Eversheds Sutherland (US) LLPIn a 3-2 split vote, the California State Board of Equalization (BOE) voted against issuing formal guidance to county assessors regarding mid-year re-assessments due to declines in value caused by the COVID-19 pandemic.

Similar to a number of other states, California law provides valuation relief for property tax purposes due to calamities, emergencies, and disasters. These property tax relief provisions may be applicable as a result of disaster declarations, stay at home orders, and other mandatory restrictions caused by the COVID-19 epidemic. [See Eversheds Sutherland’s presentation]
Despite the BOE’s decision to forgo issuing formal guidance, taxpayers should still consider filing such disaster relief claims with local assessors.
Background — California Property Tax Disaster Relief
Section 170 of the California Revenue and Taxation Code empowers local governments to adopt ordinances permitting reassessments when damage or destruction to property is due to a “major misfortune or calamity.”
More specifically, under Section 170(a)(1), valuation relief may be available if, among other things:
  1. There is a major misfortune or calamity, in an area or region subsequently proclaimed by the Governor to be in a state of disaster; and
  2. The subject property is damaged or destroyed by the major misfortune or calamity without the fault of the taxpayer.
For purposes of this specific subsection, “damage” includes “a diminution in the value of property as a result of restricted access to the property where that restricted access was caused by the major misfortune or calamity.”
Application to COVID-19
On March 4, 2020, Governor Newsom issued a Proclamation of a State of Emergency due to the COVID-19 pandemic, covering the entire State of California.
Under Section 8680.3 of the California Government Code, a “disaster” is defined as a “fire, flood, storm tidal wave, earthquake, terrorism, epidemic, or other similar public calamity that the Governor determines presents a threat to public safety.” (emphasis added). Government Code Section 8558(b) is to the same effect, defining a state of emergency to mean the “existence of condition of disaster or of extreme peril to the safety of persons and property within the state caused by conditions such as air pollution, fire, flood, storm, epidemic, riot, drought, cyberterrorism, sudden and severe energy shortage . . . .” (emphasis added).

Eversheds Sutherland Observation: While the California Constitution, Article XIII, Section 15, uses the words “physical damage,” the constitutionality of Section 170(a)(1) has not been called into question since its enactment in 1979. If any county assessor believes that Section 170(a)(1), and in particular its adoption of “restricted access” as a form of physical damage is unconstitutional, his or her sole remedy is to bring a declaratory relief action under Section 1060 of the Code of Civil Procedure. See Cal. Rev. & Tax. Code § 538. We are not aware that any such action has been brought.

Moreover, in Slocum v. State Board of Equalization, 134 Cal.App.4th 969 (2005), the Court of Appeal suggested that the Legislature’s interpretation was a permissible one – characterizing restricted access as a form of “indirect physical damage.”

BOE’s Formal Position
Despite these provisions, the BOE nonetheless voted to reject taking a formal position on the issue. In its June 9, 2020 meeting, issuing formal guidance to local assessors was one of four options being considered by the BOE.
The BOE’s reluctance does not preclude local assessors from accepting taxpayers' claims for disaster relief. In any event, the 3-2 split decision indicates some support from members of the BOE.
Eversheds Sutherland Observation: Under Section 170, California property owners have one year to file a calamity claim with the local assessor. In order to qualify for relief, a taxpayer generally must demonstrate that the COVID-19 government orders resulted in “restricted access” to their property and also prove that their property was damaged by at least $10,000. The combination of the stay at home orders, social distancing requirements, and maximum group limits have effectively closed many businesses, and such closures may satisfy the “restricted access” standard.

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