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Developers may need to put more emphasis on tax ramifications

California voters could change the way that commercial properties are taxed. The proposed overhaul of Proposition 13 could mean that developers need to place more emphasis on the tax ramifications of their projects. The major selling point for the initiative lies in providing billions more dollars for schools, along with other services and programs throughout the state.

The primary change would involve taxing industrial and commercial properties at market value. Currently, Proposition 13 places a limit on the amount of tax attributed to a particular piece of property. The current tax is 1 percent of the purchase price with increases year over year of up to 2 percent regardless of how much the property may appreciate during any given year.

Companies with property holdings whose total value does not exceed $2 million would not be taxed at market value under the proposed changes. Before the proposed initiative makes it to the voters, it still needs the required signatures, which may not happen. If it does make it to the ballot, businesses will more than likely do what they can to defeat the initiative since California is already an expensive state in which to operate.

More than likely, developers, businesses and attorneys throughout the state will keep a close eye on this proposal. If it does somehow make it to the ballot and pass in November, it could affect further developments here in the state. Some businesses may turn to their attorneys in order to ascertain what they can do and how much it would cost to continue projects and own commercial and industrial property.

Source: mercurynews.com, "Is California ready for a Prop. 13 overhaul?", Katy Murphy, Feb. 11, 2018

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