California Code of Regulations
Title 18 - Public Revenues
Division 1 - State Board of Equalization-Property Tax (California Department of Tax and Fee Administration - Timber Yield Tax, See Chapter 11)
Chapter 4 - Equalization by State Board
Article 4 - Change in Ownership and New Construction
Section 462.520 - Change in Ownership - Intergenerational Transfers

Universal Citation: 18 CA Code of Regs 462.520

Current through Register 2024 Notice Reg. No. 38, September 20, 2024

(a) GENERAL. Beginning on and after February 16, 2021, "change in ownership" shall not include the transfer of real property which is the principal residence or the family farm of an eligible transferor in the case of transfers between parents and their children or between grandparents and their grandchildren, meeting the following conditions:

(1) The principal residence or family farm of the transferor must become the principal residence or the family farm of at least one eligible transferee within one year of the transfer.

(A) If the transfer is of a principal residence, an eligible transferee must file a claim for the homeowners' or disabled veterans' exemption at the time of the transfer or within one year of the transfer.

(B) If the transfer is of a family farm, an eligible transferee need not file a claim for either the homeowners' or disabled veterans' exemption. A family farm is not required to include a principal residence to qualify for this exclusion.

(C) A claim for exclusion under this section may be filed separately for a principal residence on a family farm if that principal residence meets all the requirements of this section.

(2) The real property must continue to be the principal residence or the family farm of an eligible transferee. As of the date the property is no longer the principal residence or the family farm of an eligible transferee, the exclusion shall be removed and the taxable value of the property shall be determined pursuant to subdivision (d) of this rule. However, if another eligible transferee qualifies for the exclusion within one year of the property no longer qualifying as the principal residence of the previous eligible transferee, the exclusion shall not be removed.

(3) In the case of transfers between grandparents and grandchildren, all of the parents of those grandchildren, who qualify as children of the grandparents, are deceased as of the date of the transfer, except that a son-in-law or daughter-in-law of the grandparent who is a stepparent to the grandchild need not be deceased on the date of the transfer.

(4) A claim for the exclusion sought pursuant to this section is filed with the county assessor in accordance with subdivision (f)(2) of this rule. An assessor may request any other information reasonably related to the claim they deem necessary to verify the exclusion.

(5) Nothing in this section limits the number of principal residences or family farms of a transferor that may be transferred to an eligible transferee and excluded from change in ownership.

(b) VALUATION.

(1) Upon transfer, the principal residence or family farm obtains a new base year value equal to its full cash value on the date of transfer multiplied by the percent ownership of the principal residence or family farm transferred plus the factored base year value of the percent ownership of the principal residence or family farm not transferred.

(2) If a transferee meets the requirements for exclusion under this section, the principal residence or family farm will be assessed at its New Taxable Value in accordance with subdivision (c) of this rule rather than its new base year value.

(3) When the real property is no longer the principal residence or the family farm of an eligible transferee as required by subdivision (a)(2) of this rule, the new taxable value upon removal of the exclusion shall be determined pursuant to subdivision (d) of this rule.

Example 1: Base Year Value Calculation. Parent transfers 100 percent interest in their principal residence to Child. On March 1, 2021, the date of transfer, the principal residence has a factored base year value of $250,000 and a full cash value of $900,000. The principal residence's new base year value is $900,000. If Child meets the requirements for exclusion under this section, the principal residence will be assessed at its New Taxable Value, in accordance with subdivision (c) of this rule, rather than its new base year value.

Example 2: Base Year Value Calculation. Parent transfers 75 percent interest in their principal residence to Child and retains 25 percent interest. On March 1, 2021, the date of transfer, the principal residence has a factored base year value of $250,000 and a full cash value of $900,000. The principal residence's new base year value is $675,000 ($900,000 full cash value multiplied by the 75 percent interest transferred to Child) plus $62,500 ($250,000 factored base year value multiplied by the 25 percent interest retained by Parent) equals $737,500. If Child meets the requirements for exclusion under this section, the principal residence will be assessed at its New Taxable Value, in accordance with subdivision (c) of this rule, rather than its new base year value.

