SB 974: Property taxation: change in ownership: generational transfers: special needs trusts.
- Session Year: 2025-2026
- House: Senate
- Latest Version Date: 2026-09-27
Current Status:
Passed
(2026-09-27: Chaptered by Secretary of State. Chapter 665, Statutes of 2026.)
Introduced
In Committee
Awaiting First Chamber Vote
Passed First Chamber
In Committee
Awaiting Second Chamber Vote
Passed Second Chamber
Enacted
What does this bill do?
This bill says that a special needs trust will count as an eligible way to transfer property without causing a property tax reassessment for transfers between parents and children or between qualifying grandparents and grandchildren. A special needs trust is a trust set up to hold assets for a person with a disability.
The summary is provided by generative AI which can make mistakes. For original language, please view the details in the table below.
The California Constitution limits the amount of ad valorem taxes on real property to 1% of the full cash value of that property, defined as the county assessors valuation of real property as shown on the 197576 tax bill and, thereafter, the appraised value of the property when purchased, newly constructed, or a change in ownership occurs after the 1975 assessment, subject to an annual inflation adjustment not to exceed 2%. Existing property tax law, pursuant to specified provisions of the California Constitution, provides that the purchase or transfer of real property that is the principal residence or a family farm, as those terms are defined, of an eligible transferor in the case of a purchase or transfer between parents and their children, or between grandparents and their grandchildren if all the parents of that grandchild or those grandchildren are deceased as of the date of purchase or transfer, is not a purchase or change in ownership for purposes of determining the full cash value of property for taxation, as provided. Existing law defines transfer for these purposes to include, but not be limited to, any transfer of the present beneficial ownership of property from an eligible transferor to an eligible transferee through the medium of an inter vivos or testamentary trust.
Existing law authorizes the establishment of a special needs trust if a court makes specific determinations, including that the minor or person with a disability has a disability that substantially impairs the individuals ability to provide for their own care.
This bill would revise the definition of transfer for purposes of the above-described property tax law provisions to require that a special needs trust, established as described above, be considered an eligible medium of transfer.
The California Constitution limits the amount of ad valorem taxes on real property to 1% of the full cash value of that property, defined as the county assessors valuation of real property as shown on the 197576 tax bill and, thereafter, the appraised value of the property when purchased, newly constructed, or a change in ownership occurs after the 1975 assessment, subject to an annual inflation adjustment not to exceed 2%. Existing property tax law, pursuant to specified provisions of the California Constitution, provides that the purchase or transfer of real property that is the principal residence or a family farm, as those terms are defined, of an eligible transferor in the case of a purchase or transfer between parents and their children, or between grandparents and their grandchildren if all the parents of that grandchild or those grandchildren are deceased as of the date of purchase or transfer, is not a purchase or change in ownership for purposes of determining the full cash value of property for taxation, as provided. Existing law defines transfer for these purposes to include, but not be limited to, any transfer of the present beneficial ownership of property from an eligible transferor to an eligible transferee through the medium of an inter vivos or testamentary trust.
Existing law authorizes the establishment of a special needs trust if a court makes specific determinations, including that the minor or person with a disability has a disability that substantially impairs the individuals ability to provide for their own care.
This bill would revise the definition of transfer for purposes of the above-described property tax law provisions to require that a special needs trust, established as described above, be considered an eligible medium of transfer.
The California Constitution limits the amount of ad valorem taxes on real property to 1% of the full cash value of that property, defined as the county assessors valuation of real property as shown on the 197576 tax bill and, thereafter, the appraised value of the property when purchased, newly constructed, or a change in ownership occurs after the 1975 assessment, subject to an annual inflation adjustment not to exceed 2%. Existing property tax law, pursuant to specified provisions of the California Constitution, provides that the purchase or transfer of real property that is the principal residence or a family farm, as those terms are defined, of an eligible transferor in the case of a purchase or transfer between parents and their children, or between grandparents and their grandchildren if all the parents of that grandchild or those grandchildren are deceased as of the date of purchase or transfer, is not a purchase or change in ownership for purposes of determining the full cash value of property for taxation, as provided. Existing law defines transfer for these purposes to include, but not be limited to, any transfer of the present beneficial ownership of property from an eligible transferor to an eligible transferee through the medium of an inter vivos or testamentary trust.
Existing law authorizes the establishment of a special needs trust if a court makes specific determinations, including that the minor or person with a disability has a disability that substantially impairs the individuals ability to provide for their own care.
This bill would revise the definition of transfer for purposes of the above-described property tax law provisions to specify that an inter vivos or testamentary trust includes, but is not limited to, require that a special needs trust. trust, established as described above, be considered an eligible medium of transfer.
The California Constitution limits the amount of ad valorem taxes on real property to 1% of the full cash value of that property, defined as the county assessors valuation of real property as shown on the 197576 tax bill and, thereafter, the appraised value of the property when purchased, newly constructed, or a change in ownership occurs after the 1975 assessment, subject to an annual inflation adjustment not to exceed 2%. Existing property tax law, pursuant to specified provisions of the California Constitution, authorizes an owner of a primary residence who is over 55 years of age, severely and permanently disabled, or a victim of a wildfire or natural disaster to transfer the taxable value of property that is eligible for either the homeowners exemption or the disabled veterans exemption to any replacement dwelling that is purchased or newly constructed as that persons principal residence within 2 years of the sale of the original primary residence, as provided. provides that the purchase or transfer of real property that is the principal residence or a family farm, as those terms are defined, of an eligible transferor in the case of a purchase or transfer between parents and their children, or between grandparents and their grandchildren if all the parents of that grandchild or those grandchildren are deceased as of the date of purchase or transfer, is not a purchase or change in ownership for purposes of determining the full cash value of property for taxation, as provided. Existing law defines transfer for these purposes to include, but not be limited to, any transfer of the present beneficial ownership of property from an eligible transferor to an eligible transferee through the medium of an inter vivos or testamentary trust.
Existing law authorizes the establishment of a special needs trust if a court makes specific determinations, including that the minor or person with a disability has a disability that substantially impairs the individuals ability to provide for their own care.
This bill would require the county assessor to determine that a person is eligible as a severely and permanently disabled claimant under the above-described provisions relating to transfers of taxable value if the county assessor receives a letter certifying a special needs trust, as specified. The bill would authorize the county assessor to issue determination of preliminary eligibility, as provided, and would require the claimant be liable for property tax at the appraised value of the replacement dwelling at the time of transfer for the years since the transfer if the trust fails to produce the letter within 5 years. The bill would require the State Department of Health Care Services to develop and establish a method for a claimant to request, and the parameters for issuing, a letter certifying a special needs trust. revise the definition of transfer for purposes of the above-described property tax law provisions to specify that an inter vivos or testamentary trust includes, but is not limited to, a special needs trust.
The California Constitution limits the amount of ad valorem taxes on real property to 1% of the full cash value of that property, defined as the county assessors valuation of real property as shown on the 197576 tax bill and, thereafter, the appraised value of the property when purchased, newly constructed, or a change in ownership occurs after the 1975 assessment, subject to an annual inflation adjustment not to exceed 2%. Existing property tax law, pursuant to specified provisions of the California Constitution, authorizes an owner of a primary residence who is over 55 years of age, severely and permanently disabled, or a victim of a wildfire or natural disaster to transfer the taxable value of property that is eligible for either the homeowners exemption or the disabled veterans exemption to any replacement dwelling that is purchased or newly constructed as that persons principal residence within 2 years of the sale of the original primary residence, as provided.
Existing law authorizes the establishment of a special needs trust if a court makes specific determinations, including that the minor or person with a disability has a disability that substantially impairs the individuals ability to provide for their own care.
This bill would require the county assessor to determine that a person is eligible as a severely and permanently disabled claimant under the above-described provisions relating to transfers of taxable value if the county assessor receives a letter certifying a special needs trust, as specified. The bill would authorize the county assessor to issue determination of preliminary eligibility, as provided, and would require the claimant be liable for property tax at the appraised value of the replacement dwelling at the time of transfer for the years since the transfer if the trust fails to produce the letter within 5 years. The bill would require the State Department of Health Care Services to develop and establish a method for a claimant to request, and the parameters for issuing, a letter certifying a special needs trust.
(a)Notwithstanding any provision of this chapter, beginning on and after February 16, 2021, a change in ownership shall not include, in whole or in part, any of the following purchases or transfers for which a claim is filed:
(1)The purchase or transfer of real property that is the principal residence of an eligible transferor in the case of a purchase or transfer between parents and their children or between grandparents and their grandchildren, if all of the parents, other than stepparents, of that grandchild or those grandchildren, who qualify as the children of the grandparents, are deceased as of the date of purchase or transfer.
(A)The transfer is required to be of a principal residence of the transferor, and become the principal residence of the transferee within one year of the transfer.
(B)The transferee shall file for the homeowners or disabled veterans exemption within a year of the transfer, and the exclusion shall be removed on the date an eligible transferee, or a subsequent eligible transferee who files for the homeowners or disabled veterans exemption within one year, is no longer eligible for either the homeowners or disabled veterans exemption.
(C)If applicable, as of the lien date immediately following the date the eligible transferee or subsequent eligible transferee no longer qualifies for the exclusion provided by this section, the base year value established as of the change in ownership date to which the exclusion applied, adjusted annually in accordance with paragraph (1) of subdivision (a) of Section 51, shall be enrolled.
(2)The purchase or transfer is of a family farm of an eligible transferor in the case of a purchase or transfer between parents and their children or between grandparents and their grandchildren, if all of the parents, other than stepparents, of that grandchild or those grandchildren, who qualify as the children of the grandparents, are deceased as of the date of purchase or transfer.
(A)This exclusion shall apply separately to the transfer of each legal parcel that makes up a family farm.
(B)For purposes of this section, each legal parcel that makes up a family farm shall be deemed to itself be a family farm, except for a legal parcel containing a family home.
(C)A legal parcel containing a family home as described in subparagraph (B) may qualify separately for exclusion under paragraph (1).
(b)The exclusions provided for in this section shall not be allowed unless a claim for the exclusion sought, pursuant to subdivision (f), is filed with the assessor.
(c)A claim filed under this section is not a public document and is not subject to public inspection, except that a claim shall be available for inspection by the transferee and the transferor or their respective spouse, the transferees legal representative, the transferors legal representative, the trustee of the transferees trust, the trustee of the transferors trust, and the executor or administrator of the transferees or transferors estate.
(d)The new taxable value of the family home or family farm shall be the sum of both of the following:
(1)The taxable value of the family home or family farm as determined in accordance with Section 110.1, with the adjustments permitted by subdivision (b) of Section 2 of Article XIIIA of the California Constitution and subdivision (f) of Section 110.1, determined as of the date immediately prior to the date the principal residence or family farm is purchased or transferred to the transferee.
(2)The applicable of the following amounts:
(A)If the fair market value, as defined in subdivision (a) of Section 110, of the family home or family farm upon purchase by, or transfer to, the transferee is less than the sum of the taxable value described in paragraph (1) plus one million dollars ($1,000,000), then zero dollars ($0).
(B)If the fair market value, as defined in subdivision (a) of Section 110, of the family home or family farm upon purchase by, or transfer to, the transferee is equal to or more than the sum of the taxable value described in paragraph (1) plus one million dollars ($1,000,000), an amount equal to the fair market value of the family home upon purchase by, or transfer to, the transferee, minus the sum of the taxable value described in paragraph (1) and one million dollars ($1,000,000).
(e)As used in this section, the following terms have the following meanings:
(1)Children means any of the following:
(A)Any child born of the parent or parents, except a child, as defined in subparagraph (D), who has been adopted by another person or persons.
(B)Any stepchild of the parent or parents and the spouse of that stepchild while the relationship of stepparent and stepchild exists. For purposes of this paragraph, the relationship of stepparent and stepchild shall be deemed to exist until the marriage on which the relationship is based is terminated by divorce, or, if the relationship is terminated by death, until the remarriage of the surviving stepparent.
(C)Any son-in-law or daughter-in-law of the parent or parents. For the purposes of this paragraph, the relationship of parent and son-in-law or daughter-in-law shall be deemed to exist until the marriage on which the relationship is based is terminated by divorce, or, if the relationship is terminated by death, until the remarriage of the surviving son-in-law or daughter-in-law.
(D)Any child adopted by the parent or parents pursuant to statute, other than an individual adopted after reaching 18 years of age.
(E)Any foster child of a state-licensed foster parent, if that child was not, because of a legal barrier, adopted by the foster parent or foster parents before the child aged out of the foster care system. For purposes of this paragraph, the relationship between a foster child and foster parent shall be deemed to exist until terminated by death. However, for purposes of a transfer that occurs on the date of death, the relationship shall be deemed to exist on the date of death.
(2)Eligible transferee means a parent, child, grandparent, or grandchild of an eligible transferor.
(3)Eligible transferor means a grandparent, parent, grandchild, or child of an eligible transferee.
