The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act (Proposition 19)
The following information is intended to help counties establish uniform and effective administrative practices for making and reporting their annual gain determinations to CDTFA. Information about the requirements imposed by Regulation 35401 is also included.
The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act (Proposition 19) was approved in the November 3, 2020, General Election.
Proposition 19 added sections 2.1, 2.2, and 2.3 to article XIII A of the California Constitution. Sections 2.2 and 2.3 provide a mechanism for the California Department of Tax and Fee Administration (CDTFA) to use state funds in the County Revenue Protection Fund to reimburse the counties and local agencies in the counties that have a revenue loss from the implementation of the property tax changes made by section 2.1. Section 2.3 also imposes new duties on counties and CDTFA as part of the reimbursement process.
CDTFA has adopted Regulation 35401, which:
- Requires the counties' annual gain determinations under subdivision (a) of section 2.3 to be made for the period February 16, 2021, through June 30, 2022, and for each subsequent fiscal year thereafter, beginning with fiscal year 2022- 2023; and
- Requires each county to report the gains it determines for the county and each local agency in the county to CDTFA every three years and makes January 31, 2025, the reporting due date for the counties to report the gains they determined for the first three determination periods.
How to Use This Guide
Each section of this guide contains important information regarding Proposition 19.
The Getting Started section provides background regarding sections 2.1, 2.2, and 2.3.
The Information section provides information regarding counties' new duties under section 2.3.
The Frequently Asked Questions (FAQs) section provides answers to frequently asked questions regarding Proposition 19.
Lastly, the Resources section provides links to additional information and statutory and regulatory information.
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The following information is intended to help counties establish uniform and effective administrative practices for making and reporting their annual gain determinations to CDTFA. Information about the requirements imposed by Regulation 35401 is also included.
Proposition 19 added section 2.1 to:
- Beginning April 1, 2021, allow taxpayers who are severely disabled, over the age of 55, or victims of a wildfire or other natural disaster to transfer the taxable value of their primary residence to a replacement primary residence regardless of the replacement residence's value or location, provided the replacement residence is purchased or newly constructed within two years of the date the original residence is sold; and
- Beginning February 16, 2021, limit the parent-child and grandparent-grandchild transfer exclusions from change in ownership so they only apply to a purchase or transfer of a family home or family farm and the taxable value of the transferred property increases when its assessed value exceeds a new value limit.
Proposition 19 added section 2.2 to annually allocate any additional revenues or savings to the state, as calculated by the Director of Finance, from the implementation of the property tax changes described above, as follows:
- 75 percent to the newly created California Fire Response Fund, which shall be appropriated by the Legislature, to expand fire suppression staffing; and
- 15 percent to the newly created County Revenue Protection Fund, which is continuously appropriated, to reimburse counties and local agencies with a negative gain (or revenue decrease) resulting from the implementation of the property tax changes described above.
Proposition 19 added section 2.3 to require each county to annually determine the gain for the county and for each local agency in the county resulting from the implementation of the property tax changes described above by adding the following amounts:
- The revenue increase resulting from the sale and reassessment of original primary residences for outbound intercounty transfers;
- The revenue decrease, which shall be expressed as a negative number, resulting from the transfer of taxable values of original primary residences located in other counties to replacement primary residences located within the county for inbound intercounty transfers; and
- The revenue increase resulting from the changes to the parent-child and grandparent-grandchild transfer exclusions referenced above.
Proposition 19 also added section 2.3 to require the CDTFA to:
- Adopt a regulation specifying the deadline for the counties' annual determinations;
- Use the counties' determinations to make its own calculations of each eligible county's and local agency's aggregate gain every three years; and
- Provide full or pro rata reimbursement to the eligible counties and local agencies with an aggregate negative gain (or revenue decrease) from the money in the County Revenue Protection Fund.
The following information is intended to help counties establish uniform and effective administrative practices for making and reporting their annual gain determinations to CDTFA. Information about the requirements imposed by Regulation 35401 is also included.
The information is based on CDTFA's discussion with representatives from the counties at CDTFA's meeting on May 26, 2021. It is also based on the general consensus drawn from responses that CDTFA received to surveys sent to all counties and participants via email, during the survey periods from May 20 to May 28, 2021 and January 5 to January 21, 2022.
