As I have written about before, Proposition 13 has been in the cross-hairs of California legislators for quite some time. Once something is deemed a tax "loophole", it is only a matter of time before the "loophole" is closed. In this case, the "loophole" are statutes interpeting Propositioin 13 that allow a taxpayer to purchase 100% of a business that owns real property without causing the purchase to be considered a "change of ownership" for property tax reassessment purposes--as long as nosingle owner acquires more than a 50% interest. Most notabaly, computer giant Michael Dell purchased the Fairmont Miramar hotel and was able to structure the purchase so as to ensure that there was no reassement--a move which saved him more than a million dollars a year in property taxes.
Traditionally, the Howard Jarvis Taxpayers Association has been a staunch defender of Proposition 13. Recently, however, they announced that they would no longer voice opposition to a bill authored by Assemblyman Tom Ammiano (D-San Francisco). Ammiano's bill, AB 2372, basically states that when 100% of the ownership in a legal entity changes within a 3-year period there has been a change of ownership. While public traded companies are expressing concern, this rule should not to prove too onerous on family owned businesses. In fact, it makes it a bit easier for families to make large gifts of business interests to their children without triggering a reassessment.