(c) NEW TAXABLE VALUE. The New Taxable Value of the principal residence or family farm shall be the sum of the amounts calculated in paragraphs (1) through (3):

(1) Eligible Transferee's New Taxable Value: the sum of the factored base year value of the principal residence or family farm immediately prior to the date of transfer plus any Excess Amount. This amount shall be multiplied by the percent interest of the principal residence or family farm transferred to eligible transferees.

(A) "Excess Amount" means the full cash value of the principal residence or family farm on the date of transfer minus the Excluded Amount. If this amount is less than or equal to zero, the Excess Amount is zero.

(B) "Excluded Amount" means the factored base year value of the principal residence or family farm immediately prior to the date of transfer plus $1,000,000, adjusted pursuant to subdivision (g) of this rule.

(2) Noneligible Transferee's New Taxable Value: the full cash value of the principal residence or family farm on the date of transfer multiplied by the percent interest transferred to noneligible transferees.

(3) Factored Base Year Value of Non-Transferred Interest: the factored base year value of the principal residence or family farm immediately prior to the date of transfer multiplied by the percent interest not transferred.

(4) The New Taxable Value shall be adjusted by an inflation factor, as provided in subdivision (a) of section 51 of the Revenue and Taxation Code.

Example 3: Excess Amount Calculation. On March 1, 2021, Parents' principal residence has a factored base year value of $250,000. The Excluded Amount is $1,250,000 ($1,000,000 plus $250,000 factored base year value). Parents transfer 100 percent interest in their principal residence to Child on March 1, 2021.

Examples 3-1 and 3-2 demonstrate alternatives using the facts described in Example 3.

Example 3-1: Zero Excess Amount. The principal residence has a full cash value of $900,000 on the date of transfer. Since $900,000 is less than the $1,250,000 Excluded Amount, the Excess Amount is zero. Therefore, the New Taxable Value on the date of transfer is the factored base year value of $250,000.

Example 3-2: Excess Amount. The principal residence has a full cash value of $1,300,000 on the date of transfer. Since $1,300,000 is greater than the $1,250,000 Excluded Amount, there is an Excess Amount of $50,000. Therefore, the New Taxable Value of the principal residence on the date of transfer is $300,000 ($250,000 factored base year value plus $50,000 Excess Amount).

Example 4: Transfer to both Eligible and Non-Eligible Transferees. On March 1, 2021, Parents' principal residence has a factored base year value of $250,000. The Excluded Amount is $1,250,000 ($1,000,000 plus $250,000 factored base year value). Parents transfer 75 percent interest in their principal residence to Child and the remaining 25 percent interest to Nephew on March 1, 2021.

Examples 4-1 and 4-2 demonstrate alternatives using the facts described in Example 4.

Example 4-1: Transfer to both Eligible and Non-Eligible Transferees: Zero Excess Amount. The principal residence has a full cash value of $900,000 on the date of transfer. Since $900,000 is less than the $1,250,000 Excluded Amount, the Excess Amount is zero. Therefore, the Eligible Transferee's New Taxable Value on the date of transfer is $187,500 ($250,000 factored base year value multiplied by the 75 percent interest transferred to Child). Since 25 percent of the principal residence is transferred to Nephew, a non-eligible transferee, the Noneligible Transferee's New Taxable Value is $225,000 ($900,000 full cash value multiplied by the 25 percent interest transferred to Nephew). Thus, the New Taxable Value of the principal residence is $412,500 ($187,500 plus $225,000).

Example 4-2: Transfer to both Eligible and Non-Eligible Transferees: Excess Amount. The principal residence has a full cash value of $1,300,000 on the date of transfer. Since $1,300,000 is greater than the $1,250,000 Excluded Amount, the Excess Amount is $50,000. Since 75 percent interest in the principal residence was transferred to Child, the Eligible Transferee's New Taxable Value is $225,000 ($250,000 factored base year value plus $50,000 Excess Amount, multiplied by Child's 75 percent interest). Since 25 percent interest in the principal residence was transferred to Nephew, a non-eligible transferee, the Noneligible Transferee's New Taxable Value is $325,000 ($1,300,000 full cash value multiplied by the 25 percent interest transferred to Nephew). Therefore, the New Taxable Value of the principal residence is $550,000 ($225,000 plus $325,000).