(4)Family farm means any real property under cultivation or which is being used for pasture or grazing, or that is used to produce any agricultural commodity, as that term is defined in Section 51201 of the Government Code as that section read on January 1, 2020.
(5)Family home or principal place of residence means a dwelling that is eligible for a homeowners exemption or a disabled veterans exemption as a result of the transferors ownership and occupation of the dwelling. Family home or principal residence includes only that portion of the land underlying the residence that consists of an area of reasonable size that is used as a site for the residence.
(6)Full cash value means full cash value, as defined in Section 2 of Article XIIIA of the California Constitution and Section 110.1, with any adjustments authorized by those sections, and the full value of any new construction in progress, determined as of the date immediately prior to the date of a purchase by or transfer to an eligible transferee of real property subject to this section.
(7)Grandchild or grandchildren means any child or children of the child or children of the grandparent or grandparents.
(8)Real property means real property as defined in Section 104. Real property does not include any interest in a legal entity. For purposes of this section, real property includes any of the following:
(A)An interest in a unit or lot within a cooperative housing corporation, as defined in subdivision (i) of Section 61.
(B)A pro rata ownership interest in a mobilehome park, as defined in subdivision (b) of Section 62.1.
(C)A pro rata ownership in a floating home marina, as defined in subdivision (c) of Section 62.5.
(9)Transfer includes, and is not limited to, any transfer of the present beneficial ownership of property from an eligible transferor to an eligible transferee through the medium of an inter vivos or testamentary trust. For the purposes of this paragraph, a special needs trust established pursuant to Section 3604 of the Probate Code shall be considered an eligible medium of transfer.
(f)(1)The State Board of Equalization shall prescribe, after consultation with the California Assessors Association, a form for claiming eligibility. Except as provided in paragraph (3), any claim under this section shall be filed as follows:
(A)Within three years after the date of the purchase or transfer of real property for which the claim is filed, or prior to the transfer of the real property to a third party, or an eligible transferee no longer occupies the residence, whichever is earlier.
(B)Notwithstanding subparagraph (A), a claim shall be deemed to be timely filed if it is filed within six months after the date of mailing of a notice of supplemental or escape assessment, issued as a result of the purchase or transfer of real property for which the claim is filed.
(2)(A)Notwithstanding subparagraph (B) of paragraph (1), and subject to subparagraph (C) of this paragraph, a claim shall be deemed to be timely filed within three years after the date of mailing of a notice of supplemental or escape assessment, issued as a result of transfer of real property for which the claim is filed, when all of the following apply:
(i)The assessor reassesses the property, pursuant to Section 170, as a result of that property being damaged or destroyed by the 2025 Palisades Fire, Eaton Fire, Hurst Fire, Lidia Fire, Sunset Fire, or Woodley Fire, for which the Governor proclaimed a state of emergency.
(ii)The assessor issued a supplemental or escape assessment due to a previously unrecorded change in ownership on or after the date of the state of emergency described in clause (i).
(iii)The transferee acquires ownership of the property, including, but not limited to, pursuant to Chapter 4 (commencing with Section 13600) of Part 2 of Division 8 of the Probate Code, on or after the date of the state of emergency described in clause (i).
(B)If all conditions of subparagraph (A) are satisfied, and notwithstanding subparagraph (B) of paragraph (1) of subdivision (a), a filing to claim the homeowners or disabled veterans exemption shall be treated as timely if it is filed within a year of the date of mailing of a notice of supplemental or escape assessment issued as a result of the transfer of the real property for which the claim is filed.
(C)This paragraph shall only apply to claims filed before January 1, 2031.
(3)In the case in which the real property subject to purchase or transfer has not been transferred to a third party, a claim for exclusion under this section that is filed subsequent to the expiration of the filing periods set forth in paragraph (1) shall be considered by the assessor, subject to both of the following conditions:
(A)Any exclusion granted pursuant to that claim shall apply, commencing with the lien date of the assessment year in which the claim is filed.
(B)Under any exclusion granted pursuant to that claim, the adjusted full cash value of the subject real property in the assessment year described in subparagraph (A) shall be the adjusted base year value of the subject real property in the assessment year in which the excluded purchase or transfer took place, factored to the assessment year described in subparagraph (A) for both of the following:
(i)Inflation as annually determined in accordance with paragraph (1) of subdivision (a) of Section 51.
(ii)Any subsequent new construction occurring with respect to the subject real property.
(g)(1)If the assessor notifies the transferee in writing of potential eligibility for exclusion from change in ownership under this section, a certified claim for exclusion shall be filed with the assessor within 45 days of the date of the notice of potential eligibility. If a certified claim for exclusion is not filed within 45 days, the assessor may send a second notice of potential eligibility for exclusion, notifying the transferee that a certified claim for exclusion has not been received and that reassessment of the property will commence unless a certified claim for exclusion is filed within 60 days of the date of the second notice of potential eligibility. The second notice of potential eligibility shall indicate whether a certified claim for exclusion that is not filed within 60 days will be subject to a processing fee as provided in paragraph (2).
(2)If a certified claim for exclusion is not filed within 60 days of the date of the second notice of potential eligibility and an eligible transferee subsequently files a claim and qualifies for the exclusion, the assessor may, upon authorization by a county board of supervisors, require an eligible transferee to pay a one-time processing fee, collected at the time the claim is submitted, and reimbursed by the assessor if the claim is ineligible. The fee shall be subject to the provisions of Chapter 12.5 (commencing with Section 54985) of Part 1 of Division 2 of Title 5 of the Government Code and shall not exceed the amount of the actual and reasonable costs incurred by the assessor for reassessment work done due to failure to file the claim for exclusion or one hundred seventy-five dollars ($175), whichever is less.
(h)(1)After consultation with the California Assessors Association, the board shall, by emergency regulation, adopt regulations and produce claim forms and instructions necessary to implement this section and Section 2.1 of Article XIIIA of the California Constitution.
(2)Any emergency regulation prescribed, adopted, or enforced pursuant to this section shall be adopted in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, and, for purposes of that chapter, including Section 11349.6 of the Government Code, the adoption of the regulation is an emergency and shall be considered by the Office of Administrative Law as necessary for the immediate preservation of the public peace, health and safety, and general welfare.
(a)Notwithstanding any provision of this chapter, beginning on and after February 16, 2021, a change in ownership shall not include, in whole or in part, any of the following purchases or transfers for which a claim is filed:
(1)The purchase or transfer of real property that is the principal residence of an eligible transferor in the case of a purchase or transfer between parents and their children or between grandparents and their grandchildren, if all of the parents, other than stepparents, of that grandchild or those grandchildren, who qualify as the children of the grandparents, are deceased as of the date of purchase or transfer.
(A)The transfer is required to be of a principal residence of the transferor, and become the principal residence of the transferee within one year of the transfer.
(B)The transferee shall file for the homeowners or disabled veterans exemption within a year of the transfer, and the exclusion shall be removed on the date an eligible transferee, or a subsequent eligible transferee who files for the homeowners or disabled veterans exemption within one year, is no longer eligible for either the homeowners or disabled veterans exemption.
(C)If applicable, as of the lien date immediately following the date the eligible transferee or subsequent eligible transferee no longer qualifies for the exclusion provided by this section, the base year value established as of the change in ownership date to which the exclusion applied, adjusted annually in accordance with paragraph (1) of subdivision (a) of Section 51, shall be enrolled.
(2)The purchase or transfer is of a family farm of an eligible transferor in the case of a purchase or transfer between parents and their children or between grandparents and their grandchildren, if all of the parents, other than stepparents, of that grandchild or those grandchildren, who qualify as the children of the grandparents, are deceased as of the date of purchase or transfer.
(A)This exclusion shall apply separately to the transfer of each legal parcel that makes up a family farm.
(B)For purposes of this section, each legal parcel that makes up a family farm shall be deemed to itself be a family farm, except for a legal parcel containing a family home.
(C)A legal parcel containing a family home as described in subparagraph (B) may qualify separately for exclusion under paragraph (1).
(b)The exclusions provided for in this section shall not be allowed unless a claim for the exclusion sought, pursuant to subdivision (f), is filed with the assessor.
(c)A claim filed under this section is not a public document and is not subject to public inspection, except that a claim shall be available for inspection by the transferee and the transferor or their respective spouse, the transferees legal representative, the transferors legal representative, the trustee of the transferees trust, the trustee of the transferors trust, and the executor or administrator of the transferees or transferors estate.
(d)The new taxable value of the family home or family farm shall be the sum of both of the following:
(1)The taxable value of the family home or family farm as determined in accordance with Section 110.1, with the adjustments permitted by subdivision (b) of Section 2 of Article XIIIA of the California Constitution and subdivision (f) of Section 110.1, determined as of the date immediately prior to the date the principal residence or family farm is purchased or transferred to the transferee.
(2)The applicable of the following amounts:
(A)If the fair market value, as defined in subdivision (a) of Section 110, of the family home or family farm upon purchase by, or transfer to, the transferee is less than the sum of the taxable value described in paragraph (1) plus one million dollars ($1,000,000), then zero dollars ($0).
(B)If the fair market value, as defined in subdivision (a) of Section 110, of the family home or family farm upon purchase by, or transfer to, the transferee is equal to or more than the sum of the taxable value described in paragraph (1) plus one million dollars ($1,000,000), an amount equal to the fair market value of the family home upon purchase by, or transfer to, the transferee, minus the sum of the taxable value described in paragraph (1) and one million dollars ($1,000,000).
(e)As used in this section, the following terms have the following meanings:
(1)Children means any of the following:
(A)Any child born of the parent or parents, except a child, as defined in subparagraph (D), who has been adopted by another person or persons.
(B)Any stepchild of the parent or parents and the spouse of that stepchild while the relationship of stepparent and stepchild exists. For purposes of this paragraph, the relationship of stepparent and stepchild shall be deemed to exist until the marriage on which the relationship is based is terminated by divorce, or, if the relationship is terminated by death, until the remarriage of the surviving stepparent.
(C)Any son-in-law or daughter-in-law of the parent or parents. For the purposes of this paragraph, the relationship of parent and son-in-law or daughter-in-law shall be deemed to exist until the marriage on which the relationship is based is terminated by divorce, or, if the relationship is terminated by death, until the remarriage of the surviving son-in-law or daughter-in-law.
(D)Any child adopted by the parent or parents pursuant to statute, other than an individual adopted after reaching 18 years of age.
(E)Any foster child of a state-licensed foster parent, if that child was not, because of a legal barrier, adopted by the foster parent or foster parents before the child aged out of the foster care system. For purposes of this paragraph, the relationship between a foster child and foster parent shall be deemed to exist until terminated by death. However, for purposes of a transfer that occurs on the date of death, the relationship shall be deemed to exist on the date of death.
(2)Eligible transferee means a parent, child, grandparent, or grandchild of an eligible transferor.
(3)Eligible transferor means a grandparent, parent, grandchild, or child of an eligible transferee.
(4)Family farm means any real property under cultivation or which is being used for pasture or grazing, or that is used to produce any agricultural commodity, as that term is defined in Section 51201 of the Government Code as that section read on January 1, 2020.
(5)Family home or principal place of residence means a dwelling that is eligible for a homeowners exemption or a disabled veterans exemption as a result of the transferors ownership and occupation of the dwelling. Family home or principal residence includes only that portion of the land underlying the residence that consists of an area of reasonable size that is used as a site for the residence.
(6)Full cash value means full cash value, as defined in Section 2 of Article XIIIA of the California Constitution and Section 110.1, with any adjustments authorized by those sections, and the full value of any new construction in progress, determined as of the date immediately prior to the date of a purchase by or transfer to an eligible transferee of real property subject to this section.
(7)Grandchild or grandchildren means any child or children of the child or children of the grandparent or grandparents.
(8)Real property means real property as defined in Section 104. Real property does not include any interest in a legal entity. For purposes of this section, real property includes any of the following:
(A)An interest in a unit or lot within a cooperative housing corporation, as defined in subdivision (i) of Section 61.
(B)A pro rata ownership interest in a mobilehome park, as defined in subdivision (b) of Section 62.1.
(C)A pro rata ownership in a floating home marina, as defined in subdivision (c) of Section 62.5.
(9)Transfer includes, and is not limited to, any transfer of the present beneficial ownership of property from an eligible transferor to an eligible transferee through the medium of an inter vivos or testamentary trust. For the purposes of this paragraph, a special needs trust established pursuant to Section 3604 of the Probate Code shall be considered an eligible medium of transfer.
(f)(1)The State Board of Equalization shall prescribe, after consultation with the California Assessors Association, a form for claiming eligibility. Except as provided in paragraph (3), any claim under this section shall be filed as follows:
(A)Within three years after the date of the purchase or transfer of real property for which the claim is filed, or prior to the transfer of the real property to a third party, or an eligible transferee no longer occupies the residence, whichever is earlier.
