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California Property Tax for Investors: Prop 13, LLCs and Reassessment

By Matthew Martinez, Founder, CEO & Managing Broker, Diamond Real Estate Group. California DRE #01869679.

Under Proposition 13, a California rental or commercial property is reassessed to market value when it changes ownership, and between changes its assessed value can rise by no more than 2% a year, with the general tax limited to 1% of that value. For property held in an LLC, partnership or corporation, a change in ownership can happen without any deed being recorded: when one person or entity gains more than 50% of the entity, or when the original co-owners who deeded the property in have, together, transferred more than 50% of their interests. Either event must be reported to the State Board of Equalization (BOE) on Form BOE-100-B within 90 days, or a 10% penalty applies.

This guide is for investors buying income property, moving rentals into entities, or holding rentals across generations. It covers what triggers reassessment, what the supplemental bill looks like, the entity rules in Revenue and Taxation Code section 64, and why Proposition 19 gives little relief for rentals. This is general information, not legal or tax advice; talk to a California real estate attorney or tax adviser about your situation.

How Prop 13 works for investment property

The Legislative Analyst’s Office summarizes the core rules.

The general levy is capped at 1% of assessed value. A property’s assessed value resets to market value when it is sold, and each year after that it rises by 2% or the rate of inflation, whichever is lower. New construction is added at market value in the year it is built, while the rest of the property keeps its existing value.

Your bill is usually more than 1%. It also carries voter-approved rates for general obligation bonds, which adjust each year, and other charges that aren’t based on value at all, such as parcel taxes and special assessments. When values fall, assessors can temporarily reduce an assessment to current market value under Proposition 8 until the market recovers.

Commercial and industrial property is still under the same rules. Proposition 15 on the November 2020 ballot would have changed how that property is taxed, and voters rejected it, 48.0% yes to 52.0% no, according to the Secretary of State’s official results. Buyers of offices, retail and industrial buildings can see our commercial real estate services for how we approach those purchases.

Reassessment when you buy

The BOE says that on a typical purchase, 100% of the property is reassessed to its current market value. If you buy a share, only that share is reappraised. That is why the seller’s tax bill is the wrong number for your analysis; our rental property analysis worksheet and our guide to net operating income both start from your reassessed tax.

The supplemental tax bill

A change in ownership or completed new construction triggers a supplemental assessment. The assessor takes the new market value, subtracts the prior assessed value, and the county bills tax on the difference for the part of the fiscal year (July 1 to June 30) that remains.

Proration. The new value takes effect on the first day of the month after the event, and the bill covers only the months left in the fiscal year. The BOE’s table uses 0.50 when the effective date is January 1 (an event in December), 0.25 for April 1 (an event in March) and 0.67 for November 1 (an event in October).
One bill or two. An event from June through December produces one supplemental bill. An event from January through May produces two: one for the rest of the current fiscal year and one for the whole next year.
Not impounded. Supplemental bills go to the owner, not the lender, even if your lender pays the annual bill, and the BOE says penalties for missed payments can’t be excused because of a misunderstanding with your lender.
Refunds. If the new value is lower than the old one, the supplemental assessment is negative and produces a refund.

A hypothetical example: you buy a fourplex for $1,500,000 that the seller had assessed at $600,000, and you close in October. At an assumed 1.1% total rate, the $900,000 increase adds $9,900 a year in tax. The change takes effect November 1, leaving eight months in the fiscal year, so the supplemental bill is about $6,600 ($9,900 x 0.67), separate from the regular annual bill.

The change in ownership report

A Preliminary Change of Ownership Report is normally filed when the deed is recorded, and the recorder may charge an extra $20 if it isn’t. If the assessor then sends a Change in Ownership Statement and it isn’t returned within 90 days of the request, the penalty is $100 or 10% of the taxes on the new base year value, whichever is greater, capped at $5,000 for property eligible for the homeowners’ exemption and $20,000 for other property, unless the failure was willful.

When an entity change triggers reassessment

As a starting rule, section 64(a) says that buying or transferring interests in a legal entity, such as shares or LLC membership interests, isn’t a change in ownership of the real property the entity owns. Two exceptions do most of the work.

Rule	What triggers it	What is reassessed
Change in control, section 64(c)	One person or entity obtains more than 50% of a corporation’s voting stock, or more than 50% of the capital and profits of a partnership or LLC, directly or indirectly	All California real property the entity owns or leases under qualifying leases, as of the date of the change
Original co-owners, section 64(d)	Property was moved into the entity under the proportional-interest exclusion, and the original co-owners have cumulatively transferred more than 50% of their total interests, in one or more transactions	Only the property that was originally excluded, as of the date the threshold is crossed

Change in control

The BOE gives this example: A owns 55% of Corporation B; C buys A’s 55%. C now controls B, and B’s California real property is reassessed. Control can also be gained indirectly: if B in turn owns 100% of Corporation Z, C gains indirect control of Z too.

Control can arrive in pieces. In another BOE example, a partner who already held 49% received a further 2% under a will and obtained control on the date of death, so a small transfer can trigger reassessment if it pushes someone over 50%. One exception, under section 64(c)(2): when an owner of more than 50% of a partnership acquires all the remaining partnership interests, the transfer of the minority interests isn’t a change in ownership.

The original co-owner rule

This rule catches investors who moved property into an LLC without a reassessment.

