A Guide To The Supplemental Assessment Process
On July 1, 1983, Senate Bill 813 amended the State Revenue
& Taxation Code to create what are known as "Supplemental
Assessments." This new law changed the manner in which changes
in assessed value were billed by requiring that any increase
or decrease in taxes due to a change in ownership or completed
new construction became effective as of the first day of the
month following the date of change in ownership or the date new
construction was completed. (Rev & Tax Code 75 to 75.72)
Supplemental assessments result in tax bills that are "in
addition to" (that is, supplemental to) the regularly issued
annual property tax bill sent to each property owner. Changes
in ownership or completed new construction that trigger supplemental
assessments are referred to as a "supplemental events."
This guide has been produced to help property owners better
understand the supplemental assessment process and the bills
generated by such assessments.
The following topics, questions and answers are presented
in this guide:
What
is a supplemental tax bill?
In simple terms, a supplemental tax bill is based on an increase
or decrease in value that occurs upon any change in ownership
or new construction. The bill reflects any increase or decrease
in property tax generated by a supplemental event.
By law, a supplemental assessment becomes effective on the
first day of the month following the month in which a supplemental
event takes place. For example, if a supplemental event occurs
on September 5, any increase or decrease in taxes resulting from
that event becomes effective on October 1. If it occurs on April
2, it becomes effective May 1, and so on.
What is the "Supplemental Roll?"
"Supplemental Roll" is a theoretical term used to
describe a monthly accumulation of supplemental assessments made
by the Assessor. The new assessments are first sent to the County
Auditor/Controller for enrollment and, after that, to the Tax
Collector for the creation and mailing of supplemental bills.
What
qualifies as new construction or a change in ownership?
Typically, new construction is any substantial addition to
real property (such as adding a room, pool or garage) or any
substantial alteration which restores a building, room, or other
improvement to the "equivalent of new" (such as completely
renovating a building), or changes they way in which the property
is used (e.g. a residence is converted to a retail store). However,
only that portion which is newly
constructed may be reassessed.
Most changes in ownership due to the sale or transfer of all
or a portion of a property also result in a supplemental reassessment.
However, only that portion which changes ownership is reassessed.
It should be noted that certain forms of property transfer
are not subject to reassessment. Exceptions include:
- Exclusions
- Interspousal transfers
- The addition of joint tenants
- The transfer, sale or inheritance of certain properties between
parents and their children where an application for exclusion
is filed with the assessor
- The transfer, sale or inheritance of certain properties from
a Grandparent to a Grandchild where certain conditions are met
and an application for exclusion is filed with the assessor.
Also, homeowners over the age of 55 years (or disabled persons)
who sell their principle residence and purchase a replacement
residence within two years of the transfer of their original
home may be eligible to transfer the pre-sale assessed value
of their original property to the replacement dwelling. However,
the replacement dwelling must be of equal to or lesser than market
value of the original, and both the sold and replacement dwellings
must be within Madera County. In some cases, you may be able
to transfer your original property’s Prop 13 base value
to a replacement dwelling in another county, but in no
case can you transfer it from another county to Madera County.
What happens when the Assessor reassesses my property?
Where new construction is completed, or property changes ownership,
the Assessor determines the market value of that portion of the
property that was newly constructed or that portion which changed
ownership based on current market values. The Assessor then simply
subtracts the property’s prior assessed value from its newly
assessed value, and the difference between the two (may be an
increase or a decrease) is the net supplemental value that will
be assessed and enrolled as a supplemental assessment.
If the net supplemental assessment is a positive number, there
will be an increase in taxes and a supplemental tax bill will
be generated. If the result is a negative number, that is the
value has declined, a supplemental refund of a portion of the
current taxes that have already been paid will be generated and
a refund check will be issued.
Once the new assessed value of your property has been determined,
the Assessor will send you a "Notice of Supplemental Assessment"
that will show you what the net supplemental assessment amount
is and how it was calculated.