(B)Notwithstanding subparagraph (A), a claim shall be deemed to be timely filed if it is filed within six months after the date of mailing of a notice of supplemental or escape assessment, issued as a result of the purchase or transfer of real property for which the claim is filed.
(2)(A)Notwithstanding subparagraph (B) of paragraph (1), and subject to subparagraph (C) of this paragraph, a claim shall be deemed to be timely filed within three years after the date of mailing of a notice of supplemental or escape assessment, issued as a result of transfer of real property for which the claim is filed, when all of the following apply:
(i)The assessor reassesses the property, pursuant to Section 170, as a result of that property being damaged or destroyed by the 2025 Palisades Fire, Eaton Fire, Hurst Fire, Lidia Fire, Sunset Fire, or Woodley Fire, for which the Governor proclaimed a state of emergency.
(ii)The assessor issued a supplemental or escape assessment due to a previously unrecorded change in ownership on or after the date of the state of emergency described in clause (i).
(iii)The transferee acquires ownership of the property, including, but not limited to, pursuant to Chapter 4 (commencing with Section 13600) of Part 2 of Division 8 of the Probate Code, on or after the date of the state of emergency described in clause (i).
(B)If all conditions of subparagraph (A) are satisfied, and notwithstanding subparagraph (B) of paragraph (1) of subdivision (a), a filing to claim the homeowners or disabled veterans exemption shall be treated as timely if it is filed within a year of the date of mailing of a notice of supplemental or escape assessment issued as a result of the transfer of the real property for which the claim is filed.
(C)This paragraph shall only apply to claims filed before January 1, 2031.
(3)In the case in which the real property subject to purchase or transfer has not been transferred to a third party, a claim for exclusion under this section that is filed subsequent to the expiration of the filing periods set forth in paragraph (1) shall be considered by the assessor, subject to both of the following conditions:
(A)Any exclusion granted pursuant to that claim shall apply, commencing with the lien date of the assessment year in which the claim is filed.
(B)Under any exclusion granted pursuant to that claim, the adjusted full cash value of the subject real property in the assessment year described in subparagraph (A) shall be the adjusted base year value of the subject real property in the assessment year in which the excluded purchase or transfer took place, factored to the assessment year described in subparagraph (A) for both of the following:
(i)Inflation as annually determined in accordance with paragraph (1) of subdivision (a) of Section 51.
(ii)Any subsequent new construction occurring with respect to the subject real property.
(g)(1)If the assessor notifies the transferee in writing of potential eligibility for exclusion from change in ownership under this section, a certified claim for exclusion shall be filed with the assessor within 45 days of the date of the notice of potential eligibility. If a certified claim for exclusion is not filed within 45 days, the assessor may send a second notice of potential eligibility for exclusion, notifying the transferee that a certified claim for exclusion has not been received and that reassessment of the property will commence unless a certified claim for exclusion is filed within 60 days of the date of the second notice of potential eligibility. The second notice of potential eligibility shall indicate whether a certified claim for exclusion that is not filed within 60 days will be subject to a processing fee as provided in paragraph (2).
(2)If a certified claim for exclusion is not filed within 60 days of the date of the second notice of potential eligibility and an eligible transferee subsequently files a claim and qualifies for the exclusion, the assessor may, upon authorization by a county board of supervisors, require an eligible transferee to pay a one-time processing fee, collected at the time the claim is submitted, and reimbursed by the assessor if the claim is ineligible. The fee shall be subject to the provisions of Chapter 12.5 (commencing with Section 54985) of Part 1 of Division 2 of Title 5 of the Government Code and shall not exceed the amount of the actual and reasonable costs incurred by the assessor for reassessment work done due to failure to file the claim for exclusion or one hundred seventy-five dollars ($175), whichever is less.
(h)(1)After consultation with the California Assessors Association, the board shall, by emergency regulation, adopt regulations and produce claim forms and instructions necessary to implement this section and Section 2.1 of Article XIIIA of the California Constitution.
(2)Any emergency regulation prescribed, adopted, or enforced pursuant to this section shall be adopted in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, and, for purposes of that chapter, including Section 11349.6 of the Government Code, the adoption of the regulation is an emergency and shall be considered by the Office of Administrative Law as necessary for the immediate preservation of the public peace, health and safety, and general welfare.
(a)Notwithstanding any provision of this chapter, beginning on and after February 16, 2021, a change in ownership shall not include, in whole or in part, any of the following purchases or transfers for which a claim is filed:
(1)The purchase or transfer of real property that is the principal residence of an eligible transferor in the case of a purchase or transfer between parents and their children or between grandparents and their grandchildren, if all of the parents, other than stepparents, of that grandchild or those grandchildren, who qualify as the children of the grandparents, are deceased as of the date of purchase or transfer.
(A)The transfer is required to be of a principal residence of the transferor, and become the principal residence of the transferee within one year of the transfer.
(B)The transferee shall file for the homeowners or disabled veterans exemption within a year of the transfer, and the exclusion shall be removed on the date an eligible transferee, or a subsequent eligible transferee who files for the homeowners or disabled veterans exemption within one year, is no longer eligible for either the homeowners or disabled veterans exemption.
(C)If applicable, as of the lien date immediately following the date the eligible transferee or subsequent eligible transferee no longer qualifies for the exclusion provided by this section, the base year value established as of the change in ownership date to which the exclusion applied, adjusted annually in accordance with paragraph (1) of subdivision (a) of Section 51, shall be enrolled.
(2)The purchase or transfer is of a family farm of an eligible transferor in the case of a purchase or transfer between parents and their children or between grandparents and their grandchildren, if all of the parents, other than stepparents, of that grandchild or those grandchildren, who qualify as the children of the grandparents, are deceased as of the date of purchase or transfer.
(A)This exclusion shall apply separately to the transfer of each legal parcel that makes up a family farm.
(B)For purposes of this section, each legal parcel that makes up a family farm shall be deemed to itself be a family farm, except for a legal parcel containing a family home.
(C)A legal parcel containing a family home as described in subparagraph (B) may qualify separately for exclusion under paragraph (1).
(b)The exclusions provided for in this section shall not be allowed unless a claim for the exclusion sought, pursuant to subdivision (f), is filed with the assessor.
(c)A claim filed under this section is not a public document and is not subject to public inspection, except that a claim shall be available for inspection by the transferee and the transferor or their respective spouse, the transferees legal representative, the transferors legal representative, the trustee of the transferees trust, the trustee of the transferors trust, and the executor or administrator of the transferees or transferors estate.
(d)The new taxable value of the family home or family farm shall be the sum of both of the following:
(1)The taxable value of the family home or family farm as determined in accordance with Section 110.1, with the adjustments permitted by subdivision (b) of Section 2 of Article XIIIA of the California Constitution and subdivision (f) of Section 110.1, determined as of the date immediately prior to the date the principal residence or family farm is purchased or transferred to the transferee.
(2)The applicable of the following amounts:
(A)If the fair market value, as defined in subdivision (a) of Section 110, of the family home or family farm upon purchase by, or transfer to, the transferee is less than the sum of the taxable value described in paragraph (1) plus one million dollars ($1,000,000), then zero dollars ($0).
(B)If the fair market value, as defined in subdivision (a) of Section 110, of the family home or family farm upon purchase by, or transfer to, the transferee is equal to or more than the sum of the taxable value described in paragraph (1) plus one million dollars ($1,000,000), an amount equal to the fair market value of the family home upon purchase by, or transfer to, the transferee, minus the sum of the taxable value described in paragraph (1) and one million dollars ($1,000,000).
(e)As used in this section, the following terms have the following meanings:
(1)Children means any of the following:
(A)Any child born of the parent or parents, except a child, as defined in subparagraph (D), who has been adopted by another person or persons.
(B)Any stepchild of the parent or parents and the spouse of that stepchild while the relationship of stepparent and stepchild exists. For purposes of this paragraph, the relationship of stepparent and stepchild shall be deemed to exist until the marriage on which the relationship is based is terminated by divorce, or, if the relationship is terminated by death, until the remarriage of the surviving stepparent.
(C)Any son-in-law or daughter-in-law of the parent or parents. For the purposes of this paragraph, the relationship of parent and son-in-law or daughter-in-law shall be deemed to exist until the marriage on which the relationship is based is terminated by divorce, or, if the relationship is terminated by death, until the remarriage of the surviving son-in-law or daughter-in-law.
(D)Any child adopted by the parent or parents pursuant to statute, other than an individual adopted after reaching 18 years of age.
(E)Any foster child of a state-licensed foster parent, if that child was not, because of a legal barrier, adopted by the foster parent or foster parents before the child aged out of the foster care system. For purposes of this paragraph, the relationship between a foster child and foster parent shall be deemed to exist until terminated by death. However, for purposes of a transfer that occurs on the date of death, the relationship shall be deemed to exist on the date of death.
(2)Eligible transferee means a parent, child, grandparent, or grandchild of an eligible transferor.
(3)Eligible transferor means a grandparent, parent, grandchild, or child of an eligible transferee.
(4)Family farm means any real property under cultivation or which is being used for pasture or grazing, or that is used to produce any agricultural commodity, as that term is defined in Section 51201 of the Government Code as that section read on January 1, 2020.
(5)Family home or principal place of residence means a dwelling that is eligible for a homeowners exemption or a disabled veterans exemption as a result of the transferors ownership and occupation of the dwelling. Family home or principal residence includes only that portion of the land underlying the residence that consists of an area of reasonable size that is used as a site for the residence.
(6)Full cash value means full cash value, as defined in Section 2 of Article XIIIA of the California Constitution and Section 110.1, with any adjustments authorized by those sections, and the full value of any new construction in progress, determined as of the date immediately prior to the date of a purchase by or transfer to an eligible transferee of real property subject to this section.
(7)Grandchild or grandchildren means any child or children of the child or children of the grandparent or grandparents.
(8)Real property means real property as defined in Section 104. Real property does not include any interest in a legal entity. For purposes of this section, real property includes any of the following:
(A)An interest in a unit or lot within a cooperative housing corporation, as defined in subdivision (i) of Section 61.
(B)A pro rata ownership interest in a mobilehome park, as defined in subdivision (b) of Section 62.1.
(C)A pro rata ownership in a floating home marina, as defined in subdivision (c) of Section 62.5.
(9)Transfer includes, and is not limited to, any transfer of the present beneficial ownership of property from an eligible transferor to an eligible transferee through the medium of an inter vivos or testamentary trust, including, but not limited to, a special needs trust. For the purposes of this paragraph, a special needs trust established pursuant to Section 3604 of the Probate Code shall be considered an eligible medium of transfer.
(f)(1)The State Board of Equalization shall prescribe, after consultation with the California Assessors Association, a form for claiming eligibility. Except as provided in paragraph (3), any claim under this section shall be filed as follows:
(A)Within three years after the date of the purchase or transfer of real property for which the claim is filed, or prior to the transfer of the real property to a third party, or an eligible transferee no longer occupies the residence, whichever is earlier.
(B)Notwithstanding subparagraph (A), a claim shall be deemed to be timely filed if it is filed within six months after the date of mailing of a notice of supplemental or escape assessment, issued as a result of the purchase or transfer of real property for which the claim is filed.
(2)(A)Notwithstanding subparagraph (B) of paragraph (1), and subject to subparagraph (C) of this paragraph, a claim shall be deemed to be timely filed within three years after the date of mailing of a notice of supplemental or escape assessment, issued as a result of transfer of real property for which the claim is filed, when all of the following apply:
(i)The assessor reassesses the property, pursuant to Section 170, as a result of that property being damaged or destroyed by the 2025 Palisades Fire, Eaton Fire, Hurst Fire, Lidia Fire, Sunset Fire, or Woodley Fire, for which the Governor proclaimed a state of emergency.
(ii)The assessor issued a supplemental or escape assessment due to a previously unrecorded change in ownership on or after the date of the state of emergency described in paragraph (A). clause (i).
(iii)The transferee acquires ownership of the property, including including, but not limited to, pursuant to Chapter 4 (commencing with Section 13600) of Part 2 of Division 8 of the Probate Code, on or after the date of the state of emergency described in paragraph (A). clause (i).
(B)If all conditions of subparagraph (A) are satisfied, and notwithstanding subparagraph (B) of paragraph (1) of subdivision (a), a filing to claim the homeowners or disabled veterans exemption shall be treated as timely if it is filed within a year of the date of mailing of a notice of supplemental or escape assessment issued as a result of the transfer of the real property for which the claim is filed.
(C)This paragraph shall only apply to claims filed before January 1, 2031.
(3)In the case in which the real property subject to purchase or transfer has not been transferred to a third party, a claim for exclusion under this section that is filed subsequent to the expiration of the filing periods set forth in paragraph (1) shall be considered by the assessor, subject to both of the following conditions:
(A)Any exclusion granted pursuant to that claim shall apply, commencing with the lien date of the assessment year in which the claim is filed.