Suppose two siblings own a duplex 50/50 and deed it to an LLC in which each holds 50%. That transfer is excluded, and both siblings become original co-owners.

If one sibling later sells her 50% to a cousin, the cumulative total transferred is 50%, which isn’t more than 50%, so there is no reassessment yet. If the other sibling then transfers even a small further interest, the total passes 50% and the duplex is reassessed on that date.

Original co-owner status ends when the excluded property is reappraised or transferred out of the entity. Property the entity bought later isn’t covered by this rule, because it was reassessed when the entity acquired it.

Filing BOE-100-B and the penalty

Form BOE-100-B, Statement of Change in Control and Ownership of Legal Entities, goes to the BOE, not the county. The BOE reviews it and tells the county assessor where the property is located, and the assessor reassesses.

Deadline. Within 90 days of a change in control or change in ownership, for changes on or after January 1, 2012. The BOE also can require a filing within 90 days of its written request, whether or not a change occurred.
No extensions. The law provides none, and an exclusion from reassessment doesn’t excuse the filing.
Filing with the assessor doesn’t count. The BOE says this directly.
Penalty. Under section 482(b), 10% of the taxes on the new base year value of the reassessed property, or, if no change occurred, 10% of the current year’s taxes on the property.
Abatement. The BOE and assessors can’t cancel the penalty; an application goes to the county board of supervisors or assessment appeals board within 60 days of the assessor’s notice.
Deaths. The date of death is generally the date of change. If the distribution isn’t settled, file within 90 days with what is known, then amend after final distribution.

Check the BOE’s Legal Entity Ownership Program page for the current form and filing options.

Moving a rental into an LLC

Section 62(a)(2) excludes a transfer between individuals and a legal entity that only changes how title is held, as long as the proportional ownership interests “in each and every piece of real property transferred” stay the same. A couple who own a rental 50/50 and deed it to an LLC they own 50/50 fits; a deed that changes the percentages, or that brings in a new member, doesn’t.

The exclusion has a long tail. The moment the deed records, the transferors become original co-owners, and the 50% clock under section 64(d) starts. Keep a record of every later transfer of membership interests, including gifts, and ask your attorney which ones count toward the total before you make them.

Property tax is only one consideration. A deed to an LLC can affect your loan, your title insurance and, for a single-family rental, the exemption from the state rent cap, which isn’t available to an LLC with a corporate member. Our comparison of holding a rental in an LLC or in your own name covers those trade-offs, and our guide to AB 1482 for landlords explains the exemption.

Other transfers investors run into

Spouses. Transfers between spouses are excluded, including adding a spouse to title and transfers on death or divorce.
Revocable trusts. A transfer into a revocable trust for the transferor’s benefit is excluded.
Long leases. Creating a lease of 35 years or more, counting written renewal options, is a change in ownership of the leased portion. Selling the landlord’s interest is a change in ownership if less than 35 years remain on the lease.
1031 exchanges. An exchange can defer income tax, but the replacement property is still a purchase and is reassessed. See our 1031 exchange guide and our guide to selling a rental property in California.

Prop 19 and inherited rentals

For transfers on or after February 16, 2021, Proposition 19 limited the parent-child exclusion to a family home that becomes the child’s principal residence and to a family farm. The BOE states that a parent-to-child transfer of a rental home isn’t excluded, so an inherited rental is reassessed to market value.

Even for a family home, the exclusion is capped. The value limit is the factored base year value plus an adjustment that is $1,044,586 from February 16, 2025 through February 15, 2027, and the child must file for the homeowners’ exemption within one year. Our guide to Prop 19 and inherited homes covers the details, and inherited rental property covers keeping or selling a rental after a death.

Prop 19’s base year transfer, which lets owners 55 and over move their tax base, applies only between primary residences, so it doesn’t help with investment property. See Prop 19 base year transfers for who qualifies.

Questions people ask

Does transferring my rental to an LLC trigger reassessment?

Not if the transfer only changes how title is held and each owner’s proportional interest in each property stays the same. But it makes you an original co-owner, and if more than 50% of the original interests are later transferred, cumulatively, the property is reassessed.

What happens if I buy 60% of an LLC that owns a building?

Gaining more than 50% of an LLC’s capital and profits is a change in control, so the LLC’s California real property is reassessed as of that date, and BOE-100-B must be filed within 90 days.

Who files BOE-100-B?

The person or entity that acquired control, or the entity whose original co-owner interests crossed the threshold, files with the BOE. Filing with the county assessor doesn’t satisfy the requirement.

Why did I get a second tax bill after closing?

That is the supplemental bill for the difference between the old assessed value and your purchase price, prorated for the rest of the fiscal year. If you closed between January and May, expect two of them. Your lender doesn’t receive them, so pay them directly.

Can my children inherit my rental at my tax base?

Not under Prop 19, for transfers since February 16, 2021. The parent-child exclusion now covers a family home that becomes the child’s principal residence and family farms, not rentals.

Did Prop 15 change taxes on commercial property?

No. Voters rejected Proposition 15 in November 2020, so commercial and industrial property is still assessed under Prop 13.

Plan the tax before you sign

Reassessment is easier to plan than to undo. Before you buy into an entity, restructure title or transfer interests among family members, map the transfers against the 50% rules with your attorney or CPA. When you are ready to buy, sell or reposition a rental, our investor services team can help you model the reassessed numbers.

Sources & notes

Last reviewed October 2026 by Matthew Martinez.