A new construction California property tax exclusion is enacted for property damaged or destroyed by a Governor-declared disaster.
New Construction Exclusion Conditions
For property that has been substantially damaged or destroyed by a Governor-declared disaster on or after January 1, 2017, a construction exclusion for comparable property that is reconstructed on the site of the damaged or destroyed property is available under the following conditions:
- the property must be substantially damaged or destroyed by a disaster, misfortune, or calamity, as declared by the Governor;
- the property is substantially damaged or destroyed if the improvements sustain physical damage that amounts to more than 50% of the improvements’ full cash value immediately prior to the disaster;
- reconstructed property is comparable if it is similar in function, size, and utility;
- only the owner(s) of the property substantially damaged or destroyed is eligible to receive this relief; and
- construction must be completed within five years of the date of the damage or destruction.
Reconstructed property is comparable if it is similar in function, size, and utility as follows:
- property is similar in function if it is subject to similar governmental restrictions, such as zoning; and
- property is similar in size and utility if is used or intended to be used in the same manner and its full cash value does not exceed 120% of the full cash value of the damaged original property, determined just prior to the date of damage/destruction.
If the full cash value of the reconstructed property exceeds the 120% threshold, the amount above 120% will be added to the transferred base year value.
These provisions apply to real property damaged or destroyed by misfortune or calamity on or after January 1, 2017.
Ch. 124 (A.B. 2013), Laws 2020, effective January 1, 2021, and applicable as noted.
Wilson Tax Law Group, APLC (www.wilsontaxlaw.com) is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense. Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board. Wilson Tax Law Group is exclusively comprised of former IRS litigators and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division and Criminal Division.
For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC
Newport Beach and Yorba Linda, California