(B)Under any exclusion granted pursuant to that claim, the adjusted full cash value of the subject real property in the assessment year described in subparagraph (A) shall be the adjusted base year value of the subject real property in the assessment year in which the excluded purchase or transfer took place, factored to the assessment year described in subparagraph (A) for both of the following:
(i)Inflation as annually determined in accordance with paragraph (1) of subdivision (a) of Section 51.
(ii)Any subsequent new construction occurring with respect to the subject real property.
(g)(1)If the assessor notifies the transferee in writing of potential eligibility for exclusion from change in ownership under this section, a certified claim for exclusion shall be filed with the assessor within 45 days of the date of the notice of potential eligibility. If a certified claim for exclusion is not filed within 45 days, the assessor may send a second notice of potential eligibility for exclusion, notifying the transferee that a certified claim for exclusion has not been received and that reassessment of the property will commence unless a certified claim for exclusion is filed within 60 days of the date of the second notice of potential eligibility. The second notice of potential eligibility shall indicate whether a certified claim for exclusion that is not filed within 60 days will be subject to a processing fee as provided in paragraph (2).
(2)If a certified claim for exclusion is not filed within 60 days of the date of the second notice of potential eligibility and an eligible transferee subsequently files a claim and qualifies for the exclusion, the assessor may, upon authorization by a county board of supervisors, require an eligible transferee to pay a one-time processing fee, collected at the time the claim is submitted, and reimbursed by the assessor if the claim is ineligible. The fee shall be subject to the provisions of Chapter 12.5 (commencing with Section 54985) of Part 1 of Division 2 of Title 5 of the Government Code and shall not exceed the amount of the actual and reasonable costs incurred by the assessor for reassessment work done due to failure to file the claim for exclusion or one hundred seventy-five dollars ($175), whichever is less.
(h)(1)After consultation with the California Assessors Association, the board shall, by emergency regulation, adopt regulations and produce claim forms and instructions necessary to implement this section and Section 2.1 of Article XIIIA of the California Constitution.
(2)Any emergency regulation prescribed, adopted, or enforced pursuant to this section shall be adopted in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, and, for purposes of that chapter, including Section 11349.6 of the Government Code, the adoption of the regulation is an emergency and shall be considered by the Office of Administrative Law as necessary for the immediate preservation of the public peace, health and safety, and general welfare.
(a)Notwithstanding any provision of this chapter, beginning on and after February 16, 2021, a change in ownership shall not include, in whole or in part, any of the following purchases or transfers for which a claim is filed:
(1)The purchase or transfer of real property that is the principal residence of an eligible transferor in the case of a purchase or transfer between parents and their children or between grandparents and their grandchildren, if all of the parents, other than stepparents, of that grandchild or those grandchildren, who qualify as the children of the grandparents, are deceased as of the date of purchase or transfer.
(A)The transfer is required to be of a principal residence of the transferor, and become the principal residence of the transferee within one year of the transfer.
(B)The transferee shall file for the homeowners or disabled veterans exemption within a year of the transfer, and the exclusion shall be removed on the date an eligible transferee, or a subsequent eligible transferee who files for the homeowners or disabled veterans exemption within one year, is no longer eligible for either the homeowners or disabled veterans exemption.
(C)If applicable, as of the lien date immediately following the date the eligible transferee or subsequent eligible transferee no longer qualifies for the exclusion provided by this section, the base year value established as of the change in ownership date to which the exclusion applied, adjusted annually in accordance with paragraph (1) of subdivision (a) of Section 51, shall be enrolled.
(2)The purchase or transfer is of a family farm of an eligible transferor in the case of a purchase or transfer between parents and their children or between grandparents and their grandchildren, if all of the parents, other than stepparents, of that grandchild or those grandchildren, who qualify as the children of the grandparents, are deceased as of the date of purchase or transfer.
(A)This exclusion shall apply separately to the transfer of each legal parcel that makes up a family farm.
(B)For purposes of this section, each legal parcel that makes up a family farm shall be deemed to itself be a family farm, except for a legal parcel containing a family home.
(C)A legal parcel containing a family home as described in subparagraph (B) may qualify separately for exclusion under paragraph (1).
(b)The exclusions provided for in this section shall not be allowed unless a claim for the exclusion sought, pursuant to subdivision (f), is filed with the assessor.
(c)A claim filed under this section is not a public document and is not subject to public inspection, except that a claim shall be available for inspection by the transferee and the transferor or their respective spouse, the transferees legal representative, the transferors legal representative, the trustee of the transferees trust, the trustee of the transferors trust, and the executor or administrator of the transferees or transferors estate.
(d)The new taxable value of the family home or family farm shall be the sum of both of the following:
(1)The taxable value of the family home or family farm as determined in accordance with Section 110.1, with the adjustments permitted by subdivision (b) of Section 2 of Article XIIIA of the California Constitution and subdivision (f) of Section 110.1, determined as of the date immediately prior to the date the principal residence or family farm is purchased or transferred to the transferee.
(2)The applicable of the following amounts:
(A)If the fair market value, as defined in subdivision (a) of Section 110, of the family home or family farm upon purchase by, or transfer to, the transferee is less than the sum of the taxable value described in paragraph (1) plus one million dollars ($1,000,000), then zero dollars ($0).
(B)If the fair market value, as defined in subdivision (a) of Section 110, of the family home or family farm upon purchase by, or transfer to, the transferee is equal to or more than the sum of the taxable value described in paragraph (1) plus one million dollars ($1,000,000), an amount equal to the fair market value of the family home upon purchase by, or transfer to, the transferee, minus the sum of the taxable value described in paragraph (1) and one million dollars ($1,000,000).
(e)As used in this section, the following terms have the following meanings:
(1)Children means any of the following:
(A)Any child born of the parent or parents, except a child, as defined in subparagraph (D), who has been adopted by another person or persons.
(B)Any stepchild of the parent or parents and the spouse of that stepchild while the relationship of stepparent and stepchild exists. For purposes of this paragraph, the relationship of stepparent and stepchild shall be deemed to exist until the marriage on which the relationship is based is terminated by divorce, or, if the relationship is terminated by death, until the remarriage of the surviving stepparent.
(C)Any son-in-law or daughter-in-law of the parent or parents. For the purposes of this paragraph, the relationship of parent and son-in-law or daughter-in-law shall be deemed to exist until the marriage on which the relationship is based is terminated by divorce, or, if the relationship is terminated by death, until the remarriage of the surviving son-in-law or daughter-in-law.
(D)Any child adopted by the parent or parents pursuant to statute, other than an individual adopted after reaching 18 years of age.
(E)Any foster child of a state-licensed foster parent, if that child was not, because of a legal barrier, adopted by the foster parent or foster parents before the child aged out of the foster care system. For purposes of this paragraph, the relationship between a foster child and foster parent shall be deemed to exist until terminated by death. However, for purposes of a transfer that occurs on the date of death, the relationship shall be deemed to exist on the date of death.
(2)Eligible transferee means a parent, child, grandparent, or grandchild of an eligible transferor.
(3)Eligible transferor means a grandparent, parent, grandchild, or child of an eligible transferee.
(4)Family farm means any real property under cultivation or which is being used for pasture or grazing, or that is used to produce any agricultural commodity, as that term is defined in Section 51201 of the Government Code as that section read on January 1, 2020.
(5)Family home or principal place of residence means a dwelling that is eligible for a homeowners exemption or a disabled veterans exemption as a result of the transferors ownership and occupation of the dwelling. Family home or principal residence includes only that portion of the land underlying the residence that consists of an area of reasonable size that is used as a site for the residence.
(6)Full cash value means full cash value, as defined in Section 2 of Article XIIIA of the California Constitution and Section 110.1, with any adjustments authorized by those sections, and the full value of any new construction in progress, determined as of the date immediately prior to the date of a purchase by or transfer to an eligible transferee of real property subject to this section.
(7)Grandchild or grandchildren means any child or children of the child or children of the grandparent or grandparents.
(8)Real property means real property as defined in Section 104. Real property does not include any interest in a legal entity. For purposes of this section, real property includes any of the following:
(A)An interest in a unit or lot within a cooperative housing corporation, as defined in subdivision (i) of Section 61.
(B)A pro rata ownership interest in a mobilehome park, as defined in subdivision (b) of Section 62.1.
(C)A pro rata ownership in a floating home marina, as defined in subdivision (c) of Section 62.5.
(9)Transfer includes, and is not limited to, any transfer of the present beneficial ownership of property from an eligible transferor to an eligible transferee through the medium of an inter vivos or testamentary trust. trust, including, but not limited to, a special needs trust.
(f)(1)The State Board of Equalization shall prescribe, after consultation with the California Assessors Association, a form for claiming eligibility. Except as provided in paragraph (3), any claim under this section shall be filed as follows:
(A)Within three years after the date of the purchase or transfer of real property for which the claim is filed, or prior to the transfer of the real property to a third party, or an eligible transferee no longer occupies the residence, whichever is earlier.
(B)Notwithstanding subparagraph (A), a claim shall be deemed to be timely filed if it is filed within six months after the date of mailing of a notice of supplemental or escape assessment, issued as a result of the purchase or transfer of real property for which the claim is filed.
(2)(A)Notwithstanding subparagraph (B) of paragraph (1), and subject to subparagraph (C) of this paragraph, a claim shall be deemed to be timely filed within three years after the date of mailing of a notice of supplemental or escape assessment, issued as a result of transfer of real property for which the claim is filed, when all of the following apply:
(i)The assessor reassesses the property, pursuant to Section 170, as a result of that property being damaged or destroyed by the 2025 Palisades Fire, Eaton Fire, Hurst Fire, Lidia Fire, Sunset Fire, or Woodley Fire, for which the Governor proclaimed a state of emergency.
(ii)The assessor issued a supplemental or escape assessment due to a previously unrecorded change in ownership on or after the date of the state of emergency described in paragraph (A).
(iii)The transferee acquires ownership of the property, including but not limited to, pursuant to Chapter 4 (commencing with Section 13600) of Part 2 of Division 8 of the Probate Code, on or after the date of the state of emergency described in paragraph (A).
(B)If all conditions of subparagraph (A) are satisfied, and notwithstanding subparagraph (B) of paragraph (1) of subdivision (a), a filing to claim the homeowners or disabled veterans exemption shall be treated as timely if it is filed within a year of the date of mailing of a notice of supplemental or escape assessment issued as a result of the transfer of the real property for which the claim is filed.
(C)This paragraph shall only apply to claims filed before January 1, 2031.
(3)In the case in which the real property subject to purchase or transfer has not been transferred to a third party, a claim for exclusion under this section that is filed subsequent to the expiration of the filing periods set forth in paragraph (1) shall be considered by the assessor, subject to both of the following conditions:
(A)Any exclusion granted pursuant to that claim shall apply, commencing with the lien date of the assessment year in which the claim is filed.
(B)Under any exclusion granted pursuant to that claim, the adjusted full cash value of the subject real property in the assessment year described in subparagraph (A) shall be the adjusted base year value of the subject real property in the assessment year in which the excluded purchase or transfer took place, factored to the assessment year described in subparagraph (A) for both of the following:
(i)Inflation as annually determined in accordance with paragraph (1) of subdivision (a) of Section 51.
(ii)Any subsequent new construction occurring with respect to the subject real property.
(g)(1)If the assessor notifies the transferee in writing of potential eligibility for exclusion from change in ownership under this section, a certified claim for exclusion shall be filed with the assessor within 45 days of the date of the notice of potential eligibility. If a certified claim for exclusion is not filed within 45 days, the assessor may send a second notice of potential eligibility for exclusion, notifying the transferee that a certified claim for exclusion has not been received and that reassessment of the property will commence unless a certified claim for exclusion is filed within 60 days of the date of the second notice of potential eligibility. The second notice of potential eligibility shall indicate whether a certified claim for exclusion that is not filed within 60 days will be subject to a processing fee as provided in paragraph (2).
(2)If a certified claim for exclusion is not filed within 60 days of the date of the second notice of potential eligibility and an eligible transferee subsequently files a claim and qualifies for the exclusion, the assessor may, upon authorization by a county board of supervisors, require an eligible transferee to pay a one-time processing fee, collected at the time the claim is submitted, and reimbursed by the assessor if the claim is ineligible. The fee shall be subject to the provisions of Chapter 12.5 (commencing with Section 54985) of Part 1 of Division 2 of Title 5 of the Government Code and shall not exceed the amount of the actual and reasonable costs incurred by the assessor for reassessment work done due to failure to file the claim for exclusion or one hundred seventy-five dollars ($175), whichever is less.
(h)(1)After consultation with the California Assessors Association, the board shall, by emergency regulation, adopt regulations and produce claim forms and instructions necessary to implement this section and Section 2.1 of Article XIIIA of the California Constitution.
(2)Any emergency regulation prescribed, adopted, or enforced pursuant to this section shall be adopted in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, and, for purposes of that chapter, including Section 11349.6 of the Government Code, the adoption of the regulation is an emergency and shall be considered by the Office of Administrative Law as necessary for the immediate preservation of the public peace, health and safety, and general welfare.
