State assessors brace for the real impacts of Prop. 19.

Last October, after the Weekly’s endorsement issue ran with our choices for president, county supervisor, dozens of other local races and all of those propositions on the 2020 ballot, my phone rang early one morning.

Steve Vagnini was on the other end and his question was this: What were you guys thinking with your endorsement of Prop. 19?

Here’s our writeup for Prop. 19: “If you’re 55 or older, Prop. 19 will give you a tax break if you sell your home, allowing you to transfer your existing property tax rate (in theory lower than the taxes on the new place) to the property you purchase. Additionally, this proposition ends a tax break many Californians receive on homes they’ve inherited.”

It seemed simple, but as Vagnini explained recently, it’s anything but: around the state, there’s a sense of urgency because the first major part of Prop. 19 takes effect on Feb. 15.

“Most people have no idea what they voted for,” Vagnini says. “People are scrambling and there’s a lot of confusion.”

So let’s try to unconfuse all the confusion.

Prop. 19 passed by 51.1 to 48.8 percent with the “yes” side’s single largest backer, the California Association of Realtors Issues Mobilization PAC, contributing $35.7 million to the campaign. One pro-19 campaign was simply named “Yes on 19,” and the other was named “Yes on 19: Tax Savings and Housing Relief for Seniors, Severely Disabled, and Wildfire Victims” – and really, how can you not vote for something that’s going to benefit seniors, severely disabled and wildfire victims? Each committee raised just over $21 million.

That’s the who and the how much, now here’s the why – and why Vagnini and other assessors are concerned.

Prop. 19 allows eligible homeowners to transfer their tax assessments anywhere in the state and allows assessments to be transferred to a more expensive home with an upward adjustment; it increases the number of times that people over the age of 55 or who have severe disabilities can transfer their tax assessments up to three times, from its current one; and it requires that inherited homes that aren’t used as principal residences, including second homes or rentals, to be reassessed at market value when transferred. Any additional revenue or net savings resulting from the ballot measure are supposed to be allocated to wildfire agencies and counties.

But, Vagnini says, a large portion of 19’s provisions are confusing and require clarification to capture the intent of the law.

Here are a few possible points of contention. Only a principal residence (or family farm) is eligible for reduced reassessment. Before transferring, the home must be the parent’s principal residence and become the principal residence of the child or children after the transfer.

Also, unlike the state’s previous law, Prop. 19’s benefits appear to be limited to the first $1 million of value that would be added upon reassessment of a family home or family farm. Vagnini gives the following example: If the assessed value was $100,000 and the market value on transfer was $1 million, the children would retain that $100,000 assessed value.

“The bill was really initially pushed by Realtors because they wanted to expand on Prop. 60, a wonderful measure that allows people 55 or older to transfer their property… Prop. 60 passed and we implemented it a lot,” Vagnini tells me. “Realtors pushed to expand 60, and it’s going to be difficult to implement. Now it’s Prop. 60 on steroids.”

As of April 21 – the second phase of implementation – Monterey County will be obligated to accept out-of-county transfers and people can do it not once, but three times. And when you transfer a home to a child, your child is then obligated to live in the home to get the exemption.

“How are we going to keep track of that? How do we keep track if someone is staying in a house? Do we seek affidavits?” Vagnini says.

From California State Board of Equalization Chairman Antonio Vazquez, there was a dire warning issued via press release. With less than two weeks before the law goes into effect, he stated, “families who planned to leave property to their children should immediately evaluate their options and make a decision that’s best for their own circumstances.”

Mary Duan writes Local Spin for the Weekly. Reach her at mary@mcweekly.com or follow her at twitter.com/maryrduan