Example:
|
New value at date of purchase or completion of new construction: |
$120,000 |
|
Prior assessed value on current Annual tax roll: |
- 100,000 |
|
The Net Supplemental Assessment will be: |
+ $20,000 |
When the reassessment results in an increase in property value,
your supplemental taxes will be calculated by the Auditor-Controller
based on the change in value. Supplemental tax bills (explained
below) will be created and mailed to you by the Tax Collector.
When the reassessment results in a reduction in value, a refund
will be prepared by the Auditor-Controller and mailed
to you. Important note: A supplemental reduction
in value will not reduce (nor can it be used
as a credit toward) the amount still due on the existing,
annual tax bill. The amount of tax originally billed
must be paid even though the assessed value of the property
was reduced by the supplemental assessment. Any excess
taxes paid on that prior bill will be refunded later,
but only after the original bill is paid in full (Ref.
R&T 75.43).
Can supplemental
assessments be appealed?
Yes, click here for information
about Assessment Appeals on Supplemental Assessments.
Will
I still receive an annual tax bill in October or November?
Yes. The supplemental tax bill is sent in addition to
the annual tax bill and both must be paid as
specified on the bill.
If I pay property
taxes through an impound account (i.e., with my mortgage
payment), will my lender get my supplemental tax bill?
No. Unlike the annual tax bill, lending agencies do not receive
the original or a copy of the supplemental tax bill. Instead,
supplemental bills are sent directly to the property owner. When
you receive a supplemental tax bill, we recommend that you either
pay the bill or contact your lender to discuss who should pay
the bill.
It is important to understand that if the supplemental tax
payment is not made before the delinquency date of the bill,
due to a misunderstanding between yourself and your lender, the
penalties cannot be excused. State law stipulates that
this is not an acceptable reason for excusing penalties.
Why are supplemental bills sent directly to the owner instead
of the owner’s lender? By law, the Tax Collector is required
to send supplemental bills to the owner of record even in those
cases where a lender or mortgage company is otherwise being sent
and is paying the same owner’s regular annual tax bills.
What information appears on a supplemental tax bill?
The supplemental tax bill provides the following information:
- The owner (or new owner as of the date of ownership).
- The fiscal year for which the taxes are assessed.
- The location of the property.
- The old and the new assessed value and the difference (net
supplemental assessment) upon which the tax is computed.
- The type and amount of exemptions (e.g., homeowner's).
- The total of taxes due based on the net increase in value.
- The date of the ownership change or completion of new construction.
This date is used to prorate the tax for the period remaining
in the current fiscal year for which the bill is issued.
The bill may be paid in two installments and it provides payment
stubs for each installment. Each stub shows the amount
due, the date that the amount must be paid in order
to avoid penalties for late payment, and the amount
of the penalty if the payment is late.
What happens if
I resell a property shortly after I purchase it?
If you purchase and then resell property within a short period
of time and the Assessor has not already issued a supplemental
assessment for the date you first acquired the property, any
supplemental tax bills will be prorated between you and the new
owner. In that case, you should eventually receive a tax bill
that reflects only the actual time period which you owned the
property. The new owner should receive a separate supplemental
tax bill that reflects their period of ownership from the date
they acquired the property from you until the end of the fiscal
year.
However, if a supplemental assessment for the transfer in
which you first acquired the property is issued before the Assessor
is aware of a subsequent sale of the property, the county cannot
prorate the bill between you and the new owner. Any proration
of the supplemental bill you do receive then becomes a private
matter to be resolved between buyer and seller.
Because of the large number of parcels and frequency of property
changing hands in Madera County, there are often delays
in placing new assessments on the roll. It is not uncommon
to receive an unprorated bill after a property has been
resold and escrow closed. Unfortunately, the bill cannot
be prorated by the county and, as stated above, proration
of the supplemental bill becomes a private matter to
be resolved between buyer and seller.
How are supplemental
taxes computed?
