Property taxation: new construction: definition.
The impact of AB 885 is significant as it provides much-needed clarity for property owners looking to rebuild after calamities like wildfires. The bill defines 'substantially equivalent' as either the size of the reconstructed improvement not exceeding 120% of the original size, or the full cash value of the improvement after reconstruction not exceeding 120% of the original cash value. This allows property owners to rebuild without facing prohibitive tax increases on their property, essentially facilitating recovery efforts. However, the bill also stipulates that if a property exceeds these thresholds, it will be deemed new construction, thereby potentially triggering a reassessment of property taxes.
Assembly Bill 885, introduced by Assembly Member Irwin, aims to amend Section 70 of the Revenue and Taxation Code in California, particularly regarding the definitions of newly constructed and new construction. The bill specifically addresses property that has been damaged or destroyed by misfortune or calamity, such as wildfires, and clarifies what is considered 'substantially equivalent' when reconstructing such properties. This new definition is crucial for determining property tax implications for these affected properties, ensuring that property taxes do not increase dramatically due to necessary reconstruction efforts.
Reactions to AB 885 have been largely supportive, particularly among communities affected by wildfires and advocates for property rights. There is a consensus that the bill provides essential relief to taxpayers who have suffered losses due to disasters, recognizing their need for financial support during challenging times. However, there is also concern from some quarters regarding the state's commitment to ensuring that local agencies are not adversely affected financially by the implications of the bill, especially in regard to lost property tax revenues.
Notably, the bill does not mandate that the state reimburse local agencies for any lost property tax revenues due to the provisions of AB 885. This has raised concerns among local governments about their future funding and financial stability. The balance between providing property tax relief to individuals and ensuring local governments can maintain their budgets is at the center of ongoing discussions surrounding this legislation. Some argue that the lack of state reimbursement could lead to strained local budgets, particularly in areas heavily impacted by natural disasters.