Posted by CSM, a resident of the Woodside: other neighborhood, on Feb 15, 2012 at 10:13 am
Best post on the thread over at PAOnline:
Time to eliminate the transfer loopholes for large commercial properties allowed by a flaw in Prop 13.
Do not attempt to modify the residential component - politically not feasible.
The commercial loopholes have changed the entire structure of who pays property taxes in California. Prior to Prop 13, commercial payed 60% of the taxes and residential paid 40%.
It has reversed - now residential pays 60%, commercial pays 40%.
Where's the fairness?
"It's an open secret in California that the biggest properties are bought and sold under a loophole in the Proposition 13 that prevents city's from reassessing them. It's a fairly easy scam, one that almost never happens with lower-priced residential property: Instead of selling, say, a large commercial office building, the owners simply incorporate the building as a limited liability corporation and then sell shares in the LLC. That doesn't count as a property transfer under Proposition 13, so the building is never reassessed.
That means a building that may have sold for $500 million still pays taxes on an earlier assessment, which is often far, far lower.
The California Tax Reform Association, in a May, 2010 report, notes that many of the biggest mergers, acquisitions, and property sales in the state over the past 30 years have taken place with legal tricks that keep property taxes artificially low."