1. New Construction

Investors and developers: Would be most interested in understanding how new construction impacts property tax assessments and whether certain exemptions apply to their projects. For example, the New Construction section outlines how new buildings, additions, or renovations affect property taxes, which is crucial for budgeting in investment projects.

Homeowners: Would look for information on how their home renovations or additions affect their property taxes and whether any exemptions or exclusions apply.

Brokers/Agents: Would want to know how to advise clients who are purchasing or selling properties involving new construction or extensive remodels.

2. Exclusions from Reappraisal

Investors: Interested in understanding how property value is adjusted if certain exclusions, such as disaster relief or certain types of improvements, apply to the property. This can affect the property’s overall tax liability.

Homeowners: May search for exclusions related to new construction or specific types of property, such as improvements for disabled persons, which might reduce their tax liabilities.

Brokers/Agents: Need to be familiar with these exclusions when guiding clients on tax implications during transactions, particularly for properties with upgrades or improvements.

3. Assessment Appeals

Investors and Property Owners: Can benefit from information on how to appeal property assessments if they believe their property is overvalued by the county assessor, which directly affects their tax burden.

Brokers/Agents: Need to be aware of how the appeal process works to better assist clients when there are discrepancies in property valuations or taxes, especially in the case of commercial properties.

4. Supplemental Assessment

Investors: Would be interested in supplemental assessments, as these affect how properties are assessed when new construction is completed or when properties change ownership. This could affect their purchase price negotiations or investment returns.

Homeowners: Would be interested in understanding how changes to their property, such as renovations or improvements, could trigger supplemental assessments.

Brokers/Agents: Should be able to explain the supplemental assessment process to buyers and sellers when property ownership or significant renovations take place.

5. Property Tax Rules & Legal Resources

Investors and Brokers: Need to stay informed about any changes in property tax laws and regulations that may impact the market or their clients’ transactions. The Property Tax Rules section and legal opinions could provide valuable insight into how taxes are applied and how they may be challenged in the future.

Homeowners: May be looking for guidance on how to ensure they are compliant with property tax regulations or seeking answers to questions about tax assessments related to their home.

6. Valuation Factor Studies & Property Tax Law Guides

Investors: Would want to access detailed studies on property valuations and tax law guides to help them evaluate the potential return on investment (ROI) of a property and assess whether taxes are aligned with market value.

Brokers/Agents: Should be aware of valuation factors and changes in property tax law that may impact clients’ decisions to buy, sell, or hold property.

7. Agricultural Lands and Urban Agriculture Incentive Zones

Investors: Interested in understanding how agricultural properties are valued for tax purposes and whether any incentives apply to properties in urban agriculture zones.

Homeowners: Especially those with land or who are considering buying agricultural property, will want to understand how their land might be assessed for tax purposes.

Active Solar Energy System Exclusion

Description

New Construction Exclusion

The property tax incentive for the installation of an active solar energy system is in the form of a new construction exclusion. It is not an exemption. Therefore, the installation of a qualifying solar energy system will not result in either an increase or a decrease in the assessment of the existing property.

Generally, when something of value is physically added to real property, the addition is assessed at current market value and this value is added to the existing base year value of the real property. When an active solar energy system is installed, it is not assessed, meaning that the existing assessment will not increase.

Some active solar energy properties may be eligible for exclusion from reassessment.

Effective September 18, 2022, the sunset date for the active solar energy system new construction exclusion was extended through the 2025-26 fiscal year. The statute is now scheduled to sunset on January 1, 2027.

Active Solar Energy Systems

An active solar energy system is a 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.

An active solar energy system may be used for any of the following:

• Domestic, recreational, therapeutic, or service water heating
• Space conditioning
• Production of electricity
• Process heat
• Solar mechanical energy

An active solar energy system does not include:

• solar swimming pool heaters
• hot tub heaters
• passive energy systems
• wind energy systems

Guidelines

Guidelines for Active Solar Energy Systems New Construction Exclusion were approved by the Members of the State Board of Equalization on November 15, 2012 following an extensive process involving interaction of Board staff with government officials and the public. Please visit the Guidelines for Active Solar Energy Systems New Construction Exclusion project page for more information about the implementation process.

The objective of the guidelines is to provide assessors’ staff, assessment appeals board members, taxpayer representatives, and others interested in the administration of property taxes in California with information regarding the new construction exclusion for active solar energy systems, including:

• Definitions
• Assessment responsibility
• First buyer exclusion
• Construction completion
• Leases
• Legal entities
• Decline in value
• Types of uses for active solar energy systems

Resources

The following resources provide information and guidance on active solar energy systems and the active solar energy systems new construction exclusion, which is incorporated in section 73 of the Revenue and Taxation Code.

Letters To Assessors (LTAs)

LTAs provide an ongoing advisory service for county assessors and others interested in the property tax system in California. The letters present Board staff’s interpretation of rules, laws, and court decisions on property tax assessment. The following LTAs pertain to assessment or procedural issues involving active solar energy systems:

Annotated Legal Opinions

Annotated legal opinions are summaries of the conclusions reached in selected legal rulings of California State Board of Equalization counsel. The following legal opinions pertain to questions involving active solar energy systems:

Forms

A property owner who adds an active solar energy system to an existing structure does not have to file for the exclusion. The exclusion should be automatically granted when the assessor receives a copy of the building permit.

However, if a developer installs an active solar energy system while constructing a new building, the initial purchaser of that building may receive the exclusion if:

• The building was completed on or after January 1, 2008
• The developer/builder did not receive the exclusion, and
• The purchaser files a form with the assessor.

The claim form, BOE-64-SES, Initial Purchaser Claim for Solar Energy System New Construction Exclusion, is available from the assessor of the county where the property is located. After the assessor receives this form, the new base year value of the building may be reduced by the value of the active solar energy system, less any rebates or tax credits received. The developer will be able to provide the initial purchaser with the value of the system and any rebates or tax credits that they received.

FAQs

General Information

I just installed solar heating panels on my roof to heat my swimming pool water. Is this excluded from new construction assessment because it is an active solar energy system?

No. Revenue and Taxation Code section 73(b)(2) specifically states that “active solar energy system” does not include solar swimming pool heaters or hot tub heaters. An active solar energy system must be a system that uses solar devices to provide for the collection, storage, or distribution of solar energy (for example, produces electricity or heats a hot water heater).

How does the new construction exclusion for solar energy systems work?

Generally, when something of value is physically added to real property, the addition is assessed at current market value and this value is added to the existing base year value of the real property. When an active solar energy system is installed, it is not assessed, meaning that the existing assessment will not increase.

Leases and Ownership

A homeowner installed an active solar energy system last year and financed it with a capital lease. The leasing company was advised to report the system as machinery and equipment on their annual BOE-571-L, Business Property Statement, and the homeowner subsequently received a tax bill. Is this correct?

No. The system is excluded whether it is leased or owned. The real property appraiser in the assessor’s office should coordinate information with the business property auditor-appraiser when a permit for construction is issued. Contact the assessor’s office for more information.