All matter omitted in this version of the bill appears in the bill as introduced in the Senate, February 4, 2026. (JR11)Notwithstanding any other law, on and after April 1, 2021, the following shall apply:
(a)(1)Pursuant to subdivision (b) of Section 2.1 of Article XIIIA of the California Constitution, any person over 55 years of age, any severely and permanently disabled person, or a victim of wildfire or natural disaster who resides in property that is eligible for either the homeowners exemption, under subdivision (k) of Section 3 of Article XIII of the California Constitution and Section 218, or the disabled veterans exemption, under subdivision (a) of Section 4 of Article XIII of the California Constitution and Section 205.5, may transfer, subject to the conditions and limitations provided in this section, the taxable value of that property to any replacement dwelling that is purchased or newly constructed by that person as their principal residence within two years of the sale by that person of the original property, provided that the taxable value of the original property shall not be transferred to the replacement dwelling until the original property is sold. A
(2)A person shall not be allowed to transfer the taxable value of a primary residence pursuant to this section more than three times as a claimant who is over 55 years of age or severely or permanently disabled.
(3)(A)The county assessor shall determine that a person is eligible as a severely and permanently disabled claimant if the county assessor receives a letter certifying a special needs trust. The county assessor shall accept an electronically generated letter certifying a special needs trust in lieu of an original letter certifying a special needs trust, at the discretion of the claimant.
(B)The county assessor may issue a written or electronic determination of preliminary eligibility for a severely and permanently disabled claimant conditioned on receiving a letter certifying a special needs trust. If the trust fails to produce the letter within five years of the assessor issuing the determination, the claimant shall be liable for property tax at the appraised value of the replacement dwelling at the time of transfer for the years since the transfer.
(C)The State Department of Health Care Services shall develop and establish both of the following:
(i)A method for a claimant to request a letter certifying a special needs trust.
(ii)Parameters for issuing a letter certifying a special needs trust.
(D)For purposes of this paragraph, letter certifying a special needs trust means a letter from the State Department of Health Care Services that affirms the property is held for the benefit of the claimant in a special needs trust that meets either of the following conditions:
(i)Adheres to the requirements established in Section 3604 of the Probate Code.
(ii)Is irrevocable and adheres to the requirements established in Section 1396p(d)(4)(A) or 1396p(d)(4)(C) of Title 42 of the United States Code.
(b)In addition to meeting the requirements of subdivision (a), any person claiming the property tax relief provided by this section shall be eligible for that relief only if the following conditions are met:
(1)The claimant is an owner and a resident of the original property either at the time of its sale or within two years of the purchase or new construction of the replacement dwelling.
(2)The original property is eligible for the homeowners exemption or the disabled veterans exemption, as the result of the claimants ownership and occupation of the property as their principal residence, either at the time of its sale or within two years of the purchase or new construction of the replacement dwelling.
(3)At the time of the sale of the original property, the claimant is over 55 years of age, is severely and permanently disabled, or is a victim of wildfire or natural disaster.
(4)At the time of claiming the property tax relief provided by subdivision (a), the claimant is an owner of a replacement dwelling and occupies it as their principal place of residence and, as a result thereof, the property is currently eligible for the homeowners exemption or the disabled veterans exemption, or would be eligible for the exemption except that the property is already receiving the exemption because of an exemption claim filed by the previous owner.
(5)The claimant sells the original property within two years of the purchase or new construction of the replacement dwelling. For purposes of this paragraph:
(A)Either the sale of the original property or the purchase or new construction of the replacement dwelling, but not both, may occur before April 1, 2021.
(B)The purchase or new construction of the replacement dwelling includes the purchase of that portion of land on which the replacement building, structure, or other shelter constituting a place of abode of the claimant will be situated and that constitutes a part of the replacement dwelling.
(6)The claimant has not previously been granted, as a claimant who is over 55 years of age or severely and permanently disabled, the property tax relief provided by this section more than two times. This limitation shall not apply to claimants who are victims of wildfire or natural disaster. In order to prevent more than three claims under this section within this state per person, each county assessor shall report quarterly to the State Board of Equalization that information from claims filed and from county records as is specified by the board to be necessary to identify fully all claims under this section allowed by assessors and all claimants who have thereby received relief. The board may specify that the information include all or a part of the names and social security numbers of claimants and the identity and location of the replacement dwelling to which the claim applies. The information may be required in the form of data processing media or other media and in a format that is compatible with the recordkeeping processes of the counties and the auditing procedures of the state.
(c)(1)To receive the property tax relief under this section, a claim shall be filed within three years of the date the replacement dwelling was purchased or the new construction of the replacement dwelling was completed.
(2)A claim for transfer of taxable value under this section that is filed after the expiration of the filing period set forth in paragraph (1) shall be considered by the assessor, subject to both of the following conditions:
(A)Any base year value transfer granted pursuant to that claim shall apply, commencing with the lien date of the assessment year in which the claim is filed.
(B)The full cash value of the replacement dwelling in the assessment year described in subparagraph (A) shall be the base year value of the real property in the assessment year in which the base year value was transferred, factored to the assessment year described in subparagraph (A) for all of the following:
(i)Inflation as annually determined in accordance with paragraph (1) of subdivision (a) of Section 51.
(ii)Any subsequent new construction occurring with respect to the subject real property that does not qualify for property tax relief pursuant to the criteria set forth in subparagraphs (A) and (B) of paragraph (7) of subdivision (e).
(d)For the purposes of this section, the following terms have the following meanings:
(1)Person over 55 years of age means any person who has attained the age of 55 years or older at the time of the sale of the original property.
(2)Taxable value of the original property means its base year value, as determined in accordance with Section 110.1, with the adjustments permitted by subdivision (b) of Section 2 of Article XIII A of the California Constitution and subdivision (f) of Section 110.1, determined as of the date that the original property is sold by the claimant, or in the case where the original property has been substantially damaged or destroyed by wildfire or natural disaster and the owner does not rebuild on the original property, determined as of the date immediately before the wildfire or natural disaster.
(3)Replacement dwelling means a building, structure, or other shelter constituting a place of abode, whether real property or personal property, that is owned and occupied by a claimant as the claimants principal place of residence, and any land owned by the claimant on which the building, structure, or other shelter is situated. For purposes of this paragraph, land constituting a part of a replacement dwelling includes only that area of reasonable size that is used as a site for a residence, and land owned by the claimant includes land for which the claimant either holds a leasehold interest described in subdivision (c) of Section 61 or a land purchase contract. Each unit of a multiunit dwelling shall be considered a separate replacement dwelling. For purposes of this paragraph, area of reasonable size that is used as a site for a residence includes all land if any nonresidential uses of the property are only incidental to the use of the property as a residential site. For purposes of this paragraph, land owned by the claimant includes an ownership interest in a resident-owned mobilehome park that is assessed pursuant to subdivision (b) of Section 62.1.
(4)Original property means a building, structure, or other shelter constituting a place of abode, whether real property or personal property, that is owned and occupied by a claimant as the claimants principal place of residence, and any land owned by the claimant on which the building, structure, or other shelter is situated. For purposes of this paragraph, land constituting a part of the original property includes only that area of reasonable size that is used as a site for a residence, and land owned by the claimant includes land for which the claimant either holds a leasehold interest described in subdivision (c) of Section 61 or a land purchase contract. Each unit of a multiunit dwelling shall be considered a separate original property. For purposes of this paragraph, area of reasonable size that is used as a site for a residence includes all land if any nonresidential uses of the property are only incidental to the use of the property as a residential site. For purposes of this paragraph, land owned by the claimant includes an ownership interest in a resident-owned mobilehome park that is assessed pursuant to subdivision (b) of Section 62.1.
(5)For purposes of this section, an original dwelling or replacement dwelling shall not be considered a multiunit dwelling if: (A) there is a dwelling unit on the property, (B) the only other units on the real property are accessory dwelling units or junior accessory dwelling units, (C) any accessory dwelling units and junior accessory dwelling units are not separately alienable from the title of any other dwelling unit on the property, and (D) the claimant occupies one of the structures as their primary residence.
(6)For the purposes of this subdivision, except as otherwise provided in paragraph (7) of subdivision (e), if the replacement dwelling is, in part, purchased and, in part, newly constructed, the date the replacement dwelling is purchased or newly constructed is the date of purchase or the date of completion of construction, whichever is later.
(7)Full cash value of the replacement dwelling means its full cash value, determined in accordance with Section 110.1, as of the date on which it was purchased or new construction was completed, and after the purchase or the completion of new construction.
(8)Full cash value of the original property means either of the following, as applicable:
(A)Its new base year value, in accordance with Section 75.8, without the application of subdivision (c) of Section 2.1 of Article XIIIA of the California Constitution, plus the adjustments permitted by subdivision (b) of Section 2 of Article XIIIA and subdivision (f) of Section 110.1 for the period from the date of its sale by the claimant to the date on which the replacement dwelling was purchased or new construction was completed.
(B)In the case where the original property has been substantially damaged or destroyed by wildfire or natural disaster and the owner does not rebuild on the original property, its full cash value, as determined in accordance with Section 110, immediately before its substantial damage or destruction by wildfire or natural disaster, as determined by the assessor of the county in which the property is located, without the application of subdivision (c) of Section 2.1 of Article XIIIA of the California Constitution, plus the adjustments permitted by subdivision (b) of Section 2 of Article XIIIA of the California Constitution and subdivision (f) of Section 110.1, for the period from the date of its sale by the claimant to the date on which the replacement property was purchased or new construction was completed.
(9)Sale means any change in ownership of the original property for consideration.
(10)Claimant means any person claiming the property tax relief provided by this section.
(11)Property that is eligible for the homeowners exemption includes property that is the principal place of residence of its owner and is entitled to exemption pursuant to Section 205.5.
(12)Person means any individual, but does not include any firm, partnership, association, corporation, company, or other legal entity or organization of any kind. Person includes an individual who is the present beneficiary of a trust.
(13)Equal or lesser value means that the amount of the full cash value of a replacement dwelling does not exceed one of the following:
(A)One hundred percent of the amount of the full cash value of the original property if the replacement dwelling is purchased or newly constructed prior to the date of the sale of the original property.
(B)One hundred and five percent of the amount of the full cash value of the original property if the replacement dwelling is purchased or newly constructed within the first year following the date of the sale of the original property.
(C)One hundred and ten percent of the amount of the full cash value of the original property if the replacement dwelling is purchased or newly constructed within the second year following the date of the sale of the original property.
(14)For the purposes of this section, original property is substantially damaged or destroyed by wildfire or natural disaster if either the land or the improvements sustain physical damage amounting to more than 50 percent of either the lands or the improvements full cash value immediately before the wildfire or natural disaster. Damage includes a diminution in the value of the original property as a result of restricted access caused by the wildfire or natural disaster.
(e)(1)Upon the timely filing of a claim described in paragraph (1) of subdivision (c), the assessor shall adjust the new base year value of the replacement dwelling in conformity with this section. This adjustment shall be made as of the latest of the following dates:
(A)The date the original property is sold.
(B)The date the replacement dwelling is purchased.
(C)The date the new construction of the replacement dwelling is completed.
(2)If the full cash value of the replacement dwelling is of equal or lesser value than that of the original property, the taxable value shall be deemed to be the taxable value of the original property.
(3)If the full cash value of the replacement dwelling is of greater value than the original property, the taxable value of the replacement dwelling shall be calculated by adding the difference between the full cash value of the original property and the full cash value of the replacement dwelling to the taxable value of the original property.
(4)If the replacement dwelling is purchased or newly constructed after the transfer of the original property, taxable value of the original property also includes any inflation factor adjustments permitted by subdivision (f) of Section 110.1 for the period subsequent to the sale of the original property. The base year or years used to compute the taxable value of the original property shall be deemed to be the base year or years of any property to which that base year value is transferred pursuant to this section.
(5)Any taxes that were levied on the replacement dwelling prior to the filing of the claim on the basis of the replacement dwellings new base year value, and any allowable annual adjustments thereto, shall be canceled or refunded to the claimant to the extent that the taxes exceed the amount that would be due when determined on the basis of the adjusted new base year value.
(6)Notwithstanding Section 75.10, Chapter 3.5 (commencing with Section 75) shall be utilized for purposes of implementing this subdivision, including adjustments of the new base year value of replacement dwellings acquired prior to the sale of the original property.
(7)In the case when a claim under this section has been timely filed and granted, and new construction is performed upon the replacement dwelling subsequent to the transfer of base year value, the property tax relief provided by this section also shall apply to the replacement dwelling, as improved, and thus there shall be no reassessment upon completion of the new construction if both of the following conditions are met:
(A)The new construction is completed within two years of the date of the sale of the original property and the owner notifies the assessor in writing of completion of the new construction within six months after completion.
(B)The fair market value of the new construction on the date of completion, plus the full cash value of the replacement dwelling on the date of acquisition, is not more than the full cash value of the original property as determined pursuant to paragraph (8) of subdivision (d) for purposes of granting the original claim.