Annual Determination Periods
Regulation 35401 requires annual gain determinations under subdivision (a) of section 2.3 to be made for the period February 16, 2021, through June 30, 2022, and for each subsequent fiscal year, beginning with the fiscal year starting July 1, 2022, and ending on June 30, 2023.
Deadlines for Annual Gain Determinations
Regulation 35401 makes January 31, 2024, the deadline for the counties to determine their gains under subdivision (a) of section 2.3, for fiscal year 2022-2023 and each subsequent January 31 as the deadline for the counties to determine their gains for the prior fiscal year. However, counties should determine their gains as soon as practical and not wait for the deadlines.
The deadline for the counties to determine their gains for the period from February 16, 2021, through June 30, 2022, was not included in Regulation 35401 because it was retroactive. However, the gains for that period must be reported by the reporting due date (discussed below); counties should determine their gains for that period as soon as practical, and counties should not wait for the reporting due date.
Revenue Included in Annual Gain Determinations
Annual gain determinations under subdivision (a) of section 2.3 should only include revenue from the 1 percent ad valorem tax on real property collected by the counties and apportioned to the districts within the counties.
Impacts of Events
If an event occurs that increases or decreases revenue under subdivision (a) of section 2.3, the event should continue to impact revenue until the property's value is reassessed and the revenue impact from the event should be adjusted for inflation.
Revenue Increases from the Limits on the Parent-Child and Grandparent-Grandchild Transfer Exclusions
For purposes of determining revenue increases from the limits on the parent-child and grandparent-grandchild transfer exclusions under subdivision (a)(3) of section 2.3, counties should identify and include every purchase or transfer of real property for which a claim for either exclusion is filed and is either partially granted or denied under section 2.1. The counties should not try to identify or estimate the revenue increases from any purchases or transfers for which no claim is filed.
Revenue Decrease from an In-Bound Base Year Value Transfer
To determine the revenue decrease from an in-bound base year value transfer under subdivision (a)(2) of section 2.3, the decrease in assessed value of the replacement property due to section 2.1 should be calculated as the purchase price of the replacement property minus the replacement property's new base year value with any adjustments required by section 2.1.
Example: An intercounty base year value transfer occurred on April 15, 2021. The original property in Napa County has a base year value of $200,000. The replacement property in Kern County has a base year value of $450,000. The original property is sold for $1,000,000. The replacement property is purchased for $1,100,000. The new base year value for the replacement property is $300,000 ($200,000 + ($1,100,000 - $1,000,000) = $300,000) under subdivision (b)(2) of section 2.1.
The decrease in assessed value of the replacement property due to the base year value transfer is $800,000 ($1,100,000 purchase price - $300,000 new base year value = $800,000).
Reporting Gains to CDTFA
Regulation 35401 requires each county to report the gains it determines for the county and each local agency in the county to CDTFA every three years and makes January 31, 2025, the reporting due date for counties to report the gains they determined for the first three determination periods, which are:
- February 16, 2021, through June 30, 2022;
- Fiscal year 2022-2023; and
- Fiscal year 2023-2024.
Regulation 35401 provides an automatic one-month extension of the reporting due date. It also allows CDTFA to grant a county an extension of the reporting due date to April 30, if a state of emergency due to a disaster, as proclaimed by the Governor pursuant to section 8625 of the Government Code, is in effect in the county at any time during the month before or after the reporting due date.
The following information is intended to help counties establish uniform and effective administrative practices for making and reporting their annual gain determinations to CDTFA. Information about the requirements imposed by Regulation 35401 is also included.
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What is the effective date of Proposition 19?
The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act (Proposition 19) was approved in the November 3, 2020, General Election and added sections 2.1, 2.2, and 2.3 to article XIII A of the California Constitution effective December 16, 2020.
Section 2.1's limits on the parent-child and grandparent-grandchild transfer exclusions became operative February 16, 2021.
Section 2.1's new base year value transfer provisions became operative April 1, 2021.
Section 2.3's reimbursement provisions became operative on December 16, 2020.
Who is CDTFA required to reimburse under section 2.3?
CDTFA is required to provide full or pro rata reimbursement from the County Revenue Protection Fund to the counties and eligible local agencies with an aggregate negative gain (or revenue decrease) from the implementation of section 2.1 every three years, based on the counties annual gain determinations under section 2.3 (discussed below).