Example 5: Transfer to an Existing Owner Eligible Transferee. On June 1, 2022, Parent's principal residence has a factored base year value of $320,000. The Excluded Amount is $1,320,000 ($1,000,000 plus $320,000 factored base year value). Parent's principal residence is owned 60 percent by Parent and 40 percent by Child. Parent transfers her 60 percent interest to Child. Child meets all intergenerational transfer exclusion requirements, and the exclusion is applied.

Examples 5-1 and 5-2 demonstrate alternatives using the facts described in Example 5.

Example 5-1: Transfer to an Existing Owner Eligible Transferee: Zero Excess Amount. The full cash value of the principal residence is $1,100,000 on the date of transfer. Since the Excluded Amount ($1,320,000) is greater than the full cash value of the principal residence, the Excess Amount is zero. The Eligible Transferee's New Taxable Value on the date of transfer is $192,000 ($320,000 factored base year value multiplied by the 60 percent interest transferred to Child). Since 40 percent interest in the principal residence was already owned by Child and not transferred, the factored base year value of the Non-Transferred Interest is $128,000 ($320,000 factored base year value multiplied by the Child's 40 percent interest not transferred). Thus, the New Taxable Value of the principal residence is $320,000 ($192,000 plus $128,000).

Example 5-2: Transfer to an Existing Owner Eligible Transferee: Excess Amount. The full cash value of the principal residence is $1,500,000 on the date of transfer. Since the full cash value of the principal residence ($1,500,000) is greater than the $1,320,000 Excluded Amount, there is an Excess Amount of $180,000. Therefore, the Eligible Transferee's New Taxable Value is $300,000 ($320,000 factored base year value plus $180,000 Excess Amount, multiplied by the 60 percent interest transferred to Child). Since 40 percent interest in the principal residence was already owned by Child and not transferred, the factored base year value of the Non-Transferred Interest is $128,000 ($320,000 factored base year value multiplied by the Child's 40 percent interest not transferred). Therefore, the New Taxable Value of the principal residence is $428,000 ($300,000 plus $128,000).

Example 6: Transfer to an Existing Owner Eligible Transferee and Non-Eligible Transferee. On June 1, 2022, Parent's principal residence has a factored base year value of $320,000 and a full cash value of $1,500,000. The Excluded Amount is $1,320,000 ($1,000,000 plus $320,000 factored base year value). The Excess Amount is $180,000. Parent's principal residence is owned 60 percent by Parent and 40 percent by Child. Parent transfers half of her 60 percent interest to Child and her remaining 30 percent interest to Niece. Child meets all intergenerational transfer exclusion requirements, and the exclusion is applied. The Eligible Transferee's New Taxable Value is $150,000 ($320,000 factored base year value plus $180,000 Excess Amount, multiplied by the 30 percent interest transferred to Child). Since 30 percent of the principal residence was transferred to Niece, a non-eligible transferee, the Noneligible Transferee's New Taxable Value is $450,000 ($1,500,000 full cash value multiplied by the 30 percent interest transferred to Niece). Since 40 percent interest in the principal residence was already owned by Child and not transferred, the factored base year value of the Non-Transferred Interests is $128,000 ($320,000 factored base year value multiplied by the Child's 40 percent interest not transferred). Therefore, the New Taxable Value of the principal residence is $728,000 ($150,000 plus $450,000 plus $128,000).

(d) TAXABLE VALUE UPON EXCLUSION REMOVAL.

