Some types of new construction are excluded from property tax assessment:
Builders' Inventory Exclusion:
- This program excludes from supplemental assessment any newly completed inventory owned by a builder who does not intend to occupy or use the property. In this case, the appraisal of new construction is delayed until certain other events occur.
- The owner must build with the intention of selling the property, and must also file an application with the Assessor's Office no later than 30 days after the start of construction. If the property qualifies, the new construction will not be appraised until lien date unless it is sold, rented, or occupied before then. Find out more about the Builders' Inventory Exclusion criteria.
- The owner must also notify the Assessor within 45 days of leasing or renting the property, or using the property for themselves. An application for
this exclusion must be filed with the Assessor. If you have further questions you may call our office at (916) 875-0700 (8am to 4pm), or email us at assessor@saccounty.gov. (ref. R&T 75.12)
Active Solar Energy System New Construction Exclusion:
- The new construction exclusion for active solar energy systems was created in 1980. It has been available to property owners since 1981, except for a 5-year break in FY 1994-95 through 1998-99. The active solar exclusion will remain in effect until January 1, 2025, unless extended by legislative action. Active solar energy systems that qualify for the new construction exclusion prior to January 1, 2017 will continue to be excluded after that date, until there is a subsequent change in ownership.
- The addition of an active solar energy system to an existing structure is excluded from property tax assessment under Revenue and Tax code section 73, which defines the term 'active solar energy system' as any system that uses solar devices which are thermally isolated from living space or any other area where the energy is used, to provide for the collection, storage, or distribution of solar energy.
- Active solar energy systems may be used for any of the following: (a) domestic, recreational, therapeutic, or service water heating; (b) space conditioning; (c) production of electricity; (d) process heat, (e) solar mechanical energy.
- Pipes, ducts, tanks, and other auxiliary equipment used in a solar energy system that also carry or use energy from sources other than solar energy are assessable at 75% of their market value. Excluded from this benefit are solar swimming pool heaters, hot tub heaters, passive energy systems and wind energy systems.
As of September 2008, this exclusion was modified further to include the construction of an active solar energy system in a new building where:
- Owner-builder incorporates an active solar energy system in the initial construction of the new building and does not intend to occupy or use the new building.
The exclusion from “new construction” provided by this subdivision also applies to the initial purchaser who purchases the new building from the owner-builder, but only if:
- Owner-builder did not receive an exclusion under this section for the same active solar energy system and
- Initial purchaser purchased the new building prior to that building becoming subject to reassessment to the owner builder.
- The initial purchaser must file a claim with the Assessor and provide any documents necessary to identify the value attributable to the active solar energy system included in the purchase price of the new building. The claim shall also identify the amount of any rebate for the active solar energy system provided to either the owner-builder or the initial purchaser.
- Active Solar Energy Systems are NOT excluded from reassessment when property changes ownership after the initial purchase.
- This program remains in effect until January 1, 2025. An application for this exclusion must be filed with the Assessor. If you have further questions you may call our office at (916) 875-0700 (8am to 4pm), or email us at ASR-SolarExclusionTeam@saccounty.gov.
The Solar Exclusion and Proposition 19 Base Year Value Transfers
California law requires that the solar exclusion amount be applied to the purchase price of a newly constructed residence. In the case of an approved Proposition 19 Base Year Value Transfer, only the original property’s factored base year value is enrolled. The purchase price of replacement property and solar exclusion (if any) are used to assist in determining the transferable amount of the original property’s factored base year value. In most instances the purchase price of the replacement property is not enrolled, therefore the benefit of the Solar Exclusion is not directly reflected in assessed value. Typically, only the original property’s factored base year value is enrolled. The solar exclusion can be applied in cases where excess value is added to the original property’s factored base year value. Below are some examples.
Example 1: Original property sold for $500,000 and had a factored base year value of $300,000. The newly constructed replacement property was purchased for $450,000 and included a $20,000 solar package eligible for exclusion. Since the original property sale price of $500,000 exceeds the purchase price of the replacement property, less the $20,000 solar package ($430,000), only the original property’s factored base year value of $300,000 is enrolled.
Example 2: Original property sold for $500,000 and had a factored base year value of $300,000. The newly constructed replacement property was purchased for $550,000 and included a $20,000 solar package eligible for exclusion. Taking the solar exclusion into consideration results in an adjusted price of $530,000 for the replacement property ($550,000 less $20,000). Since the original property sale price of $500,000 is less than the adjusted purchase price of $530,000 for the replacement property), the $30,000 is added as excess value to the original property’s factored base year value. The total amount enrolled is $330,000. Without the solar exclusion the total amount enrolled would have been $350,000 ($300,000 + $50,000 in excess value).
Fire Sprinkler, Fire Extinguishing, Fire Detection, and Fire-Related Egress Improvements New Construction Exclusion:
- The addition of fire sprinkler, fire extinguishing, fire detection, and/or fire-related egress improvements to an existing structure are excluded from property tax assessment. However, such items are NOT excluded from reassessment when property changes ownership.
- No application is required; however, if you think your property qualifies for this exclusion, contact the Assessor immediately. Call (916) 875-0700 (8am to 4pm). (ref. R&T 74)
- Fire suppression systems installed or constructed concurrent with the construction of a structure are assessable as part of the new construction.
Disabled Access New Construction Exclusion:
- The disabled access exclusion is available in two formats: one designed for the typical homeowner and the other for commercial property owners.
