Proposition 72: Permits Legislature to Exclude Newly Constructed Rain-Capture Systems From Property-Tax Reassessment Requirement.
Should the value of new construction of rain-capture systems be excluded from reassessment of property for property taxes purposes?
California property taxes are typically charged at 1.1% of the full cash value of the property, initially assessed at the time of purchase or construction. This taxable value can be adjusted for inflation at a rate of no more than 2% per year. Normally a property’s value is not fully updated until it is sold or changes owners, but certain improvements can also trigger an updated value. In that case, only the value of the improvement (usually a major renovation or new construction) is considered, and this value is then added to the taxable base value of the property. A few types of improvements are already excluded from reassessment: solar energy systems, fire sprinkler systems, changes to increase accessibility for people with disabilities, and seismic retrofitting.
Prop 72 would add systems installed by property owners or developers to catch rainwater and store it for use on the property to the list of improvements excluded from reassessment for property taxes. The exclusion is only for systems installed between January 2018 and the end of 2028. The exclusion ends when the property is sold.
Tax exemptions are generally thought to provide incentives, in this case to encourage property owners to install rain-capture systems by exempting them from property tax reassessments at the time of installation. Because these systems are usually not very expensive compared to the total cost of real estate, individual tax savings would be fairly small. The loss to local government revenue from property taxes would also be correspondingly small, though this amount would increase if the incentive succeeds in encouraging construction of more rain-capture systems. The property owner would save money on water bills by using the water captured by the system, also conserving water from public utilities for other uses, including drinking water and agricultural irrigation.