(f)A claim filed under this section is not a public document and is not subject to public inspection, except that a claim shall be available for inspection by the claimant or the claimants spouse, the claimants or the claimants spouses legal representative, the trustee of a trust in which the claimant or the claimants spouse is a present beneficiary, and the executor or administrator of the claimants or the claimants spouses estate.
(g)(1)After consultation with the California Assessors Association, the Board of Equalization shall, by emergency regulation, adopt regulations and produce claim forms and instructions necessary to implement this section and Section 2.1 of Article XIII A of the California Constitution.
(2)Any emergency regulation prescribed, adopted, or enforced pursuant to this section shall be adopted in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, and, for purposes of that chapter, including Section 11349.6 of the Government Code, the adoption of the regulation is an emergency and shall be considered by the Office of Administrative Law as necessary for the immediate preservation of the public peace, health and safety, and general welfare.
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Date
|
Status
|
|---|---|
| Sep 27, 2026 | Chaptered by Secretary of State. Chapter 665, Statutes of 2026. |
| Sep 27, 2026 | Approved by the Governor. |
| Sep 2, 2026 | Enrolled and presented to the Governor at 3 p.m. |
| Aug 27, 2026 | Assembly amendments concurred in. (Ayes 40. Noes 0. Page 5986.) Ordered to engrossing and enrolling. |
| Aug 27, 2026 | Assembly amendments concurred in. (Ayes 39. Noes 0.) Ordered to engrossing and enrolling. |
| Aug 26, 2026 | Ordered to special consent calendar. |
| Aug 24, 2026 | In Senate. Concurrence in Assembly amendments pending. |
| Aug 24, 2026 | Read third time. Passed. (Ayes 76. Noes 0. Page 6371.) Ordered to the Senate. |
| Aug 24, 2026 | Read third time. Passed. Ordered to the Senate. |
| Jul 2, 2026 | Read second time. Ordered to third reading. |
| Jul 1, 2026 | From committee: Do pass. (Ayes 11. Noes 0.) (July 1). |
| Jun 18, 2026 | Read second time and amended. Re-referred to Com. on APPR. |
| Jun 17, 2026 | From committee: Do pass as amended and re-refer to Com. on APPR. (Ayes 7. Noes 0.) (June 8). |
| May 11, 2026 | Referred to Com. on REV. & TAX. |
| Apr 23, 2026 | In Assembly. Read first time. Held at Desk. |
| Apr 23, 2026 | Read third time. Passed. (Ayes 37. Noes 0.) Ordered to the Assembly. |
| Apr 23, 2026 | Read third time. Passed. (Ayes 37. Noes 0. Page 4034.) Ordered to the Assembly. |
| Apr 21, 2026 | Read second time. Ordered to consent calendar. |
| Apr 20, 2026 | From committee: Be ordered to second reading pursuant to Senate Rule 28.8 and ordered to consent calendar. |
| Apr 10, 2026 | Set for hearing April 20. |
| Apr 9, 2026 | Withdrawn from committee. |
| Apr 9, 2026 | Re-referred to Com. on APPR. |
| Apr 8, 2026 | From committee: Do pass and re-refer to Com. on HEALTH with recommendation: To consent calendar. (Ayes 5. Noes 0.) (April 8). Re-referred to Com. on HEALTH. |
| Apr 8, 2026 | From committee: Do pass and re-refer to Com. on HEALTH with recommendation: To consent calendar. (Ayes 5. Noes 0. Page 3795.) (April 8). Re-referred to Com. on HEALTH. |
| Mar 26, 2026 | Set for hearing April 8. |
| Mar 25, 2026 | From committee with author's amendments. Read second time and amended. Re-referred to Com. on REV. & TAX. |
| Feb 11, 2026 | Referred to Coms. on REV. & TAX. and HEALTH. |
| Feb 5, 2026 | From printer. May be acted upon on or after March 7. |
| Feb 4, 2026 | Introduced. Read first time. To Com. on RLS. for assignment. To print. |
|
Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| Aug 27, 2026 | Special Consent SB974 Seyarto | Senate Floor |
Passed |
|
| Aug 24, 2026 | SB 974 Seyarto Senate Third Reading By Lackey | Assembly Floor |
Passed |
|
| Jul 1, 2026 | Do pass. | Assembly Standing Committee on Appropriations |
Passed |
|
| Jun 8, 2026 | Do pass as amended and be re-referred to the Committee on [Appropriations] | Assembly Standing Committee on Revenue and Taxation |
Passed |
|
| Apr 23, 2026 | Consent Calendar 2nd SB974 Seyarto | Senate Floor |
Passed |
|
| Apr 8, 2026 | Do pass, but first be re-referred to the Committee on [Health] with the recommendation: To Consent Calendar | Senate Standing Committee on Revenue and Taxation |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| Arc and United Cerebral Palsy California Collaboration, The | ** Support | |
| Association Of Regional Center Agencies | ** Support | |
| Autism Society San Francisco Bay Area | ** Support | |
| California Board of Equalization | ** Support | |
| California State Board of Equalization | ** Support | |
| California Taxpayers Association | ** Support | |
| City Of Temecula | ** Support | |
| County of Riverside | ** Support | |
| Howard Jarvis Taxpayers Association | ** Support | |
| Parents Helping Parents | ** Support | |
| Peter Aldana, Assessor, County Clerk, and Recorder of Riverside County | ** Support | |
| Peter Aldana, Riverside County Assessor - County Clerk – Recorder | ** Support | |
| Peter Aldana, Riverside County Assessor – County Clerk – Recorder | ** Support | |
| Temecula, City of | ** Support | |
| The Arc and United Cerebral Palsy California Collaboration | ** Support |
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-4171 | SB 974 |
UNFINISHED BUSINESS
Bill No: SB 974
Author: Seyarto (R)
Amended: 6/18/26
Vote: 21
SENATE REVENUE AND TAXATION COMMITTEE: 5-0, 4/8/26
AYES: McNerney, Alvarado-Gil, Ashby, Becker, Grayson
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SENATE FLOOR: 37-0, 4/23/26 (Consent)
AYES: Allen, Alvarado-Gil, Archuleta, Arreguín, Ashby, Becker, Blakespear, Cabaldon, Caballero, Cervantes, Choi, Cortese, Dahle, Durazo, Gonzalez, Grayson, Grove, Hurtado, Jones, Laird, Limón, McGuire, McNerney, Menjivar, Niello, Padilla, Pérez, Richardson, Rubio, Seyarto, Smallwood-Cuevas, Stern, Strickland, Umberg, Valladares, Weber Pierson, Wiener
NO VOTE RECORDED: Ochoa Bogh, Reyes, Wahab
ASSEMBLY FLOOR: Passed, 8/24/26
SUBJECT: Property taxation: change in ownership: generational transfers: special needs trusts
SOURCE: Author
DIGEST:
This bill modifies the definition of “transfer” in statute implementing Proposition 19 to explicitly state that other forms of trusts can qualify for the exclusion, specifically Special Needs Trusts.
Assembly Amendments
restate the measure’s change, add a reference for its definition of “special needs trust,” and refine a cross reference.
ANALYSIS:
Existing law:
- Provides that all property is taxable unless explicitly exempted by the Constitution or federal law (California Constitution, Article XIII, Section One).
- Limits the maximum amount of any ad valorem tax on real property at 1% of full cash value, plus any locally-authorized bonded indebtedness, and caps a property’s annual inflationary increase in taxable value to 2%. Provides that assessors reappraise property whenever it is purchased, newly constructed, or when ownership changes (California Constitution, Article XIIIA, as added by Proposition 13, 1978).
- Defines “change in ownership” as “a transfer of a present interest in real property, including the beneficial use thereof, the value of which is substantially equal to the value of the fee interest.”
- Enacts change in ownership exclusions for transfers of property from one generation to the next, specifically:
- Transfers of property from parents to children (Proposition 58, 1986).
- Transfers of property to grandchildren, so long as the parents are deceased (Proposition 193, 1996).
- Enacts the Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act, which limits the above exclusions solely to the transfer of a principal residence when the property continues as the primary residence of the transferee, and requires the transferee to claim the homeowner’s exemption from property tax at the time of transfer or within one year to apply the exclusion (Proposition 19, 2020).
- Implements Proposition 19 to set forth definitions, requirements, limitations, and procedures for claiming a change in ownership exclusion for transfers of property from one generation to the next, based on similar statutes implementing Propositions 58 and 193 (SB 539, Hertzberg, Chapter 427, Statutes of 2021).
- Defines “transfer” to include a transfer through the medium of an inter vivos or testamentary trust to ensure that these transfers are eligible for Prop. 19 intergenerational transfer exclusions.
- Extends the current deadline for taxpayers to retroactively apply a Proposition 58, 193, or 19 intergenerational transfer from six months to three years under specified circumstances resulting from the 2025 Los Angeles Fires (SB 293, Perez, Chapter 539, Statutes of 2025).
This bill:
- States that a Special Needs Trust (SNT) is considered to be an eligible means of transfer for purposes of a Proposition 19 transfer.
- Defines “Special Needs Trust” by reference to the Probate Code.
- Changes a reference in SB 293 to more accurately refer to specified disasters.
Background
Often used to transfer property from one generation to the next, trusts are specific legal agreements to hold and administer property, in which a trustee manages property on behalf of others. Trusts allow grantors to pass assets to future generations while avoiding lengthy and costly probate proceedings. Trusts must identify:
- The creator of the trust, known as the trustor or grantor.
- The manager of the trust, known as a trustee or fiduciary.
- The beneficiary or beneficiaries who will receive property from the trust.
- The property the trust manages.
A Special Needs Trust is a trust that allows disabled persons to maintain their eligibility for public assistance benefits, despite having assets that would otherwise make the person ineligible for those benefits, specifically Medicaid and Supplemental Security Income. Because the beneficiary does not own the trust assets, they remain eligible for benefit programs that apply asset limits.
For the most part, a trustor transferring property to a trust is treated as a change in ownership at the time of transfer, triggering a reassessment of the property held by the trust, with several exceptions. According to Board of Equalization (BOE) Rule 462.010, the transfer of real property by a trustor to a trust in which the trustor-transferor is the sole present beneficiary of the trust is not a change in ownership, but generally becomes one when persons other than the trustor-transferor are or become present beneficiaries of the trust. BOE guidance states that assessors can look through a trust to its beneficial owners to determine whether an exclusion applies, such as a Prop. 19 intergenerational transfer, so long as the trustee or trustor submits a timely exclusion claim. While SB 539 includes trusts in its definition of “transfer” it did not explicitly include SNTs.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
According to the Assembly Appropriations Committee:
- No property tax revenue loss, as the State Board of Equalization (BOE) notes this bill clarifies a special needs trust is an eligible medium of transfer under existing law.
- Costs of approximately $15,000 in fiscal year (FY) 2026-27, $5,000 in FY 2027-28, and $2,000 in FY 2028-29 to the BOE to update and provide related guidance.
SUPPORT: (Verified 8/12/26)
Peter Aldana, Riverside County Assessor – County Clerk – Recorder
Association of Regional Center Agencies
Autism Society San Francisco Bay Area
California State Board of Equalization
California Taxpayers Association
City of Temecula
County of Riverside
Howard Jarvis Taxpayers Association
Parents Helping Parents
The Arc and United Cerebral Palsy California Collaboration
OPPOSITION: (Verified 8/12/26)
None received
ARGUMENTS IN SUPPORT: According to the author, “SB-974 provides important clarification to Proposition 19 by ensuring that Special Needs Trusts are recognized as meeting eligibility requirements for property tax protections. This will ensure that families planning for the long-term care of a severely disabled loved one are not unfairly penalized with property tax reassessment.”
Prepared by: Colin Grinnell / REV. & TAX. / (916) 651-4117, Haley Summers / REV. & TAX. / (916) 651-4117
8/24/26 17:12:47
**** END ****
SENATE THIRD READING
STR Bill Id:SB 974
Author:(Seyarto)
As Amended Ver:June 18, 2026
Majority vote
SUMMARY
Provides that a special needs trust, established pursuant to existing law, is an eligible medium of transfer, for the purposes of the intergenerational transfer exclusion.
Major Provisions
COMMENTS
- ACA 11/Proposition 19 (Prop. 19): In 2020, the Legislature enacted ACA 11 (Mullin) Chapter 31, Statutes of 2020, which voters subsequently approved in November 2020 as Prop. 19. Prop. 19 dramatically restructured a number of provisions related to the retention of base year values for properties with certain eligible owners. Prior to Prop. 19, intergenerational base year value transfers were far more generous, allowing the base year value of a decedent's property to transfer to their qualifying child or grandchild, regardless of the property's fair market value if the property was used as the principal place of residence for both the transferor and transferee. Additionally, $1 million of the aggregate full cash value of all other real property could be excluded from assessment resulting from a change in ownership. Prop. 19 restricted this exclusion, such that only $1 million above the principal residence's taxable value just prior to transfer is excluded. Any increase in the amount of taxable value above $1 million is added to the adjusted base year value of the property, and the resulting sum becomes the property's new base year value.