What are the periods for the counties' annual gain determinations under section 2.3?
Regulation 35401 requires annual gain determinations to be made for the period of February 16, 2021, through June 30, 2022, and for each subsequent fiscal year, beginning with the fiscal year July 1, 2022, and ending on June 30, 2023.
When are annual gain determinations required to be made?
Regulation 35401 makes January 31, 2024, as the deadline for the counties to determine their gains for fiscal year 2022-2023, and each subsequent January 31 the deadline for the counties' to determine their gains for the prior fiscal year. However, counties should determine their gains as soon as practical and not wait for the deadlines.
The deadline for the counties to determine their gains for the period from February 16, 2021, through June 30, 2022, was not included in Regulation 35401 because it was retroactive. However, the gains for that period must be reported by the reporting deadline (discussed below); counties should determine their gains for that period as soon as practical, and counties should not wait for the reporting deadline.
What information is a county required to include in its annual gain determinations?
Each county is only required to include the annual positive or negative gain for the county and each local agency in the county under subdivision (a) of section 2.3.
What information is a county required to report to CDTFA?
Each county is required to report a separate positive or negative gain amount to CDTFA for the county and each local agency in the county for each of the three annual determination periods within the reporting period. The following table illustrates how County X would report the positive or negative gain for the county and Agency A and Agency B in the county.
| Gain for First Annual Determination Period | Gain for Second Annual Determination Period | Gain for Third Annual Determination Period | |
|---|---|---|---|
| County X | -$10,000.00 | -$20,000.00 | $5,000.00 |
| Agency A | $30,000.00 | -$5,000.00 | $40,000.00 |
| Agency B | -$8,000.00 | -$25,000.00 | -$30,000.00 |
When will counties have to report their gains to CDTFA?
Regulation 35401 requires each county to report the gains it determined for the county and each local agency in the county to CDTFA by January 31, every three years. Regulation 35401 makes January 31, 2025, the reporting due date for counties to report the gains they determined for the first three determination periods, which are:
- February 16, 2021, through June 30, 2022;
- Fiscal year 2022-2023; and
- Fiscal year 2023-2024.
Regulation 35401 provides an automatic one-month extension of the reporting due date. It also allows CDTFA to grant a county an extension of the reporting due date to April 30, if a state of emergency due to a disaster, as proclaimed by the Governor pursuant to section 8625 of the Government Code, is in effect in the county at any time during the month before or after the reporting due date.
How will counties receive payments for negative gains?
If CDTFA determines reimbursement is required, funds will be distributed by paper warrant directly to the county or local agency with the negative gain at the end of each three-year period.
Who must register with CDTFA?
Regulation 35401 requires each county to electronically register with CDTFA for the county and the county's local agencies. CDTFA is working on the registration process and will provide information when it is available.
What information is needed to register?
You will need the following information to register:
- Name of county and each local agency (city, special district, or school district)
- Federal Employer Identification Number (FEIN) for each of the above
- Addresses (mailing and warrant for each of the above)
- County representative contact information (name, email address, phone number)
How do counties report their gains?
Regulation 35401 requires each county to electronically report its gains through CDTFA's online services portal using a User ID and Password. We are working on the reporting process and will provide information when it is available.
Will CDTFA audit the counties' annual determinations?
No. Section 2.3 does not establish a mechanism for CDTFA to audit the counties' annual gain determinations.
Can CDTFA make changes to the amounts the counties report?
No. Section 2.3 does not authorize CDTFA to make changes to the gains reported by the counties.
If I have questions regarding CDTFA’s responsibilities under section 2.3, who do I contact?
Send your questions to Prop19@cdtfa.ca.gov.
The following information is intended to help counties establish uniform and effective administrative practices for making and reporting their annual gain determinations to CDTFA. Information about the requirements imposed by Regulation 35401 is also included.
Legislation
- Proposition 19 – The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act
- Regulation 35401, Registration, Reporting, and Reimbursement
Meeting Information
- Proposition 19 – County Meeting PowerPoint May 2021
- Proposition 19 – County Meeting Survey May 2021
- Proposition 19 – Interested Parties Meeting Information
Surveys
Helpful Resources
- Sign Up for Proposition 19 Updates – Subscribe to our Proposition 19 Updates List and receive the latest updates and announcements regarding Proposition 19.