An anti-tax movement is working in Silicon Valley and elsewhere in California to gut a law that taxes transfers of inherited property.
An estimated 8,000 volunteers for the nonprofit Howard Jarvis Taxpayers Association have been collecting signatures across California to put a measure on the November ballot to repeal part of Prop. 19. Approved in 2020, this law has multiple components, but opponents want to get rid of a single provision that requires the reassessment of property at fair market value when it’s transferred to an heir, unless that person is willing to live in the home within one year.
Karen Deloumi, a volunteer from Los Gatos, calls the law a “death tax” because it often applies to children who inherit property after a parent dies.
“People didn’t understand what they were really voting on when it came to all the pieces (of Prop. 19),” Deloumi told San José Spotlight. “I don’t have a problem if there was a proper initiative or something that’s reasonable, but this isn’t reasonable.”
Before Prop. 19, heirs could pay the same property tax as their parents paid at the date of purchase, which was often low thanks to a different state law, Prop. 13. That law restricts the annual increase on property taxes. The rule governing the transfer of property taxes between parents and children was approved by California voters in 1986.
Prop. 19 closed this exemption to create additional revenue for a tax break given to older Californians buying new homes. Under the new law, which went into effect in 2021, a person who inherits a piece of property must use it as their primary residence within a year to enjoy the old property tax base. If they don’t, the property is reassessed at market rate.
In Silicon Valley’s expensive real estate market, that means some heirs face whopping tax bills after a parent dies. Susan Shelley, spokesperson for the Howard Jarvis Taxpayers Association, said the law also has a negative impact on housing because heirs to rental properties will need to raise rents or sell their buildings if they can’t afford to pay the higher property tax.
“How does that help anybody?” Shelley told San José Spotlight. “This was not well thought out or explained to the voters, so we think the original law should be put back.”
According to Shelley, the association needs roughly 1.5 million signatures to qualify its measure for the ballot. The due date for signatures is April 15 and she doesn’t know how many have been collected so far.
There is no organized movement against the repeal initiative. But at least one of the original proponents of Prop. 19 is unhappy to see the law under attack.
Fera Dayani, a spokesperson for California Professional Firefighters, told San José Spotlight her organization is opposed to the proposed initiative because it will eliminate crucial revenue used to fight wildfires. She said wildfires have consumed 10 million acres since 2016, and some are occurring in districts where departments are badly underfunded because of the lack of property tax income.
“The funding Proposition 19 brings is fundamental to getting more boots on the ground and resources to respond to catastrophic fires that are part of our state’s reality now,” Dayani said.
Dayani cited a report from the state Legislative Analyst’s Office that estimated the repeal initiative could cost local governments tens of millions of dollars—and eventually, hundreds of millions of dollars—per year. The state would have to spend a similar sum each year to cover the losses suffered by local governments.
Santa Clara County Assessor Larry Stone told San José Spotlight he voted for Prop. 19 “holding my nose.” He noted the proposition was drafted in haste with little input from assessors, and as a result some of the mandates are frustratingly vague.
“You can transfer your primary residence to your children, but they have to live there—who monitors that?” Stone said. “Do we ask them to report once a year? What happens if you move in, get the exemption, then move out?”
Despite these issues, Stone said the law is not overwhelming to administer. He also doesn’t anticipate any problems for his office if it is repealed.
“If it passes, it would just return things to the way they were before,” Stone said. “As long as we have clarity around the language of implementation so we can administer it consistently throughout the state and all counties—that’s always our biggest concern.”