Supplemental refunds or bills are calculated based on the
number of months remaining in the current fiscal year after the
month in which a property transfers or after the date new construction
was completed. In other words, if a supplemental event raises
the annual tax by say $200 and there were six months left in
the current fiscal year when the event occurred, the supplemental
tax bill would be 50% of the $200, or $100.
If a supplemental event occurs between June 1 and December
31, only one supplemental tax bill or refund check is issued.
However, if a supplemental event occurs between January 1 and
May 31, a second supplemental bill or refund is issued.
That second bill or refund will cover the entire 12-months of
the coming fiscal year beginning on July 1. That’s because
the assessment roll created on the preceding January 1 Lien Date
does not reflect the change in value that occurred after
the Lien Date; hence, a second bill or refund must be created
to account for the increase or decrease for the entire coming
fiscal year.
Because a change in the tax due to a supplemental event becomes
effective on the first day of the month following the month in
which the event took place, monthly proration factors are used
to calculate the taxes owed. Supplemental Taxes are computed
by first multiplying the Net Supplemental Assessment by the tax
rate, and then multiplying that amount by a monthly proration
factor. The proration factors are:
|
Tax effective: |
Factor |
|
Tax effective: |
Factor |
|
January 1 |
.50 |
|
July 1 |
1.00 * |
|
February 1 |
.42 |
|
August 1 |
.92 |
|
March 1 |
.33 |
|
September 1 |
.83 |
|
April 1 |
.25 |
|
October 1 |
.75 |
|
May 1 |
.17 |
|
November 1 |
.67 |
|
June 1 |
.08 |
|
December 1 |
.58 |
* A supplemental event that occurs in June rolls over to July
1, the first day of the new fiscal year. As a result,
there is no supplemental assessment to the current
roll; however, there is a supplemental assessment
to the new main roll (the annual tax roll created on
the January 1 Lien Date), that covers the full 12 months
of the coming fiscal year, Therefore, a single supplemental
bill or refund is issued.
Why would an owner
receive more than one supplemental tax bill?
It is true that in some cases you might receive two
(or more) supplemental tax bills, depending on the date the ownership
change or completion of new construction occurred.
If a supplemental event occurs on or between June 1 and December
31, there will be only one supplemental Bill (or refund). That
bill is ‘supplemental’ to the current fiscal year during
which the supplemental event took place.
If a supplemental event occurs on or between January 1 and
May 31, it will generate two bills (or refunds). The first bill
is supplemental to the current fiscal year during which the supplemental
event took place, and the second bill is supplemental to the
coming fiscal year.
The second bill is generated because the January 1 Lien Date
assessment created for the coming fiscal year does
not reflect the change in value generated by that event,
but must also to be adjusted to reflect the difference
as well.
You can also receive multiple supplemental bills
in situations where a series of supplemental events take
place over time.
Bills prorated between owners: You may also
receive multiple supplemental bills when you purchase a property
soon after a prior owner purchased the same property (or newly
constructed something on the property). If the supplemental assessment
for the previous change in ownership (or new construction) had
not been issued when you acquired the property, then the Assessor
will prorate the supplemental bill for that previous event between
the new and prior owners.
Example: Let's say a previous owner purchased
a property in August for $150,000. At that time of the sale,
the assessed value of the property was $100,000. If no other
supplemental events occur, the prior owner would later receive
a supplemental assessment of $50,000 (the net difference between
the roll value and market value at purchase), and the tax for
that increase would be 10/12ths of $500 (assume tax rate is 1%
of assessed value), or about $417 (i.e., the supplemental
bill covers only the 10 months remaining in the fiscal year after
the purchase).
In this example however, let's say you then purchased the
property in December for $160,000, before the supplemental bill
for the prior owner's purchase of $150,000 had been issued. Under
this circumstance, you will receive two supplemental bills:
The first supplemental bill will be for the difference
between your purchase price of $160,000 and the previous owner's
purchase price of $150,000. That supplemental assessment will
be for a net $10,000 in assessed value, and the tax bill should
be 6/12ths (6 months remaining in the current fiscal year after
your purchase in December) of a $100 tax, or $50. Simply
put, your first supplemental bill should be in the amount of
$50.