(1) When the real property is no longer the principal residence or the family farm of an eligible transferee as required by subdivision (a)(2) of this rule, the intergenerational transfer exclusion shall be removed from the property, and its new taxable value upon removal shall be the new base year value calculated pursuant to subdivision (b) of this rule, adjusted by an inflation factor, as provided in subdivision (a) of section 51 of the Revenue and Taxation Code through the year the exclusion is lost. This amount shall be further adjusted as necessary, including for any part of the real property that changes ownership at the time the exclusion is lost, or that previously changed ownership, or that was newly constructed.

(2) Any portion of the real property not reassessed at the time of the removal of the exclusion shall not be subject to supplemental assessment.

Example 7: Calculation of Taxable Value on Exclusion Removal. Parent transfers their principal residence 60 percent interest to Son and 40 percent interest to Daughter. On the date of transfer, the principal residence has a factored base year value of $150,000 and a full cash value of $800,000. Since 100 percent interest in the principal residence is transferred, the principal residence's new base year value as determined in subdivision (b) of this rule is $800,000. Son meets all intergenerational transfer exclusion requirements, and the exclusion is applied. The New Taxable Value of the principal residence, pursuant to subdivision (c) of this rule, at the time the exclusion is first applied is $150,000. Five years later, Son moves out of the principal residence and no longer qualifies for the exclusion. If the inflation factor was 2 percent each of the five years the property was Son's principal residence, the taxable value of the principal residence at the time Son moves out is $165,612 ($150,000 multiplied by the 2 percent adjustment for 5 years).

Examples 7-1 through 7-4 demonstrate alternatives using the facts described in Example 7.

Example 7-1: No Qualifying Subsequent Eligible Transferee: Full Exclusion Removal. Son and Daughter rent the property to a third party. As of the date the principal residence no longer qualifies for the homeowners' exemption, it no longer qualifies for the intergenerational transfer exclusion. Since 100 percent interest in the property is retained by former eligible transferees (Son and Daughter), the taxable value upon removal of the exclusion is the new base year value established at the time of the transfer ($800,000) adjusted by the inflation factor for five years. Since the inflation factor was 2 percent each of those five years, the new base year value factored for inflation upon removal of the exclusion is $883,265 ($800,000 multiplied by the 2 percent adjustment for 5 years).

Example 7-2: Qualifying Subsequent Eligible Transferee: Exclusion Retained. Instead of renting the property to a third party, Daughter moves in within one year of Son moving out (which is 5 years after the transfer from Parent) and meets all intergenerational transfer exclusion requirements. Since the property became the principal residence of another eligible transferee (Daughter) within one year, the intergenerational transfer exclusion is not removed. Therefore, the New Taxable Value, which is the taxable value, of the principal residence remains at $165,612.

Example 7-3: Qualifying Subsequent Eligible Transferee: Partial Exclusion Removal, Partial Change in Ownership. Instead of renting the property to a third party, Daughter moves in within one year of Son moving out (which is 5 years after the transfer from Parent) and meets all intergenerational transfer exclusion requirements. At the time Son moves out, he sells his 60 percent interest to Daughter when the full cash value of the principal residence was $900,000. Although the property became the principal residence of another eligible transferee (Daughter) within one year, since 60 percent interest in the principal residence was transferred to Daughter by Son, 60 percent of the exclusion is removed and 60 percent interest in the principal residence is reassessed, since there is no exclusion from reassessment for transfers between siblings. Therefore, the New Taxable Value upon partial removal of the exclusion is $606,245, which is equal to the reassessed amount of $540,000 ($900,000 multiplied by the 60 percent interest sold to Daughter) plus Daughter's retained factored base year value of $66,245 ($165,612 multiplied by Daughter's 40 percent interest).

