatment from the hospital and doctors so I can prove she did not pay for the home.
Thank you and hope to hear your opinion.
Le
Hi Le. I’m so sorry for your loss and the difficult situation. I apologize too for a slight delay in response as I was out of town for a family funeral. I wish I could give you a definitive answer, but I really don’t know the answer. I specialize in value rather than the nitty gritty of tax code. I will say one thing to keep in mind is it does not matter who is paying the mortgage and taxes. The key is if there was a title change in 2012 that would trigger a reassessment.
Thank you Ryan for your opinion. My condolences to your family. I hope you are feeling well during this difficult time
Le
Thank you sincerely.
Hi Ryan,
I have one more question, you know what is the formula if 50% of my sister transferred to me and then reassessed value to be? Do you have an example? Thank you very much for your help.
Le
Hi Le. I’m not exactly sure what you mean. I do know assessed value is theoretically based on market value though. This means your assessed value ought to be based on a certain date when the property had a change of ownership or transfer. Current value could be much different than actual assessed value depending on when the property was assessed and what the current market has done. If your sister owned 50% of the property, that value might not actually be 50% of the actual total value of the home since there is a partial interest discount in order (since if 50% of an interest went to sell on the open market, most buyers would expect a discount (they wouldn’t pay the full 50%)). This may be wildly off from what you are asking, but I thought I would give an answer a stab. If you have any follow-up questions to help me understand what you are getting at, please advise. Thank you.
Hi Ryan,
This will result in 50 percent of each property maintaining its prior base year value and 50 percent of each property receiving a new base year value. What is the new value?
Thank you.
Le
That is a very interesting situation. There is no one formula to apply here. It really comes down to what it is worth today to determine 50% of the new assessed value and then what the original Prop 13 value is for the other 50%. It sounds like your assessment will be a math equation to add these two figures. The tricky part is that a partial interest in value is not likely realistically going to split down the middle at exactly 50% from a market value perspective. However, for the sake of assessed value the Assessor may simply split whatever today’s value is at 50% and assess you based on that figure for half the property. That’s my guess.
hi Mr. Lundquist: my husband & I did “new construction” on our home which was finished in June of 2009 [all completely permitted]. In August 2016, we received 4 tax bills, representing 2012-2016 for “escaped assessment” on this construction. I know we only got billed for those 4 years–2012 to 2016–b/c of the 4 year statute of limitations. However, my question is, since we did not receive these “escaped assessment” tax bills until 2016, more than 7 years after completion of the construction, can we still be taxed or does the 4 year statute of limitations prohibit it? Unfortunately, I misunderstood the appeal filing time of 60 days [I thought it was an appeal time that started running from the date the new tax bill was due in april 2017 based on confusing info we received when we visited the tax assessors office back in September 2016] so we did not appeal on this question in October 2016. thank you, cheryl holland
Hi Cheryl. Thanks for reaching out. I am not sure if there is a statute of limitations of sorts regarding back taxes, though I am very aware if the government is owed money they are going to ask for it and probably get it to some degree or another. In your case I hope the base-year value was at least set in place at a reasonable level so your current taxes are based in reality (this assumes you are in California under Prop 13). Moreover, keep in mind in some markets values declined until 2012, so you may have lost value off your original base price (this may or may not be true in your market of course). You may not be able to dispute your escape assessment any longer, but if you can somehow get an extension I would definitely encourage you to pay close attention to the value from 2012 to be sure it is realistic so that subsequent years are therefore more realistic too.
You may be able to talk with a tax specialist or attorney to better answer your question. I wish I knew the fine print of the law to be able to speak into your situation. I will say I’ve had files comes across my desk where I’ve assisted home owners for a good 4 to 5 years of taxes. It is not usually 7 years, but that does not mean it cannot be.
Please keep me posted if there is anything I can do for you. I wish you the very best.
