Understanding SCA 4 and Its Implications for Property Tax Appeals and Taxpayers

In California, property tax laws have long been a hot topic, especially as they pertain to intergenerational property transfers. Senate Constitutional Amendment 4 (SCA 4) is one such legislative proposal that aims to reshape property tax rules, potentially bringing relief to families while sparking discussions about its broader implications. This blog explores what SCA 4 entails, its current status, and how it could affect property tax appeals and taxpayers.

What is SCA 4?

SCA 4 is a proposed amendment to the California Constitution designed to address changes made by Proposition 19 in 2020. Proposition 19 significantly limited reassessment exclusions for properties transferred between parents and children, allowing exclusions only for family homes used as the transferee’s principal residence and within specific value limits.

SCA 4 seeks to:

• Reinstate the broader reassessment exclusion for intergenerational transfers of principal residences, regardless of their use.
• Reintroduce the $1 million assessed value exclusion for other real property transferred between parents and children.

Current Status of SCA 4

As of early 2025, SCA 4 has not been enacted. It failed to pass a Senate committee vote in 2023 but remains a subject of legislative discussion. While the amendment has yet to reshape property tax rules, its potential enactment has sparked debate about how it could affect families, local governments, and the property tax system.

Examples of How SCA 4 Could Help Taxpayers

Here are three scenarios where SCA 4 could prevent reassessments and benefit property owners:

1. Intergenerational Transfers of Principal Residences

   • Current Law: When a parent transfers a home to their child, reassessment occurs unless the child uses the property as their principal residence, with exclusions capped to specific value limits.
   • How SCA 4 Helps: It would restore broader exclusions for principal residences, eliminating reassessments and preserving lower tax rates even if the property is not used as the child’s primary residence.

2. Transfers of Other Real Properties

   • Current Law: Proposition 19 eliminated reassessment exclusions for non-primary residence properties, such as rental properties or vacation homes, triggering full reassessments upon transfer.
   • How SCA 4 Helps: By reinstating the $1 million assessed value exclusion for other real properties, SCA 4 could prevent reassessment for family-held investment properties or second homes, easing the tax burden.

3. Grandparent-to-Grandchild Transfers

   • Current Law: Reassessment exclusions for transfers from grandparents to grandchildren apply only when both parents of the grandchildren are deceased, and only for limited types of properties.
   • How SCA 4 Helps: It could expand exclusions for intergenerational transfers, making it easier for families to pass on properties without triggering steep tax increases.

Implications for Property Tax Appeals

If enacted, SCA 4 could influence property tax appeals in several ways:

1. Reduced Reassessments for Transfers:
   The broader exclusions would reduce reassessments, especially for inherited properties, leading to fewer appeals related to reassessment triggers.
2. Impact on Comparable Sales Data:
   Properties retaining lower historical assessments could affect the availability and accuracy of comparable sales data used in appeals, potentially complicating valuation disputes.
3. Shifting Appeal Focus:
   Taxpayers might shift focus to disputes over fair market value assessments rather than reassessments due to ownership changes.

Effects on Property Taxpayers

SCA 4 could have significant impacts on California taxpayers:

1. Potential Savings for Families:
   Families inheriting property could see substantial tax savings, preserving family homes and investments for future generations.
2. Increased Administrative Responsibilities:
   Counties may face challenges processing additional exclusion applications, potentially leading to delays.
3. Revenue Impacts on Local Governments:
   Restored exclusions could reduce property tax revenue for local governments, potentially prompting alternative revenue strategies.

Preparing for Potential Changes

While SCA 4 has not yet become law, property owners should stay informed and prepared. Here’s how:

• Monitor Legislative Updates: Keep track of developments regarding SCA 4 and related proposals.
• Consult Tax Professionals: Work with property tax experts to understand how potential changes might affect your obligations or appeal strategies.
• Organize Property Records: Maintain thorough documentation of property transfers and assessments to simplify compliance and appeals.

Conclusion

SCA 4 represents a critical opportunity to revisit California’s property tax system, addressing the challenges introduced by Proposition 19. For taxpayers, it offers the promise of tax relief and preservation of family wealth. However, its broader implications for local governments and property tax appeals underscore the need for vigilance and preparation. Staying informed and proactive will be key to navigating this changing landscape.