Laws, Regulations & Annotations

Property Taxes Law Guide – Revision 2016

Property Tax Annotations

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See Change in Ownership

565.0010 Business Organization. Arrangements whereby property is conveyed to an individual or individuals in accordance with an instrument that provides that the property is to be held and managed for the benefit of the transferor(s) or their assign(s) as may from time to time be holder(s) of transferable certificate(s) issued by the transferee(s) are denominated in law as Massachusetts Trusts. These organizations should be treated as trusts if the transferee(s) has/have control in the management of the property or as a partnership(s) if the certificate holder(s) and the transferee(s) are associated in the control of the property with the latter acting only as a managing agent(s).

Whether a Massachusetts Trust is a trust or a partnership, it is a legal entity just as is a corporation or a partnership. A transfer of real property to the entity may be excluded from change in ownership if the transfer results only in a change in the manner of holding title. Additionally, since a Massachusetts Trust is a legal entity, transfers of certificates result in changes in ownership only when there is a change in control. Transfers of property from the entity to children or parents of certificate holders and transfer(s) of certificates between children and parents are not within the parent/child exclusion contained in Revenue and Taxation Code section 63.1. C 5/3/1994.

565.0020 Change in Ownership Filing Requirements. Effective January 1, 2010, Revenue and Taxation Code sections 480.1, 480.2, 482, and 483 were amended to establish a penalty for legal entities that do not file a change in control and ownership statement with the Board of Equalization within 45 days of a change in control or change in ownership pursuant to section 64(c) or (d). If legal entity ownership interests are transferred due to a death but it will not be known within 45 days of the date of death whether a change in control or ownership will occur because the allocation of interests to the beneficiaries is not determined, the change in control and ownership statement should still be filed with as much information as is known to avoid the penalty. The form should then be supplemented once a change in control or ownership determination is made. C 9/10/2010.

565.0050 Legal Entity Ownership Program. Revenue and Taxation Code sections 480.1 and 480.2 require legal entities to file a change in ownership statement (form BOE-100-B) with the Board's Legal Entity Ownership Program when a change in control or ownership of the entity has occurred. The names of legal entities that do not respond to a second request by the Board of Equalization to provide change in ownership information on form BOE-100-B are placed on the Board's non-response list and transmitted to county assessors. The identities of legal entities on the Board's non-response list should not be disclosed to the public, regardless of whether the Board initiated contact with the non-responding legal entity based on confidential information received from the Franchise Tax Board or from public information sources. C 7/9/2008.

565.0090 Rescission. Corporation X indirectly owned several parcels of California real property through wholly owned subsidiaries. Corporation X assigned its interests in each subsidiary to another indirectly held limited liability company, Limited Liability Company B (LLC B) such that LLC B obtained 100 percent ownership of all the subsidiaries. Because the proportional ownership interests in each and every piece of real property remained the same before and after the transfers, the transfers were excluded under Property Tax Rule 462.180(d)(4). As a result of this exclusion, LLC A, as the holder of the interests in LLC B, became an original co-owner in LLC B, for purposes of counting future transfers of LLC B interests under section 64(d). Corporation X and LLC B now desire to unwind the assignment of interests and have mutually agreed to rescind the assignments.

The assignments were "transfers" within the meaning of Civil Code section 1040 because they were intended to pass title to interests in the subsidiaries. Moreover, since the assignments were voluntary transfers, they were considered executed contracts under Civil Code section 1040, regardless of consideration. Thus, Civil Code section 1689 allows for their rescission. As with rescissions of real property transfers, the rescission of a contract for the transfer of legal entity interests voids the transactions ab initio as though the transfers had never been made, and restores the parties to the positions they held before the transfers being rescinded. The property tax consequence is that the former base year value of the property prior to the transfer is restored and the original co-owner status created under Rule 462.180(d)(4) is extinguished. C 11/21/2012.