Hello Mr. Lundquist, I’ve been researching this escaped tax assessment, but haven’t been able to find anything that fits my particular situation. I purchased our house from the estate of the previous owner in January COE. I just received a delinquent notice indicating that i owed taxes from 7/1/2016 – 6/30/2017, however i didn’t close escrow on the house until 1/13/2017. Is there a way to dispute the tax bill or have it pro-rated for the period of time i lived in the house? A call to the county assessor told me that I’m responsible to pay the entire bill even though I wasn’t the owner from 7/1/2016 – 1/13/2017. Was hoping your experience might be able to save me additional phone calls.
Hi Robert. I’m sorry to hear about your situation. Unfortunately I don’t have an answer for you since it’s really a legal issue. I am on the value side of things, so I just don’t know. Why was this not caught during escrow though? I would reach out to the title company and ask them about this. Who should have caught this? Was it title, escrow, the previous owner, or you? That’s a key question in my mind. I sure hope someone else picks up the payment here. Sorry I couldn’t be more help.
They taxes should have been prorated in escrow. If you closed escrow in January, the escrow company should have verified the 1st installment was paid. If you go back to them they will normally pay the installment if they failed to collect it from the Estate Seller.
Hello Ryan,
My wife and I bought our home in 2009. We received a bill for an escaped assessment from the past 3 fiscal years (‘14-‘15, ‘15-‘16, ‘16-‘17). However, we did not have any new construction, change in ownership, or property discovered. The only thing that I can think of was when we asked the Assessor’s Office to remove the former home owner from the name on the monthly bill. (For some reason, his name was always included on the bill since we bought the home). We did refinance our home in 2015, but I don’t think that would cause this Escaped Assessment.
Any guidance would be appreciated.
Thank you in advance.
Jeff
Hi Jeff. A refinance should not trigger new ownership, which then should not trigger a new assessment. Maybe it was the removal of the previous owner that did the trick here. I would recommend you call the Assessor and ask what is going on. I would encourage you to be nice and diplomatic too (not that I needed to say that, but sometimes property owners get militant and I just don’t think that serves them well). I have found sometimes the Assessor’s office does make mistakes. Hopefully this is one of them. Once you call them and find out what this escape assessment is all about, let me know if you have any follow-up questions. I would recommend calling them immediately though because escape assessments often need to be handled with 120 days or so.
Ryan,
My mother-in-law passed away on December 6th, 2018. She was receiving a partial exemption (my father-in-law was disabled from the Navy) on property taxes. I notified the assessor of her passing and sent a death certificate. Now, I received a notice of escaped assessment in the mail for an “improvement increase” of $76,026 for 2018. Why? We sold the house in April 21st (closed escrow), and the taxes were paid “pre-escrow” $988+/- already. Why would they go back and try to get more taxes for 2018 when she was still exempt? She doesn’t lose her exemption when she passed away 25 days before 2019 would she? We are at a loss of what we need to do. Please advise.
Thanks!
Hi Laura. I’m so sorry to hear about your loss and this situation. I would honestly recommend asking the Assessor directly what this assessment is all about. They might have a very logical and legal reason, but then again it could have been a mistake. I wonder if the assessment is the value they’ll be assessing you at too rather than the amount you owe (I sure hope so). I would recommend calling them and being as diplomatic as possible (even if you’re really upset). Unfortunately I don’t have any specific advice here other than that because there are too many complexities with taxation to offer specific insight into a situation I know very little about, but going straight to the source and really understanding what the escape assessment is will be very key. One would think the assessment would at least be prorated. Whatever the case, call them and see what they have to say. If you aren’t satisfied with the answer you can also search the Board of Equalization website for your state to look up the fine print of what is legal or not in terms of taxation. Your Assessor’s website might also have this. If you are in California, here you go. http://www.boe.ca.gov/
Thank you Ryan! I will call them again to see what they can tell me, unfortunately, the “contact” listed on my notice is on the rude side and I really have to fight myself not to say something that would really lead me to a guaranteed “not to go anywhere” response, if you follow me. I will let you know what I find out. Thank you for your time.