Your second supplemental bill will be for your pro-rata
share of the $417 supplemental tax generated when the
prior owner purchased the property back in August, and will be
based on the number of days of ownership you held the property
during the current fiscal year. For this example, lets say the
prior owner owned it for 55 days (the number of days between
July 1, first day of the fiscal year, and his late-August purchase
date). The prior owner's pro-rata supplemental bill will be 55/365ths
of $417 tax (roughly $63), and your pro-rata bill
will be 310/365ths of the $417 tax. Your second supplemental
bill in this instance should be about $354.
When all is said and done, you have two supplemental bills:
one for $50 and the other for $354, while the prior owner gets
a single bill for $63.
Many people are upset by pro-rata bills because they
sense they are unfairly taxed, but the pro-ration really
covers the period of time they actually possess the property.
That is to say, you aren't really paying the prior owner's
tax in your $354 bill, nor are you being doubly assessed
by the other, $50 supplemental bill you receive.
Why would I receive supplemental tax bills prorated with
a prior owner?
You may also receive multiple supplemental bills when
you purchase a property soon after a prior owner purchased
the same property (or newly constructed something on the
property). If the supplemental assessment for the previous
change in ownership (or new construction) had not been
issued when you acquired the property, then the Assessor
will prorate the supplemental bill for that previous event
between the new and prior owners.
Example: Let's say a previous owner purchased
a property in August for $150,000. At that time of the
sale, the assessed value of the property was $100,000.
If no other supplemental events occur, the prior owner
would later receive a supplemental assessment of $50,000
(the net difference between the roll value and market
value at purchase), and the tax for that increase would
be 10/12ths of $500 (assume tax rate is 1% of assessed
value), or about $417 (i.e., the supplemental bill
covers only the 10 months remaining in the fiscal year
after the purchase).
In this example however, let's say you then purchased
the property in December for $160,000, before the supplemental
bill for the prior owner's purchase of $150,000 had been
issued. Under this circumstance, you will receive two
supplemental bills:
The first supplemental bill will be for the difference
between your purchase price of $160,000 and the previous
owner's purchase price of $150,000. That supplemental
assessment will be for a net $10,000 in assessed value,
and the tax bill should be 6/12ths (6 months remaining
in the current fiscal year after your purchase in December)
of a $100 tax, or $50. Simply put, your first supplemental
bill should be in the amount of $50.
Your second supplemental bill will be for your
pro-rata share of the $417 supplemental tax generated
when the prior owner purchased the property back in August,
and will be based on the number of days of ownership you
held the property during the current fiscal year. For
this example, lets say the prior owner owned it for 55
days (the number of days between July 1, first day of
the fiscal year, and his late-August purchase date). The
prior owner's pro-rata supplemental bill will be 55/365ths
of $417 tax (roughly $63), and your pro-rata
bill will be 310/365ths of the $417 tax. Your second
supplemental bill in this instance should be about $354.
When all is said and done, you have two supplemental
bills: one for $50 and the other for $354, while the prior
owner gets a single bill for $63.
Many people are upset by pro-rata bills because they
sense they are unfairly taxed, but the pro-ration really
covers the period of time they actually possess the property.
That is to say, you aren't really paying the prior owner's
tax in your $354 bill, nor are you being doubly assessed
by the other, $50 supplemental bill you receive.
If the previous owner’s supplemental is issued
prior to the Assessor being aware of your purchase, the
County can not prorate the existing bills. The
proration of the bill in that case becomes a private matter
to be resolved between buyer and seller.
When must supplemental tax bills be paid?
The date on which supplemental tax bills become delinquent
varies depending upon when they are mailed by the Tax Collector.
As outlined below, if the bill is mailed between July 1 and October
30, the taxes become delinquent at 5:00 P.M. on December 10 for
the first installment, and 5:00 P.M. on April 10 for the second
installment (the same schedule as for annual tax bill).
Bill mailed between July 1 and October 30
