Most people typically consider “new construction" as building a new structure or adding on to an existing one. However Under California property tax law, “new construction" can also mean:
Renovating a structure to change its use
Rehabilitating a structure to a “like new" condition
Removing a structure
However, not every building permit for new construction results in reassessment. The Assessor's office reviews thousands of building permits annually, yet, less than half result in a new, higher assessment. Our goal is to help you understand what New Construction is and when it results in a reassessment.
Types of New Construction Include:
New building(s) constructed on land.
Additional square footage added to an existing building
Additional buildings or amenities added to a property. Example: a garage, swimming pool or bathroom.
Physical alteration (rehabilitation), converting a building or any portion thereof, to the substantial equivalent of a new structure, or changing the manner in which a building is used.
Any substantial physical alteration of land, which constitutes a major rehabilitation of the land or changes the manner in which it is used. Example: Onsite streets and utilities.
The Assessor's Office mails out a questionnaire to the property owner to determine what was constructed.
New Construction Discovery
New construction is discovered in a number of ways, including:
Through the permit process
Reported by the public, crowdsourcing
While staff is performing routine field work
When a property is transferred or sold
CA law requires the Assessor to determine the date of completion and the market value of the new construction. If necessary, the Assessor corrects the assessment roll for up to four years from the date of discovery.
Date Completed Determined
The date of completion is the date the property or portion thereof is available for use.
“Available for use" means that:
The property, or a portion thereof, has been inspected and approved for occupancy by the appropriate government official
In the absence of such approval, when the prime contractor has fulfilled all of the contractual obligations
When the property is put to use for its intended purpose.?
The Assessor's Office employs all applicable approaches to determine market value:
Comparable Sales Approach
Income Approach, if it is an investment property,
Only the newly constructed portion of the property is valued. For example, if an addition increases the size of a building from 1,200 square feet to 2,000 square feet, only the market value of the additional 800 square feet is valued. A new base year value is determined for the addition only. The indexed base year assessed value of the land and existing structure(s) remain unchanged. If the construction is ongoing as of the lien date (January 1), an estimate of the value of the partially complete construction is determined for the upcoming tax bill. When construction is complete, the base year assessed value is determined and a supplemental assessment is issued for the difference between the value as of the date construction is completed, and the value that existed on the assessment roll.
Do Owner-Builder Costs Equal Market Value?
Probably not. The Cost Approach to value includes items such as labor, profit, supervision and financing, which are not typically found in the construction costs of an owner-builder.
Are Kitchen Remodels Reassessed?
Maybe. Remodeling is not generally assessable unless new square footage is added. Remodeling may be considered “repair and maintenance" and primarily cosmetic. This can include new flooring, countertops, cabinets or windows, in which case no reassessment is justified. While re-modeling work usually improves a building's appearance, it does not change the effective age of the building.
If the building is “substantially equivalent" to new after the remodeling, it will likely be reassessed. This includes properties purchased in poor condition and rehabilitated. The assessor examines each property on a case-by-case basis to determine whether the construction is “substantially equivalent" to new or not.
Some Alterations Alone Are Not Considered New Construction
?Individually, the activities that are bulleted below are not assessable new construction, but in combination or collectively they may constitute major rehabilitation or renovation, and may convert a structure into substantially equivalent to new. The determination is made by the Assessor's office and is based on a number of factors including timing, scope, or the amount of existing value allocated to the roll for the improvement in question.
Central heating and cooling system(s), or replacement of wall or floor heating with baseboard heaters
Galvanized waterlines with copper ones
Bathroom and kitchen fixtures, counter tops
Wood-framed windows with energy-efficient vinyl, or aluminum frames
Dry rot or termite damaged wood
Plaster, drywall, and wood trim/paneling
Wall or floor coverings
Electric fuse box with circuit breakers
Replacement of roofs, doors, windows, stairs, fences or decks or repairing thereof.
Exclusions That May Apply to New Construction
The actual claim forms for the following exclusions each include a page of “General Information" that contains a wealth of information and requirements for each of these exclusions. Be sure to read the entire claim form for all of the exclusions that may apply to your property and circumstances
A property owner who has suffered a loss due to a misfortune or calamity, such as fire, flood or earthquake, may be entitled to property tax relief. The physical damage must be sudden, caused by a misfortune or calamity, not a gradual deterioration over a long period. In general, the reconstruction of damaged or destroyed property is not re-assessable new construction if the following requirements are met:
The Calamity Claim is filed within one (1) year of the occurrence
Reconstruction is completed in a timely fashion
The property after reconstruction is substantially equivalent to the property prior to the damage or destruction.
If You Disagree With the Value
After receipt of the Notice of Supplemental Assessment, you may request an informal review of the assessment from the Assessor's Office. If you believe the review does not result in a satisfactory conclusion, you may pursue an assessment appeal. Any assessment appeal must be filed within the time specified on the notice. An independent Assessment Appeals Board, appointed by the Board of Supervisors, hears all appeals and renders a decision.
The annual appeal-filing period for the secured and unsecured assessment rolls is July 2-November 30. Supplemental Assessment appeals must be filed within 60 days of the date of mailing of the supplemental tax bill