Disabled Access - Residences Eligible for the Homeowners' Exemption:
- Modifications made in order to make an existing residence more accessible to a severely and permanently disabled person or persons are excluded from reassessment if certain conditions are met. The residence must be eligible for the Homeowners' Exemption, and the applicant must file a physician's certification of disability with their application. Swimming pools and spas are excluded from this benefit, although items used to make the pool or spa more accessible would be eligible.
- A "severely and permanently disabled person" is defined as any person who has a physical disability or impairment, whether from birth or by reason of accident or disease, that results in a functional limitation as to employment or substantially limits one or more major life activities of that person. The definition also requires that the condition must have been diagnosed as permanently affecting the person's ability to function, including, but not limited to, any disability or impairment that affects sight, speech, hearing, or the use of any limbs.
- Please note that existing disabled-access accommodations are NOT excluded from reassessment when property changes ownership.
- An application for this exclusion must be filed with the Assessor. If you have further questions you may call our office at (916) 875-0700 (8am to 4pm), or email us at assessor@saccounty.gov. (ref. R&T 74.3)
Disabled Access - Structures Not Eligible For the Homeowners' Exemption:
- Modifications made in order to make an existing structure or commercial property more accessible to disabled persons are also excluded from reassessment if certain conditions are met. An owner must notify the Assessor prior to, or within 30 days of, the completion of any project for making improvements of this nature and state that he or she intends to claim this exclusion.
- Please note that previously installed disabled-access accommodations are NOT excluded from reassessment when property changes ownership.
- An application for this exclusion must be filed with the Assessor. If you have further questions you may call our office at (916) 875-0700 (8am to 4pm), or email us at assessor@saccounty.gov. (ref. R&T 74.6)
Earthquake Mitigation/Seismic Retrofit New Construction Exclusion:
- Specified seismic retrofitting and earthquake hazard mitigation features that are added to existing buildings may be excluded from reassessment. An owner must notify the Assessor prior to, or within 30 days of, the completion of the construction project that he or she intends to claim this exclusion. The applicant must also certify (or have certified) to the Assessor in writing those portions of any new construction project that are specifically attributable to seismic retrofit or earthquake mitigation technologies.
- Please note that previously installed seismic retrofit or earthquake mitigation technologies are NOT excluded from reassessment when property changes ownership.
- An application for this exclusion must be filed with the Assessor. If you have further questions you may call our office at (916) 875-0700 (8am to 4pm), or email us at assessor@saccounty.gov. (ref. R&T 74.5)
Rain Water Capture System Exclusion:
The new construction exclusion for a rain water capture system was approved by voters in 2018 and implemented by Revenue and Taxation Code §74.8.
- What is a Rain Water Capture System?
- Section 74.8(b) provides that a “rain water capture system” is a facility designed to capture, retain, and store rain water flowing off a building rooftop or other manmade aboveground hard surface for subsequent onsite use. A “facility” is something designed, built, or installed to serve a particular purpose. The exclusion is not applicable to portable rain water capture systems, since they are items of personal property.
- When is the exclusion available?
- The new construction exclusion is available when the construction of the rain water capture system is completed between January 1, 2019 and January 1, 2029. Improvements that may be excluded from assessment include items such as above- or in-ground tanks, piping, pumps, or filtration systems. A rain water capture system does not include the roof of a building.
- Who should apply?
- First Time Buyer of Newly Constructed Building: To receive the rain water capture system exclusion, the initial buyer must file a claim with the Assessor and provide any documents necessary to identify the value attributable to the rain water capture system that was included in the purchase price of the new building. The claim must also identify the amount of any rebate for the rain water capture system provided to either the owner-builder or the initial purchaser.
- The exclusion is not available if the owner-builder already received the exclusion or the building became subject to assessment to the owner-builder on the lien date (January 1) following the completion of the construction.
- Owners of Existing Buildings: A property owner who adds a rain water capture system to an existing structure does not have to file for the exclusion. The exclusion is automatically granted when the assessor receives a copy of the building permit.
- Where do I apply for this exclusion?
- How much is excluded if the request is granted?
- The assessor will evaluate the claim and determine the portion of the purchase price that is attributable to the rain water capture system. The assessor will then reduce the new base year value established as a result of the change in ownership of the new building by an amount equal to the difference between the following two amounts:
- That portion of the value of the new building attributable to the rain water capture system.
- The total amount of all rebates, if any, that were provided to either the owner-builder or the initial purchaser.
New Construction Reassessment Exclusion for Governor Declared Disaster Damage or Destruction
(RTC Section 70.5):
Real property reconstructed to replace property substantially damaged or destroyed by a disaster, as declared by the Governor, is excluded from reassessment under certain conditions.
The specific requirements of RTC Section 70.5 include:
- The disaster must be one for which the Governor proclaimed a state of Disaster.
- The disaster occurred on or after January 1, 2017.
- An application is filed within 5 years of the damage or destruction.
- The real property must have suffered more than 50% damage to the improvement.
- The replacement improvement must be located on the same site as the damage or destroyed property.
- Reconstruction of the replacement improvement must be completed within five years of the disaster.
- The replacement improvement must be comparable to the substantially damaged or destroyed property, similar in size, utility, and function.
- Only the owner(s) of substantially damaged or destroyed property is eligible for relief.
- A property owner who receives relief under section 70.5 is not eligible to transfer the base year value under section 69.
If relief is not available under section 70.5, disaster relief may be available under sections 70(c) and 170, as long as the damage or destruction meets the requirements of section 170.
