Important Developments To Proposition 19: ACA 9

Last year, California voters narrowly passed Proposition 19, a measure that impacts property tax on real property passed from parents to children. Now, California Assemblyman Kevin Kiley (R-Granite Bay) is rallying efforts to pass an amendment to the proposition that would reverse this steep property tax.

For context, Proposition 19 as it currently stands will increase the property tax on millions of properties transferred to children or grandchildren. All real property will be reassessed except for the family home if a child (or grandchild under certain circumstances) lives in the house and the fair market value is no more than $1,000,000 over the assessed value. In all likelihood, the reassessment will cause an increased property tax. Our last blog post discusses Proposition 19 and the effects it will have on Californian families.

Prior to Proposition 19, Californians could transfer a home of any value and up to a $1 million of other property — such as a vacation cabin, rental property or small business — to their children without reassessment. That was thanks to longstanding Proposition 58, which passed with the approval of more than 75% of state voters in 1986. Proposition 19 effectively repealed Proposition 58. It also repealed Proposition 193, which gave grandparents the ability to pass property to their grandchildren without reassessment.

Though Proposition 19 was passed under the guise of closing tax loopholes for the ultra-wealthy, the truth is that it poses more of a threat to middle-class Californian homeowners, whose children may not be able to afford the higher taxes and be forced to sell once they inherit the properties. Ultimately, Proposition 19 puts people at risk of losing the family security generations before them worked hard for.

Children and grandchildren will be exempt from paying high property taxes on inherited properties valued over $1 million should ACA 9 pass.

In response to this dramatic tax spike, Assemblyman Kiley recently introduced Assembly Constitutional Amendment (ACA) 9 to the state legislature, which would reverse the new tax on property passed from parents and grandparents to children and grandchildren. The measure is backed by the Howard Jarvis Taxpayers Association (HJTA), a nonprofit lobbying and policy organization that advocates for low property taxes in California.

Other public figures and policymakers have also been swift to denounce the passage of Proposition 19. Malia M. Cohen, Member of the State Board of Equalization, is one of them.

“We are not talking about $25 million palaces in Malibu. We are talking about humble homes. Middle-class homes,” she said in a Los Angeles Sentinel interview in February 2021. “I live in the Bay View community (of San Francisco). We’re talking about Baldwin Hills of Los Angeles or Encanto in San Diego and other communities throughout California. Homes that were purchased for $100,000 decades ago that now have a market value of over $1 million. These homes were paid for through hard work and could be potentially lost.”

Should ACA 9 be passed, the measure will reintroduce Propositions 58 and 193 to the State Constitution, restoring the ability of parents and grandparents to pass on their property without such a hefty tax increase. As a result, ACA 9 aims to maintain family-owned, affordable rental property and family-owned homes.

“The opportunity to own a home is central to the California Dream, but our state’s affordability crisis has put this beyond the reach of too many working families,” Kiley said via the HJTA. “Now, thanks to a Special Interest deal, Californians face a large and unplanned-for tax increase when they pass down property to their children. ACA 9 restores a vital protection that was in place for 35 years.”

“It’s hard to imagine anything more callous than the government sending a giant tax bill to a bereaved family, but thanks to Proposition 19, many California families will have that unfortunate experience,” said Jon Coupal, president of HJTA, in a recent press release. "The Howard Jarvis Taxpayers Association is proud to support ACA 9 to reinstate Propositions 58 and 193, reversing this stealth tax increase on California families.”

Californians can reach out to their state representatives and local senators to weigh in on this issue. If you have any comments, questions, or concerns regarding Proposition 19 or ACA 9, please don’t hesitate to contact us.