Under Revenue and Taxation Code § 70, new construction includes:
Any addition to land or improvements, including fixtures
Any alteration of land or improvements that constitutes a major rehabilitation or converts the property to a different use
A major rehabilitation of an improvement or fixture occurs upon any rehabilitation, renovation, or modernization that converts the improvement or fixture to the substantial equivalent of a new improvement or fixture.
Examples of assessable new construction
Construction of a new building
Additions to existing improvements (e.g., increasing square footage)
Adding features such as a garage, swimming pool, spa, patio, or deck
Rebuilding a structure after demolition down to its foundation and studs
Development of rural land into a residential subdivision or extensive site preparation prior to building
What is NOT considered assessable new construction includes:
Normal maintenance and repairs
Renovating a commercial office building by moving partitions to suit a new tenant
Painting, re-carpeting and relocating electrical and telephone jacks or lines
Replacement of:
Wall or floor coverings
Central heating and cooling systems
Galvanized waterlines with copper or plastic
Old bathroom or kitchen fixtures with modern fixtures
Wood-framed windows with energy-efficient metal or aluminum frames
Molding strips, plaster, drywall, and wall paneling with similar substitute materials
Valuation
The Assessor's Office uses the following applicable methods to determine the market value of newly constructed property, including:
Cost approach
Comparable sales approach
Income approach (for investment properties)
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 contributing market value of the additional 800 square feet is added to the assessment. A new base year value is determined for the addition, while the assessment for the land and existing structure(s) remains unchanged.
Date of Completion
The date of completion is the date when the property or a portion of it becomes available for use. This can mean any one of the following:
The property (or a portion thereof) has been inspected and approved for occupancy by the appropriate government authority.
In the absence of such approval, the prime contractor has fulfilled all contractual obligations.
The property is being used for its intended purpose
Ongoing Construction
If construction is not complete as of the lien date (January 1), the Assessor estimates the value of the partially complete construction for the upcoming tax year. Once construction is complete:
A new base year value is determined.
A supplemental assessment may be issued for the difference between the value on the assessment roll and the value as of the date construction was completed.
