What Would Proposition 15 Change About How Properties Are Taxed in California?

Proposition 15 would amend the California State Constitution to require commercial and industrial properties, except those zoned as commercial agriculture, to be taxed based on their market value. In California, the proposal to assess taxes on commercial and industrial properties at market value, while continuing to assess taxes on residential properties based on the purchase price, is known as split roll. The change from the purchase price to market value would be phased-in beginning in fiscal year 2022-2023. Properties, such as retail centers, whose occupants are 50 percent or more small businesses would be taxed based on market value beginning in fiscal year 2025-2026 (or at a later date that the legislature decides on). Proposition 15 would define small businesses as those that that are independently owned and operated, own California property, and have 50 or fewer employees.

The ballot initiative would make an exception for properties whose business owners have $3.00 million or less in holdings in California; these properties would continue to be taxed based on their purchase price. The ballot initiative would exempt a small business’s tangible personal property from taxes and $500,000 in value for a non-small business’s tangible personal property.[1]

The state fiscal analyst estimated that, upon full implementation, the ballot initiative would generate between $8 billion and $12.5 billion in revenue per year.[2]

Proposition 15 would make the California State Legislature responsible for passing laws for a phase-in of the market value-based tax on commercial and industrial properties, how often reassessments would occur (no less than three years between reassessments), and an appeals process for challenging reassessments.

Where Did the Current Tax Assessment Formula, Based on Purchase Price, Come From?

In 1978, Californians approved Proposition 13, which required that residential, commercial, and industrial properties are taxed based on their purchase price. The tax is limited to no more than 1 percent of the purchase price (at the time of purchase), with an annual adjustment equal to the rate of inflation or 2 percent, whichever is lower. According to the state Legislative Analyst's Office, market values in California tend to increase faster than 2 percent per year, meaning the taxable value of commercial and industrial properties is often lower than the market value.

How Would Revenue from the Change in Taxation be Distributed?

Proposition 15 would create a process in the state constitution for distributing revenue from the revised tax on commercial and industrial properties. The ballot initiative would distribute the revenue to specific areas, rather than the General Fund. First, the revenue would be distributed to (a) the state to supplement decreases in revenue from the state's personal income tax and corporation tax due to increased tax deductions and (b) counties to cover the costs of implementing the measure. Second, 60 percent of the remaining funds would be distributed to local governments and special districts, and 40 percent would be distributed to school districts and community colleges (via a new Local School and Community College Property Tax Fund). Revenue appropriated for education would be divided as follows: 11% for community colleges and 89% for public schools, charter schools, and county education offices. There would also be a requirement that schools and colleges receive an annual minimum of $100 (adjusted each year) per full-time student.

Official Ballot Arguments for Proposition 15

Close corporate loopholes: Wealthy corporations avoid reassessment by employing highly paid tax lawyers and accountants to exploit loopholes in the law. Prop. 15 closes these loopholes by requiring nonresidential commercial properties to be assessed based on their actual fair market value.

Rebalances the scales. Increase funding for schools and community colleges: Every school district and community college will receive additional funding over and above existing funding guarantees. Prop. 15funds go directly to education and state politicians can’t take it away.

See all the arguments in favor of Proposition 15 here.

Official Ballot Arguments for Proposition 15

PROP. 15 raises our cost of living. Prop. 15’s tax hike will increase costs on everything people buy, including groceries, fuel, utilities, day care and healthcare.

PROP. 15 destroys jobs and small businesses. Seven million Californians work for a small business. Millions of Californians are filing for unemployment and are at risk of losing everything. NOTHING in Prop. 15 stops the tax from being passed on to small business tenants. Prop. 15 will make the economic crisis worse by devastating small businesses—including our neighborhood restaurants, barbershops, and dry cleaners.

See all the arguments against of Proposition 15 here.

Official Website for Proposition 15

Visit the Official Website for yes on Proposition 15 here: https://www.yes15.org

Visit the Official Website for No on Proposition 15 here: https://noonprop15.org/

Who is Funding Proposition 15?

The Schools and Communities First PAC and allied committees registered to support the ballot initiative. Together, the committees had raised $20.81 million, including $6.00 million from the California Teachers Association Issues PAC.

What is Proposition 15?

If approved, Proposition 15 will amend the state constitution so that commercial and industrial real property be taxed based on current market value rather than purchase price. The money earned from this will go toward K-12 public schools, community colleges and local governments. Exemptions of the proposed property taxation include residential properties, agricultural land, and owners of commercial and industrial properties with a combined value of $3 million or less. ‍

Who is Supporting Proposition 15?‍

Tony Thurmond, California Superintendent of Public Instruction 

Jacqueline Martinez, CEO of the Latino Community Foundation 

Sasha Cutter, public health nurse at the San Francisco Department of Public Health‍

Who is Opposing Proposition 15?‍

Jon Coupal, president of the Howard Jarvis Taxpayers Association 

Alice Huffman, president of the California State Conference of the NAACP 

Betty Jo Toccoli, president of the California Small Business Association 

For more information, go to ballotpedia.org.

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