- Disposition of a decedent's estate: Generally, a deceased person's assets are distributed through a will or by intestate succession. Usually, assets are subject to probate administration, though there are various mechanisms that allow for the transfer of property without undergoing the formal process. These include trusts and small estates, among others. There are various types of trusts and Section 401 of the Assessors' Handbook lists four overarching types of trust. Inter vivos, or living, trusts take effect during the life of the trustor, the person who establishes the trust and transfers assets into the trust. Inter vivos trusts may be revocable or irrevocable. A revocable trust is created during the life of the trustor, and the trustor retains beneficial ownership and control of the property in the trust. An irrevocable trust requires the trustor to forgo control of the property transferred into the trust and the trustor may not revoke or amend the trust after establishment. Finally, a testamentary trust is created by will and takes effect only upon the death of the trustor. Testamentary trusts may only be irrevocable[1].
- Special needs trust: Special needs trusts are established for the purposes of allowing disabled persons to maintain eligibility for means-tested public assistance programs, despite having assets in excess of eligibility thresholds for those programs. In a special needs trust, the disabled person, or beneficiary, does not hold legal title to the trust assets. Rather, the trustee holds title and ownership of the property for the beneficiary. Thereby, the disabled person does not exceed maximum value thresholds for asset ownership under programs like Social Security Income or Medicaid.
- Clarification or duplication: Existing law provides that inter vivos trusts and testamentary trusts are eligible mediums of transfer under the intergenerational transfer exclusion. Additionally, existing law provides that the intergenerational transfer exclusion applies to both voluntary transfers and transfers resulting from a court decree. While a special needs trust is not specifically delineated, it would appear that existing law already authorizes a special needs trust as an eligible form of transfer. The author would, however, like to provide abundant clarity in the statute that a special needs trust qualifies.
According to the Author
SB 974 provides important clarification to [Prop.] 19 by ensuring that Special Needs Trusts are recognized as meeting eligibility requirements for property tax protections. This will ensure that families planning for the long-term care of severely disabled loved ones are not unfairly penalized with property tax reassessment.
Arguments in Support
Parents Helping Parents, writing in support of this bill, states, in part:
The recent amendments provide helpful clarification that special needs trusts are among the trust arrangements eligible for purposes of the applicable property tax exclusion. This clarification may provide greater certainty for families seeking to preserve housing stability and other assets that support future generations.
Arguments in Opposition
None on file
FISCAL COMMENTS
The Assembly Committee on Appropriations estimates the following fiscal impact in its analysis of this bill:
- No property tax revenue loss, as the State Board of Equalization (BOE) notes this bill clarifies a special needs trust is an eligible medium of transfer under existing law.
- Costs of approximately $15,000 in fiscal year (FY) 2026-27, $5,000 in FY 2027-28, and $2,000 in FY 2028-29 to the BOE to update and provide related guidance.
VOTES
SENATE FLOOR: 37-0-3
YES: Allen, Alvarado-Gil, Archuleta, Arreguín, Ashby, Becker, Blakespear, Cabaldon, Caballero, Cervantes, Choi, Cortese, Dahle, Durazo, Gonzalez, Grayson, Grove, Hurtado, Jones, Laird, Limón, McGuire, McNerney, Menjivar, Niello, Padilla, Pérez, Richardson, Rubio, Seyarto, Smallwood-Cuevas, Stern, Strickland, Umberg, Valladares, Weber Pierson, Wiener
ABS, ABST OR NV: Ochoa Bogh, Reyes, Wahab
ASM REVENUE AND TAXATION: 7-0-0
YES: Gipson, Sanchez, Carrillo, DeMaio, McKinnor, Quirk-Silva, Michelle Rodriguez
ASM APPROPRIATIONS: 11-0-4
YES: Wicks, Hoover, Arambula, Caloza, Dixon, Fong, Mark González, Krell, Pacheco, Solache, Ta
ABS, ABST OR NV: Calderon, Pellerin, Sharp-Collins, Tangipa
UPDATED
VERSION: June 18, 2026
CONSULTANT: Harrison Bowlby / REV. & TAX. / (916) 319-2098 FN: 0003272
BOE, Change in Ownership, Assessors' Handbook, Section 401, published September 2010, https://www.boe.ca.gov/proptaxes/pdf/ah401.pdf, accessed June 2026. ↑
Date of Hearing: July 1, 2026
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Buffy Wicks, Chair
SBPCA Bill Id:SB 974
Author:(Seyarto) – As Amended Ver:June 18, 2026
Policy Committee: | Revenue and Taxation | Vote: | 7 - 0 |
|
| ||
|
|
Urgency: No State Mandated Local Program: No Reimbursable: No
SUMMARY:
This bill revises the definition of “transfer” applicable to change in ownership provisions of property tax law to explicitly specify that a special needs trust is an eligible medium of transfer.
Specifically, this bill requires a special needs trust established pursuant to Section 3604 of the Probate Code be considered an eligible medium of transfer, in addition to existing law defining “transfer” to include, and not be limited to, certain transfers through the medium of an inter vivos or testamentary trust.
FISCAL EFFECT:
- No property tax revenue loss, as the State Board of Equalization (BOE) notes this bill clarifies a special needs trust is an eligible medium of transfer under existing law.
- Costs of approximately $15,000 in fiscal year (FY) 2026-27, $5,000 in FY 2027-28, and $2,000 in FY 2028-29 to the BOE to update and provide related guidance.
COMMENTS:
- Purpose. According to the author, this bill clarifies Proposition 19 (2020) by “ensuring that Special Needs Trusts are recognized as meeting eligibility requirements for property tax protections. This will ensure that families planning for the long-term care of severely disabled loved ones are not unfairly penalized with property tax reassessment.” This bill is supported by the BOE, local government entities, taxpayer groups, and organizations that support individuals with disabilities.
- Background. Intergenerational Transfer Exclusion. Existing law excludes from the definition of “change in ownership,” which otherwise triggers a reassessment of property taxes based on the current full cash value of the property, the transfer of a family home to a decedent’s eligible child or grandchild. This “intergenerational transfer exclusion” applies to both voluntary transfers and transfers resulting from a court order or judicial decree. SB 539 (Hertzberg), Chapter 427, Statutes of 2021, clarified various administrative uncertainties after the enactment of Proposition 19 dramatically restructured many provisions related to transfer exclusions for properties with certain eligible owners, including authorizing an inter vivos and testamentary trust as an eligible medium of transfer of property from an eligible transferor to an eligible transferee that qualifies for the intergenerational transfer exclusion.
Special Needs Trust. Under a special needs trust, the beneficiary is an individual with a disability who does not hold legal title to the trust assets. Rather, the trustee holds title and ownership of the property for the beneficiary, so the beneficiary does not exceed maximum value thresholds for asset ownership under means-tested public assistance programs, such as Social Security Income or Medicaid. According to the Assembly Revenue and Taxation Committee’s analysis of this bill, “While a special needs trust is not specifically delineated, it would appear that existing law already authorizes a special needs trust as an eligible form of transfer.” This bill provides explicit authorization for a transfer through a special needs trust to qualify for the intergenerational transfer exclusion.
Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081
Date of Hearing: June 8, 2026
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Mike Gipson, Chair
SBPCA Bill Id:SB 974
Author:(Seyarto) – As Amended Ver:March 25, 2026
Majority vote. Fiscal committee.
SENATE VOTE: 37-0
SUBJECT: Property taxation: change in ownership: generational transfers: special needs trusts
SUMMARY: Provides that a "transfer" includes, but is not limited to, a special needs trust for the purposes of intergenerational transfers.
EXISTING LAW:
- Provides that all property is taxable unless otherwise stipulated by the California Constitution or the laws of the United States. (California Constitution, Article XIII, Section 1.)
- Limits the maximum amount of ad valorem property taxation to 1% of the full cash value of the property. Generally, the Constitution restricts the full cash value of a property to the assessed value upon a change of ownership in, or new construction on, the property. This value is referred to as the base year value, which may be adjusted upwards for inflation at no more than 2% annually. (California Constitution, Article XIIIA, Sections 1 and 2.)
- Excludes from the definition of change in ownership the purchase or transfer of a family home or family farm to a decedent's eligible child or grandchild. The exclusion is limited to $1 million of the increase in assessed value upon the purchase or transfer over the property's adjusted base year value; any additional assessed value is subject to taxation pursuant to existing law. To qualify, a decedent's child or grandchild, also termed a transferee, must occupy the property as their principal place of residence and claim the homeowner's or disabled veteran's exemption within one year of the transfer. Additionally, the transferee must file with the State Board of Equalization (BOE) claiming eligibility for the exclusion, generally within three years after the date of the purchase or transfer of the eligible real property, as conditioned. This exclusion applies to both voluntary transfers and transfers resulting from a court order or judicial decree, and is often referred to as the "intergenerational transfer exclusion." The qualifying intergenerational transfer of the beneficial ownership by medium of an inter vivos or a testamentary trust is eligible for the intergenerational transfer exclusion. (California Constitution, Article XIIIA, Section 2.1. and Revenue and Taxation Code (R&TC) Section 63.2.)
- Authorizes, under the Trust Law, the creation of a trust via the following methods:
- A declaration by the owner of the property that the owner holds the property as a trustee;
- A transfer of property by the owner during the owner's lifetime to another person as trustee;
- A transfer of property by the owner, by will or by other instrument taking effect upon the death of the owner, to another person as trustee;
- An exercise of power of appointment to another person as trustee; or,
- An enforceable promise to create a trust.
The statute imposes additional requirements that must be met when forming a trust, and provides that the Trust Law applies to all trusts, regardless of commencement, with certain exclusions. Finally, statutory provisions stipulate that the law of this state regarding trusts is common law, except as modified by statute. (Probate Code Section 15000 et. seq.)
- Delineates the process for a court to order the payment of money of a minor or a person with a disability into a special needs trust, and requires the court to follow those procedures. (Probate Code Section 3604.)
FISCAL EFFECT: The BOE estimates no revenue impact resulting from this bill.
COMMENTS:
- The author has submitted the following statement in support of this bill:
SB-974 provides important clarification to Proposition [(Prop.)] 19 by ensuring that Special Needs Trusts are recognized as meeting eligibility requirements for property tax protections. This will ensure that families planning for the long-term care of severely disabled loved ones are not unfairly penalized with property tax reassessment.
- The BOE, writing in support of this bill, states, in part:
SB 974 is a clarification bill which revises the definition of "transfer" and specifies that an inter vivos or testamentary trust includes, but is not limited to, a Special Needs Trust. This clarification is needed to protect individuals who are severely disabled and covered by an [Special Needs Trust] from potentially suffering reassessment on their homes.
The Legislature has ensured several times that administrative uncertainties and legal vagueness should not prevent individuals from meeting [Prop.] 19 requirements. Individuals who otherwise would inherit a property but cannot due to the needs of an [Special Needs Trust] should not lose their [Prop.] 19 exclusion due to circumstances outside their control.
- Committee Staff Comments:
- ACA 11/ Prop. 19: In 2020, the Legislature enacted ACA 11, which voters subsequently approved in November of that year as Prop. 19. Prop. 19 dramatically restructured a number of provisions related to the retention of base year values for properties with certain eligible owners. Prior to Prop. 19, intergenerational base year value transfers were far more generous, allowing the base year value of a decedent's property to transfer to their qualifying child or grandchild, regardless of the property's fair market value if the property was used as the principal place of residence for both the transferor and transferee. Additionally, $1 million of the aggregate full cash value of all other real property could be excluded from assessment resulting from a change in ownership. Prop. 19 restricted this exclusion, such that only $1 million above the principal residence's taxable value just prior to transfer is excluded. Any increase in the amount of taxable value above $1 million is added to the adjusted base year value of the property, and the resulting sum becomes the property's new base year value.
- Disposition of a decedent's estate: Generally, a deceased person's assets are distributed through a will or by intestate succession. Usually, assets are subject to probate administration, though there are various mechanisms that allow for the transfer of property without undergoing the formal process. These include trusts and small estates, among others. There are various types of trusts and Section 401 of the Assessors' Handbook lists four overarching types of trust. Inter vivos, or living, trusts take effect during the life of the trustor, the person who establishes the trust and transfers assets into the trust. Inter vivos trusts may be revocable or irrevocable. A revocable trust is created during the life of the trustor, and the trustor retains beneficial ownership and control of the property in the trust. An irrevocable trust requires the trustor to forgo control of the property transferred into the trust and the trustor may not revoke or amend the trust after establishment. Finally, a testamentary trust is created by will and takes effect only upon the death of the trustor. Testamentary trusts may only be irrevocable[1].
