Proposition 13 is a Constitutional amendment that limits the valuation and taxation of property in California. It was passed by the voters in June, 1978. Under Proposition 13, real property is reappraised only when a change in ownership occurs, or when new construction takes place. A change in ownership occurs when there is a transfer of property, whether the transfer is a purchase, a gift, an inheritance, a foreclosure, the addition or deletion of an owner, or any other means. New construction is any improvement to property that is not normal maintenance.
Proposition 13 restricts both the tax rate and the rate of increase in valuation of real property as follows:
- The maximum amount of property tax cannot exceed 1% of a property's taxable value, plus bonds approved by the voters, service fees, improvement bonds and special assessments.
- A property's original base value is its 1975-76 market value. This value is automatically increased by a maximum of 2% annually (or less if the California consumer price index (CPI) is less than 2%). A new base value is set whenever there is a change in ownership or new construction. This base value is also increased by a maximum of 2% each year (factored base year value).