Legal Entity Ownership Program (LEOP) – Exclusions from Reassessment
Even if an exclusion from reassessment is applicable to a transfer, a legal entity must file form BOE-100-B, Statement of Change in Control and Ownership of Legal Entities, with the Board of Equalization reporting the change in control under section 64(c) or change in ownership under section 64(d). The form must be filed within 90 days of the date of change in control or date of change in ownership to avoid the imposition of the penalty under section 482, subdivision (b).
Interspousal and Registered Domestic Partner Exclusions
Any transfer of legal entity interests solely between spouses or registered domestic partners is excluded from change in ownership (reassessment of real property). When a spouse or registered domestic partner acquires control of an entity due to the transfer of entity ownership interests from his or her respective spouse or registered domestic partner, an exclusion from reassessment applies to the property of the entity in which control was obtained. (See Revenue and Taxation Code sections 63 and 62(p), and Property Tax Rule 462.180 (d)(2).)
Proportional Transfer Exclusion
Any transfer between an individual or individuals and an entity, or between legal entities, that results solely in a change in the method of holding title to the real property, and in which the proportional ownership interests of the transferors and transferees in each and every piece of real property transferred remain the same before and after the transfer, is excluded from a change in ownership. This is known as the proportional transfer exclusion. (See Revenue and Taxation Code section 62(a)(2) and Property Tax Rule 462.180(d)(2).)
Affiliated Group Exclusions
The following two types of corporate reorganizations are not a change in ownership:
(1) Any corporate reorganization, where all of the corporations involved are members of an affiliated group, and that qualifies as a reorganization under section 368 of the Internal Revenue Code and is accepted as a nontaxable event by California statutes is excluded from change in ownership. (See Revenue and Taxation Code section 64(b).)
(2) Any transfer of real property among members of an affiliated group is excluded from change in ownership. (See Revenue and Taxation Code section 64(b).)
Affiliated group means one or more chains of corporations connected through stock ownership with a common parent corporation if both of the following conditions are met:
(1) The voting stock of the corporation making the transfer and the voting stock of the transferee corporation are each owned 100 percent by a corporation related by voting stock ownership to a common parent corporation; and
(2) The common parent corporation directly owns 100 percent of the voting stock of at least one of corporation in the chain(s) of related corporations. (See Property Tax Rule 462.180, subdivision (b)(1) for an example.)
By its express language, this exclusion is limited to corporations and therefore does not apply to other entities such as limited liability companies or partnerships. For the reorganization exclusion, the transfer must meet all of the requirements of Revenue and Taxation Code section 64(b), and the taxpayer must furnish supporting documentation upon request.
Note on Trust Transfers– Legal Entity Interests Held by Trust
Although, a transfer involving a trust that holds interests in a legal entity is not an "exclusion" (such as the proportional interest exclusion); certain transfers of a trust do not result in a change in control of a legal entity under Revenue and Taxation Code Section 64(c) or cumulative change in ownership under Section 64(d). Below is certain information about transfers by trustor of trusts. For additional information, refer to page 47 in Assessors' Handbook Section 401, Change in Ownership.
Irrevocable Trusts – The transfer by the trustor of an ownership interest in a legal entity holding an interest in real property into a trust in which the trustor-transferor is the sole present beneficiary, or into a trust in which the trustor-transferor retains the reversion and the present beneficial interest of any other person does not exceed 12 years is excluded from change in ownership. (See Property Tax Rule 462.160(b)(1)(C).)
Revocable Trusts – The transfer of real property or an ownership interest in a legal entity holding an interest in real property by the trustor to a trust which is revocable by the trustor is excluded from change in ownership. However, a change in ownership does occur at the time that a revocable trust becomes irrevocable unless the trustor-transferor remains or becomes the sole present beneficiary or unless otherwise excluded from change in ownership (interspousal or registered domestic partner exclusion). (See Property Tax Rule 462.160(b)(2).)