- Special needs trust: Special needs trusts are established for the purposes of allowing disabled persons to maintain eligibility for means-tested public assistance programs, despite having assets in excess of eligibility thresholds for those programs. In a special needs trust, the disabled person, or beneficiary, does not hold legal title to the trust assets. Rather, the trustee holds title and ownership of the property for the beneficiary. Thereby, the disabled person does not exceed maximum value thresholds for asset ownership under programs like Social Security Income or Medicaid.
- This bill: As currently drafted, this bill would provide that, without limitation, a special needs trust is an inter vivos trust or testamentary trust that is an eligible medium of transfer under the intergenerational transfer exclusion. This bill does not provide a definition of a special needs trust.
- Clarification or duplication: Existing law provides that inter vivos trusts and testamentary trusts are eligible mediums of transfer under the intergenerational transfer exclusion. Additionally, existing law provides that the intergenerational transfer exclusion applies to both voluntary transfers and transfers resulting from a court degree. While a special needs trust is not specifically delineated, it would appear that existing law already authorizes a special needs trust as an eligible form of transfer. The author would, however, like to provide abundant clarity in the statute that a special needs trust qualifies.
- Suggested Committee amendment: Given the intent of the author is to provide clarity in existing law, it may be prudent to stipulate a definition in this bill. As such, the Committee may wish to consider amending this bill by striking, on Page 6, lines 16-17, the phrase "including, but not limited to, a special needs trust" and inserting after the sentence ending on Page 6, line 16, the sentence "For the purposes of this subparagraph, a special needs trust established pursuant to Probate Code Section 3604 shall be considered an eligible medium of transfer."
- Prior legislation: SB 539 (Hertzberg), Chapter 427, Statutes of 2021, was enacted to implement the provisions of Prop. 19, and clarified certain administrative uncertainties. Included in these provisions was the authorization that inter vivos and testamentary trusts are eligible mediums of transfer under the intergenerational transfer exclusion.
REGISTERED SUPPORT / OPPOSITION:
Support
Arc and United Cerebral Palsy California Collaboration, The
Association of Regional Center Agencies
California Board of Equalization
California Taxpayers Association
Howard Jarvis Taxpayers Association
Temecula, City of
Peter Aldana, Assessor, County Clerk, and Recorder of Riverside County
Opposition
None on file
Analysis Prepared by: Harrison Bowlby / REV. & TAX. / (916) 319-2098
BOE, Change in Ownership, Assessors' Handbook, Section 401, published September 2010, https://www.boe.ca.gov/proptaxes/pdf/ah401.pdf, accessed June 2026. ↑
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-4171 | SB 974 |
CONSENT
Bill No: SB 974
Author: Seyarto (R)
Amended: 3/25/26
Vote: 21
SENATE REVENUE AND TAXATION COMMITTEE: 5-0, 4/8/26
AYES: McNerney, Alvarado-Gil, Ashby, Becker, Grayson
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SUBJECT: Property taxation: change in ownership: generational transfers: special needs trusts
SOURCE: Author
DIGEST:
This bill modifies the definition of “transfer” in statute implementing Proposition 19 to explicitly state that other forms of trusts can qualify for the exclusion, specifically Special Needs Trusts.
ANALYSIS:
Existing law:
- Provides that all property is taxable unless explicitly exempted by the Constitution or federal law (California Constitution, Article XIII, Section One).
- Limits the maximum amount of any ad valorem tax on real property at 1% of full cash value, plus any locally-authorized bonded indebtedness, and caps a property’s annual inflationary increase in taxable value to 2%. Provides that assessors reappraise property whenever it is purchased, newly constructed, or when ownership changes (California Constitution, Article XIIIA, as added by Proposition 13, 1978).
- Defines “change in ownership” as “a transfer of a present interest in real property, including the beneficial use thereof, the value of which is substantially equal to the value of the fee interest.”
- Enacts change in ownership exclusions for transfers of property from one generation to the next, specifically:
- Transfers of property from parents to children (Proposition 58, 1986).
- Transfers of property to grandchildren, so long as the parents are deceased (Proposition 193, 1996).
- Enacts the Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act, which limits the above exclusions solely to the transfer of a principal residence when the property continues as the primary residence of the transferee, and requires the transferee to claim the homeowner’s exemption from property tax at the time of transfer or within one year to apply the exclusion (Proposition 19, 2020).
- Implements Proposition 19 to set forth definitions, requirements, limitations, and procedures for claiming a change in ownership exclusion for transfers of property from one generation to the next, based on similar statutes implementing Propositions 58 and 193 (SB 539, Hertzberg, Chapter 427, Statutes of 2021).
- Defines “trust” to include a transfer through the medium of an inter vivos or testamentary trust to ensure that these transfers are eligible for Prop. 19 intergenerational transfers.
This bill modifies the definition of “transfer” in statute implementing Proposition 19 to explicitly state that other forms of trusts can qualify for the exclusion, specifically Special Needs Trusts (SNTs).
Background
Often used to transfer property from one generation to the next, trusts are specific legal agreements to hold and administer property, in which a trustee manages property on behalf of others. Trusts allow grantors to pass assets to future generations while avoiding lengthy and costly probate proceedings. Trusts must identify:
- The creator of the trust, known as the trustor or grantor.
- The manager of the trust, known as a trustee or fiduciary.
- The beneficiary or beneficiaries who will receive property from the trust.
- The property the trust manages.
A Special Needs Trust is a trust that allows disabled persons to maintain their eligibility for public assistance benefits, despite having assets that would otherwise make the person ineligible for those benefits, specifically Medicaid and Supplemental Security Income. Because the beneficiary does not own the trust assets, they remain eligible for benefit programs that apply asset limits.
For the most part, a trustor transferring property to a trust is treated as a change in ownership at the time of transfer, triggering a reassessment of the property held by the trust, with several exceptions. According to Board of Equalization (BOE) Rule 462.010, the transfer of real property by a trustor to a trust in which the trustor-transferor is the sole present beneficiary of the trust is not a change in ownership, but generally becomes one when persons other than the trustor-transferor are or become present beneficiaries of the trust. BOE guidance states that assessors can look through a trust to its beneficial owners to determine whether an exclusion applies, such as a Prop. 19 intergenerational transfer, so long as the trustee or trustor submits a timely exclusion claim. While SB 539 includes trusts in its definition of “transfer” it did not explicitly include SNTs.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
SUPPORT: (Verified 4/21/26)
Peter Aldana, Riverside County Assessor - County Clerk – Recorder
Association of Regional Center Agencies
California Taxpayers Association
City of Temecula
OPPOSITION: (Verified 4/21/26)
None received
ARGUMENTS IN SUPPORT: According to the author, “SB-974 provides important clarification to Proposition 19 by ensuring that Special Needs Trusts are recognized as meeting eligibility requirements for property tax protections. This will ensure that families planning for the long-term care of a severely disabled loved one are not unfairly penalized with property tax reassessment.”
Prepared by: Colin Grinnell / REV. & TAX. / (916) 651-4117, Haley Summers / REV. & TAX. / (916) 651-4117
4/21/26 16:19:36
**** END ****
SENATE COMMITTEE ON REVENUE AND TAXATION
Senator Jerry McNerney, Chair
2025 - 2026 Regular
Bill No: | SB 974 | Hearing Date: | 4/8/26 |
Author: | Seyarto | Tax Levy: | No |
Version: | 3/25/26 | Fiscal: | Yes |
Consultant: | Summers, Grinnell | ||
Property taxation: change in ownership: generational transfers: special needs trusts
Modifies the definition of “transfer” in statute implementing Proposition 19 (2020) to explicitly reference Special Needs Trusts.
Background
Special Needs Trusts. Often used to transfer property from one generation to the next, trusts are specific legal agreements to hold and administer property, in which a trustee manages property on behalf of others. Trusts allow grantors to pass assets to future generations while avoiding lengthy and costly probate proceedings. Trusts must identify:
- The creator of the trust, known as the trustor or grantor.
- The manager of the trust, known as a trustee or fiduciary.
- The beneficiary or beneficiaries who will receive property from the trust.
- The property the trust manages.
A Special Needs Trust (SNT) is a trust that allows disabled persons to maintain their eligibility for public assistance benefits, despite having assets that would otherwise make the person ineligible for those benefits, specifically Medicaid and Supplemental Security Income. Because the beneficiary does not own the trust assets, they remain eligible for benefit programs that apply asset limits.
Property taxation. Section One of Article XIII of the California Constitution provides that all property is taxable unless explicitly exempted by the Constitution or federal law. The Constitution limits the maximum amount of any ad valorem tax on real property at 1% of full cash value, plus any locally-authorized bonded indebtedness, and caps a property’s annual inflationary increase in taxable value to 2%. Assessors reappraise property whenever it is purchased, newly constructed, or when there is a change in ownership. The Constitution and statute define those terms.
As part of the effort to implement Prop. 13, the Legislature defined “change in ownership” as “a transfer of a present interest in real property, including the beneficial use thereof, the value of which is substantially equal to the value of the fee interest.” For the most part, a trustor transferring property to a trust is treated as a change in ownership at the time of transfer, triggering a reassessment of the property held by the trust, with several exceptions. According to Board of Equalization (BOE) Rule 462.010, the transfer of real property by a trustor to a trust in which the trustor-transferor is the sole present beneficiary of the trust is not a change in ownership, but generally becomes one when persons other than the trustor-transferor are or become present beneficiaries of the trust.
Change in ownership exclusions. The Legislature subsequently enacted, and voters approved, two change in ownership exclusions for property transfers from one generation to the next. Proposition 58 (1986) excluded transfers of property from parents to children from change in ownership (ACA 2, Hanigan). Ten years later, Proposition 193 extended the exclusion to transfers of property to grandchildren, so long as the parents are deceased (ACA 17, Knowles). These two changes created an exclusion to the requirement that property be reassessed when a change in ownership occurs. These exclusions applied to all inherited primary residences, regardless of value or number of transfers. They also applied to up to $1 million in aggregate value of all other types of property, such as second homes or business properties.
ACA 11/Proposition 19. In 2020, the Legislature enacted, and voters approved as Proposition 19, the Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act (ACA 11, Mullin). Among other provisions, the Act enacted a new section of the California Constitution to limit the parent-child and grandparent-grandchild exclusion enacted by Propositions 58 and 193 to apply solely to the transfer of a principal residence when the property continues to be the transferee’s primary residence. Among other requirements, the Act caps the amount of value that can be excluded for the principal residence to $1 million. The transferee must also reside in the home for one year from the date of transfer to be eligible for the exclusion. The Act further repealed entirely the parent-child, grandparent-grandchild exclusion for up to $1 million in aggregate value of all other types of property that is not the principal residence.
After the enactment of Proposition 19, the Legislature enacted an omnibus implementation bill to resolve several administrative uncertainties, largely based on similar law implementing Propositions 58 and 193 (SB 539, Hertzberg). Among its provisions, SB 539 defined “transfer” to include a transfer through the medium of an inter vivos or testamentary trust to ensure that these transfers were eligible for Prop. 19 intergenerational transfers.
BOE guidance states that assessors can look through a trust to its beneficial owners to determine whether an exclusion applies, such as a Prop. 19 intergenerational transfers, so long as the trustee or trustor submits a timely exclusion claim. While SB 539 includes trusts in its definition of “transfer” the author wants to explicitly include SNTs.
Proposed Law
Senate Bill 974 modifies the definition of “transfer” in statute implementing Proposition 19 to explicitly state that other forms of trusts can qualify for the exclusion, specifically SNTs.
State Revenue Impact
Pending.
Comments
1. Purpose of the bill. According to the author, “SB-974 provides important clarification to Proposition 19 by ensuring that Special Needs Trusts are recognized as meeting eligibility requirements for property tax protections. This will ensure that families planning for the long-term care of a severely disabled loved one are not unfairly penalized with property tax reassessment.”
2. Barriers upon barriers. Proposition 19 significantly limited the intergenerational transfer change in ownership exclusion. Parents could no longer transfer property other than the principal residence to their children without reassessment, and the exclusion applies to the principal residence only when the transferee resides in the family home. As a result, a family leaving a second home to a child no longer qualifies for an exclusion, triggering a reassessment upon death of the previous generation. Even if the principal residence exclusion applies, Prop. 19 capped the exclusion amount to $1 million, resulting in annual tax savings of around $10,000. However, there are areas of the state where real estate values have appreciated by more than $1 million from the purchase price, so even if the transfer qualifies for the narrowed exclusion, the child could face increased property tax obligations. In this case, children with special needs must either pay any additional property tax as a result of Proposition 19 or sell their home. However, affected individuals would likely be eligible for the Property Tax Postponement Program administered by the State Controller.
Support and Opposition
(4/3/26)
Support: Association of Regional Center Agencies
California Taxpayers Association
City of Temecula
Opposition: None received.
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Discussed in Hearing
1MIN
Assembly Floor
2MIN
Assembly Standing Committee on Revenue and Taxation
Bill Author
Bill Co-Author(s):