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Business Property Tax In California: What You Need To Know

Posted by James Frazier on Apr 21, 2021 5:37:00 PM

Business Property Tax In California: What You Need To Know

Business property tax in California has continued to increase in recent years. In fact, in 2017, California had the largest dollar increase in the U.S. in business property tax revenue—$1.5 billion more than the year before. And even though California property tax increases have been fairly predictable for the last few decades, all that may be about to change thanks to the split roll property tax initiative that will unfold in 2020.

One thing you can count on year after year is that the business property tax cycle in the Golden State will always be a little unconventional, because some aspects of filing, billing, and appeals are handled differently than they are in other states. (Tweet this!) We’ll take a look at some of the highlights unique to California in the sections below.

Business Property Tax Due Dates In California

Whereas many states in the union vary their due dates from county to county, California has fairly uniform property tax due dates.

Date Explanation

1/1 Lien date for all property

Tax filing in any given year includes those assets on the books as of 1/1 the year of the filing (i.e., a tax return for 2019 includes all assets on the books as of 1/1/2019).

4/1 Return deadline

Though the due date is stated as 4/1, returns are not considered delinquent if received before 5/7.

4/10 Second installment of secured taxes due for the prior year

“Secured” property is any property that can’t be moved, like land or buildings. Secured property bill payments are paid in two installments. (This article may refer to secured property as real estate.)

6/1 - 8/1 Tax bills issued

 

8/31 Unsecured taxes due for current year

All property that is not secured by real property is considered personal property and is therefore “unsecured.” California personal property bill payments are due 8/31, in one installment. (This article may refer to unsecured property as personal property.)

9/15 - 11/30 Appeal deadlines

These vary in some locations.

12/10 First installment of secured taxes due for current year

 

 

Here’s what you need to know about each stage of the business property tax cycle in California:  

Tax Returns

  • In California, you must file a personal property tax return if you own taxable personal property with a combined cost totaling $100,000 or more, or if the assessor has requested a filing. (We recommend that, to be safe, all businesses file a property tax return regardless of the amount.) Note: California considers excise, sales, and use taxes, freight, and installation charges as part of the cost of an asset.
  • All counties send a blank return form that is typically barcoded, which helps to speed up processing on their end. Note: If you’re using software to complete your tax forms, make sure it automatically prints the blank, barcoded return along with the completed form; the return will be considered incomplete without it!

California barcode

  • While the return due date is stated as 4/1, you can still file your returns until 5/7 without being considered late. Generally, it’s considered best practice to submit the return by 4/1 or as close to 4/1 as possible, so the assessor has time to send it back in case any required information is missing.
  • California non-taxable or exempt asset classifications include:
    • Business Inventory: All tangible personal property that will become part of or are themselves items held for sale.
    • Application Software: Microsoft Excel and QuickBooks, for example.
    • Licensed Vehicles
  • Incomplete return forms may be subject to penalty, for example, a return without a “wet” (actual, not computer-generated) signature. Note: If you are using a software system to prepare and file returns, ensure that your signature does not print out automatically on California returns!

Is keeping up with numerous state filings posing a challenge to your tax team? Read about the tax trends that are making teams like yours more productive.

Assessments

  • Assessors across California typically use the cost approach for personal property valuation (the original cost of an asset less depreciation). In regard to real estate, the market approach is used, looking at historical sales price plus any inflation factors.
  • Assessors do not send out a notice of assessment for business personal property. The actual tax bill issued will have the assessor’s valuation information as well as the taxes due. You may review the assessment information on the tax bill and, if you disagree, appeal the valuation.
  • California counties are also known to send “escape assessments” that reflect adjustments to your property’s values from years past, which could result in a potential increase of taxes due. Make sure you stay on top of these to mitigate any unfair/high tax bills!

What is the California split roll property tax initiative?

California taxpayers need to be aware of a possible amendment to Proposition 13 (2020 ballot) which could substantially impact values and taxes on business personal property and commercial property.

Referred to as the “California split roll property tax initiative,” this amendment would divide properties into different categories (“splitting” the tax rolls)—commercial/industrial properties vs. residential properties. Previously, all real property was afforded the benefits of Proposition 13, a tax cut implemented in 1978 that put a cap on property taxes and limited reassessment increases to 2% per year.

If this initiative is passed, certain commercial and industrial real property would lose the tax assessment protections of Proposition 13 and would therefore be required to pay more. Tax rates would not change, but property would be assessed at fair-market value rather than at historical purchase price plus inflation. Prop 13’s 2% cap was well below historical rates of appreciation for real property in California; as a result, assessed values usually fell below market value for most businesses (especially longtime property owners). Fair market value assessments would almost certainly cause significant property tax increases for California business owners.

While business personal property in California is already assessed at fair-market value, the amendment does call for a tax exemption of the first $500,000 in value for business personal property. It would also provide relief for certain small businesses by providing exemption for business personal property for businesses with 50 or fewer full-time employees.