Good luck Laura. Yeah, it’s not easy at times. Government jobs can be the worst too as it’s such an incredibly negative culture. Just do your best. I recommended being as diplomatic as possible only because I’ve found myself get results this way. You know, win people win honey instead of vinegar. You’ll do great.
MY ADULT DAUGHTER AND I PURCHASED A HOME WITH CASH IN 2018
OUR CURRENT TAXES BILL STATED WE OWE ABOUT $877 BY 12/6/2019
HOWEVER WE RECEIVED ANOTHER TAX BILL FOR ABOUT $1,200 THAT INCLUDED AN ESCAPE ASSESSMENT FOR ABOUT $700 THIS IS OUR FIRST TIME BUYING ALL NEW TO US
IT DOESN’T MAKE SENSE THAT WE ARE CHARGED FOR THE PROPERTY BEING DIVIDED INTO 2 LOTS INSTEAD OF 1 LARGE LOT
IT IS MY UNDERSTANDING LOT WAS DIVIDED 1 DAY PRIOR TO US PURCHASING THE HOME IN ADDITION WE ARE FINDING THAT ALOT OF COUNTY OFFICES ARE NOT ABLE TO FIND US ON MAP ARE WE RESPONSIBLE ?
WE DID NOT RECEIVE A NOTICE CONCERNING THIS ESCAPE AND IT WAS TO LATE TO FILE AN APPEAL PLEASE EXPLAIN THANKS
Hi Liz. Sorry to hear about your situation. It’s hard to speak into this scenario too much, though I’d ask if you are certain you’re being charged because of the lot split? Or are you being charged because you bought in-between tax bills? I find sometimes this is the case, so it’s natural to see higher taxes. Or if there was a lot split and you now have two lots, it makes sense to have two bills most likely. In these cases I recommend contacting the Assessor immediately and asking them to clearly explain the taxation. Hopefully this is some sort of accounting error. Best wishes.
My hubby and I were assessed for escaped value. We bought a house at 90k a few years ago and they think it’s worth $195! I know we owe them some because they have been assessing At $60k for a few years. I called right away and explained the pictures on Zillow were after I made major improvements. I sent photos of how trashed it was. Part of the problem was the nice photos I published. The other part is it looks like we knew the guy and got a sly deal. It never went public through a realtor so there were no competing offers or anything. Now he is asking how much money we put into it. We only put around $30k into it. Plus a lot of sweat! We did most things ourselves. I feel like if I give them these numbers they’re still going to try to assess us at over $150k! We lost out on $21k on rent for the year and half we worked on it. We still had to make our monthly private mortgage payment. I didn’t have a different job that whole time so I could work on the house… There really were no comparable houses sold that year in our small town. Certainly none that had this much damage. I want to get the best value here. What else can I add to the conversation to help justify our low value? We bought our house in similar condition a few years prior (a few doors down from this one) from foreclosure at $100k so I really don’t want to consider settling for any value over $110k for sure! My mother in law thinks they will add the $30k to the $90k to come up with a market value. But I’m certain they’re going to try to subtract my $30k from their proposed $195k. Is sweat equity even worth something in this case??? Thanks in advance.
Hi Jessica, I think the biggest issues is showing comps at the time that the home was worth what you say it was worth. If you have support for that, then it’s hard to argue with. I’m not sure why they are asking how much you put into the home. That shouldn’t have any bearing on the market at the time years ago. Though I suppose I can see why they might wonder. But whether they’re wondering or not, the key is the value that is found in the comps around the time you bought it. Bottom line. I think pictures should work well, but comps seem like they should be even better. If the office is adamant about knowing how much you put into it, I would clarify that you did this work yourself and that the $30K figure would have been way higher. But I’d also maybe politely ask why this figure matters too when in reality what you did afterward doesn’t tell us much about what the property used to be worth.