Proposition 8, passed in November 1978, amended Proposition 13 to allow assessed values to reflect declines in value. As a result, the Assessor is required to enroll a property’s Fair Market Value as of January 1 if that value is less than the Base Year Value plus inflationary adjustment (Proposition 13) value.
An assessment under Proposition 8 is a temporary assessment. The value of the property must be reviewed each January 1 to determine whether the current Fair Market Value remains less than its Base Year Value plus inflationary adjustments (Proposition 13) value
The value calculated under Proposition 13, with it's annual inflationary adjustment, continues to be tracked and remains the maximum assessed value allowed by law. If the Fair Market Value of the property increases above its Base Year Value plus inflationary adjustment, the Assessor will once again enroll the Proposition 13 value.
As the Proposition 8 value represents current Fair Market Value, it can fluctuate from year to year without limitation, to reflect changes in the market. It is not under the 2% inflationary adjustment limitation of Proposition 13.
The Assessor may initiate the Proposition 8 process without a request from an owner. Owners are notified at the beginning of the tax year and may file an Assessment Appeal if they feel the value was not lowered sufficiently.
Although the values of many properties may suffer a significant decline during a recession, not all may qualify for a Proposition 8 reduction. The current Fair Market Value must fall below the Base Year Value plus inflationary adjustment before it will affect the assessed value.
Fair Market Value is the amount of cash or its equivalent that property would bring if:
- Exposed for sale in the open market under conditions in which neither buyer or seller could take advantage of the circumstances of the other
- Both the buyer and the seller have knowledge of all of the uses and purposes to which the property is adapted and for which it is capable of being used
- Both the buyer and seller have knowledge of the enforceable restrictions upon those uses and purposes