Appeals

  • If you feel the value on your property is too high, you may choose to file an appeal to the county Assessment Appeals Board. Filings of this nature are formal and must be in writing. The normal window for filing an assessment appeal is July 1 to November 30 of the current fiscal year.
  • Once the appeal is received, the Board may schedule a series of hearings to allow you to present data and evidence to support your argument of the value.
  • In the event your appeal is initiated but not yet complete by the first installment due date, you must still pay the taxes due. If your appeal is successful, you’ll be issued a tax refund for the difference in tax amount based on the liability reduction.

Didn't file any appeals last year? That's one sign your property tax software is underperforming. Check out the other 11 signs it might be time to switch.

Tax Bills

  • The Treasurer-Tax Collector for each county is responsible for issuance and collection of all property taxes within the county. The tax amount owed is calculated by multiplying each jurisdiction’s tax rate by the valuation set by the assessor, then summing them to get the total tax due.
  • Secured taxes are given a two-installment payment option (12/10 and 4/10); unsecured taxes (business personal property) must be paid in full in a single installment (8/31).
  • In just about every California county, if payment is not received by the due date(s), collectors may add a 10% penalty in addition to the tax amount due.
  • California may also send supplemental bills apart from the standard tax bills. Supplemental bills are sent in response to a change in ownership, new construction, or a completed property tax audit and can be sent at varying points throughout the year. (Don’t be surprised to receive a supplemental bill related to a filing three years ago!) Note: Using software helps you identify supplemental bills and associate them with the correct filing from previous years.

Want to make filing your business property taxes in California easier?

CrowdReason property tax software and our experienced team can help. For businesses with numerous properties in California, automating your data entry with MetaTaskerPT saves time. Our technology extracts all available content from your scanned tax documents with a high degree of accuracy, locates related system records, and instantly updates your system—freeing up your valuable human resources. The average turnaround time is less than 24 hours.

In addition, our team saves you time by collecting relevant return forms from assessors across the United States, including the California state form, whether we gather the forms from each assessor’s website or email them directly. We then make those forms available to our customers through our TotalPropertyTax (TPT) software. You can avoid having to hunt down updated return forms for each location every year.

But TPT does much more than offer easy access to the right return forms. We also collect and make available assessors’ depreciation schedules, so you can easily combine your asset costs with the schedules to calculate accurate values. If any specific county depreciation schedules are available, we’ll provide those as well.

These provided schedules often include assessment categories you can review to best identify your assets and depreciate them accordingly (see example below). If you have assets for a bowling alley, for instance, you would choose the C15 category when filing a return in this jurisdiction.

Property tax assessment categories | CrowdReason

TPT helps you go one step further with depreciation. You can assign your individual asset categories to different schedules (as shown in the screenshot below), whether it’s the statewide schedule or a county-specific schedule with more localized asset categories. You are not forced to adhere to a standardized set of asset categories. The alternative would be to manually input all your information in a spreadsheet program like Excel. In that case, you would have to add up all your costs by acquisition year, then multiply those costs by the value factor of your chosen schedules.

Depreciation values property tax | CrowdReason

TPT helps you avoid this headache and mitigate human error by automatically calculating depreciation values once assigned. You can also easily make year-over-year comparisons to further validate the values. For example, if there’s a huge increase in a value, this may not make sense unless you, for instance, did a remodel or changed the depreciation schedule.

With TPT, you’ll never forget which depreciation decisions you made last year. You can check assigned depreciation collections and keep track of whether you used state or county depreciation schedules for each location, even seeing the corresponding assessor.

What about when it’s time to file your return? Our solution makes it easy to prepare and file California returns (see screenshot below). Instead of filling out physical forms for each location, TPT can automatically populate all relevant forms with the appropriate information, including contact details for each assessor. That way, you can simply print out pre-filled forms and mail them to the appropriate assessors’ offices. You also have the ability to easily attach images of the original barcoded forms received from the assessor to ensure proper identification and comply with requirements.

Return forms property tax | CrowdReason

Notably, not all return forms will be exactly the same. For forms that have different questions or ask for different information, TPT allows for the answers to be entered at a high level, with the ability to enter exceptions all the way down to an individual account level if needed (see screenshot below). Simply enter the information once and have that information populate all forms that require it.

For forms that require a wet signature, you can set a filter that avoids using a digital signature; these forms will print with a blank signature field for you to sign. For electronic record keeping, TPT also creates a digital package of completed return forms, in addition to printing them.

Property tax completed return forms | CrowdReason

TPT also helps manage your assessment notices, deadlines, and appeals. It can even integrate with your current accounts payable system to help track and pay your bills. Our software ensures you get the process right for California—everything from accurate depreciation schedules and barcoded forms to wet signatures and tracking supplemental bills.

Visit our website to find out more, or contact us to talk about how our software can solve your company’s biggest tax challenges!

Download Now: Property Tax Comparison By State

Topics: Business personal property tax, California business property tax