Property Tax Post: Wildfire Victims May Qualify for Tax Relief


In the last several weeks, the U.S. Virgin Islands and Puerto Rico were destroyed by wind and water damage from Hurricanes Irma and Maria. While residents in these areas struggle to cope with the aftermath of the devastating storms, residents on the U.S. mainland may soon face similar challenges in areas ravaged by wildfire. As of Oct. 12, the National Interagency Coordination Center reported fires burning throughout parts of California, Oregon, Arizona, Nevada, and West Virginia. Some tax relief, however, may be available for these disaster victims.

In California, where wildfires have already destroyed homes and businesses, including some of the state’s famed wineries, according to TIME, property owners may be able to offset some recovery costs by seeking property tax relief. Generally, under California’s state code, owners of real and personal property destroyed by fire or other calamities may seek relief under the local ordinances[1] of the county where the property is located if its value was compromised by $10,000 or more. Affected persons must file their claim by the later of within a year of the date on which the damage occurred and within the time prescribed in the governing local ordinance. In turn, taxpayers satisfying all necessary requirements will have their property reassessed and ultimately have their property taxes reduced.

In addition to the above-described relief, California taxpayers looking to have their properties reassessed may also seek a deferment of installment payments for property tax due after the disaster but prior to reassessment of the property, if the taxpayer’s property is located in a governor-declared disaster area. Like the provision for reassessment, there is also a loss threshold with respect to the property’s value. Specifically, to qualify for the deferment, the taxpayer must demonstrate that the damage reduced their property’s value by 20 percent. For property that is already receiving a homeowner’s exemption, the threshold is the lesser of 10 percent and $10,000.

Alternatively, Californians who simply aren’t interested in rebuilding their homes and businesses in designated disaster areas may be eligible to transfer the pre-damage base year value[2] to a replacement property if they relocate within the same county.[3] Residents who chose this option may transfer the base year value to a comparable replacement purchased within five years of the disaster if their property sustained a loss in value exceeding 50 percent. There is a caveat, however. If the replacement property’s value exceeds of 120 percent of the pre-disaster property’s value, the excess value will be added to the replacement’s base year value.[4]

Taxpayers looking to relocate to another country from a disaster area may also want to transfer their base year value, but there are more steps involved in transferring a base year value to another property in another county. First, the taxpayer will not be able to transfer their base year value unless the county in which the taxpayer is looking to relocate has a local ordinance that allows it. Additionally, if such an ordinance exists, the state provides that the replacement must be a principal residence that is eligible for an exemption for homeowners or disabled veterans, and its value must be less than or equal to the value of the pre-disaster property, subject to some adjustments.

Although property tax relief probably falls short of the silver lining California residents may be hoping for in the wake of the still-burning wildfires, it is certainly one avenue to ease some of the inevitable financial burdens wildfire victims will encounter in coming months.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Does your state have property tax relief in place for those affected by natural disasters or other calamities?

Get a free trial to Bloomberg BNA Tax & Accounting's State Tax solution, a comprehensive research service that provides deep analysis and time-saving practice tools to help practitioners make well-informed decisions.

[1] Fresno is the only county that has not adopted a local ordinance providing for property tax relief in the event of a major calamity, according to the California State Board of Equalization.

[2] Base year value is either the fair market value of the property on March 1, 1975, the property’s fair market value on the acquisition date (purchase price), or the fair market value on the lien date following completion of new construction.

[3] Acquisition of the new property must occur within 5 years of the disaster.

[4] For example, taxpayer’s pre-disaster property is worth $100,000. Taxpayer relocates within the same county and acquires a replacement property with a fair market value of $150,000. The full cash value of the replacement property exceeds 120 percent of the full cash value, which is $120,000. As such, the taxpayer’s new basis will be $130,000 ($100,000 (pre-disaster property basis) + $30,000 (replacement value exceeding 120 percent of pre-disaster value)).