Example 7-4: No Qualifying Subsequent Eligible Transferee: Full Exclusion Removal, Partial Change in Ownership. Son sells his 60 percent interest to Daughter when the full cash value of the principal residence was $800,000. Daughter rents the property to a third party. Since 60 percent interest in the principal residence was transferred to Daughter by Son, 60 percent of the principal residence must be reassessed, since there is no exclusion from reassessment for transfers between siblings. Therefore, the reassessed amount is $480,000 ($800,000 full cash value multiplied by the 60 percent interest sold to Daughter). Additionally, Daughter's 40 percent interest no longer qualifies for the exclusion. However, Daughter's 40 percent interest is not subject to reassessment at this time, but instead becomes a portion (40 percent) of the new base year value that was established at the time of the original transfer ($800,000), adjusted by the inflation factor for five years, which was previously excluded from reassessment by the intergenerational transfer exclusion. Since the inflation factor was 2 percent each of those five years, that amount is $883,265 ($800,000 multiplied by the 2 percent adjustment for 5 years). $883,265 multiplied by the 40 percent interest in the real property retained by Daughter is equal to $353,306. Therefore, the new base year value upon partial reassessment and then removal of the remaining exclusion of the principal residence is $833,306 ($480,000 plus $353,306).

Example 8: Calculation of Taxable Value on Exclusion Removal. Parent transfers their principal residence 50 percent interest to Son and 30 percent interest to Daughter, retaining the remaining 20 percent interest. On the date of transfer, the principal residence has a factored base year value of $150,000 and a full cash value of $800,000. Since 80 percent interest in the principal residence was transferred, the principal residence's new base year value as determined in subdivision (b) is $670,000 ($800,000 full cash value multiplied by the 80 percent interest transferred to Son and Daughter plus $150,000 factored base year value multiplied by the 20 percent interest retained by Parent).

Part A: Qualifying Eligible Transferee. Son meets all intergenerational transfer exclusion requirements, and the exclusion is applied. The New Taxable Value of the principal residence, pursuant to subdivision (c), at the time the exclusion is first applied is the factored base year value of $150,000.

Part B: No Subsequent Qualifying Eligible Transferee: Full Exclusion Removal, Partial Change in Ownership, Partial Interest Retained by Transferor. Three years later, Son moves out of the principal residence. If the inflation factor was 2 percent each of those three years, the taxable value of the principal residence is $159,181 ($150,000 multiplied by the 2 percent adjustment for 3 years). At the time Son moves out, he sells his 50 percent interest to Daughter when the full cash value of the principal residence was $900,000. Daughter does not use the property as a principal residence and, thus, does not qualify for the intergenerational transfer exclusion. Therefore, the intergenerational transfer exclusion is removed in its entirety. Since 50 percent of the real property was transferred from Son to Daughter, a transfer between siblings for which no exclusion applies, 50 percent of the real property is reassessed. That amount is $450,000 ($900,000 full cash value multiplied by the 50 percent interest sold to Daughter). Additionally, the $ 800,000 full cash value established at the time of the transfer multiplied by the 2 percent adjustment for three years is equal to $848,966. This amount must be multiplied by the percent of the real property retained by former eligible transferees (Daughter's 30 percent), which is equal to $254,690. Finally, the portion of the factored base year value of Parent's retained 20 percent interest is $31,836 ($159,181 multiplied by 20 percent). Therefore, the New Taxable Value upon removal of the exclusion of the principal residence is $736,526 ($254,690 plus $450,000 plus $31,836).

Example 9: Transfer of a Family Farm with a Principal Residence. A principal residence and family farm are located on a single, 60-acre legal parcel. The New Taxable Value of the principal residence and family farm are computed separately. The factored base year value of the entire legal parcel is $450,000, $200,000 of which is attributable to the principal residence and $250,000 of which is attributable to the family farm. The full cash value of the legal parcel is $2,800,000, $1,200,000 of which is attributable to the principal residence and $1,600,000 of which is attributable to the family farm. Parent transfers the entire legal parcel to Child on July 8, 2021. All other intergenerational transfer exclusion requirements have been met. The Excluded Amount of the principal residence is $1,200,000 ($1,000,000 plus $200,000 factored base year value of the residence). Since the full cash value of the residence is not greater than the Excluded Amount of the residence, the New Taxable Value of the residence is the factored base year value of $200,000. The Excluded Amount of the family farm is $1,250,000 ($1,000,000 plus $250,000 factored base year value of the family farm). Since the full cash value of the farm is $1,600,000, it has an Excess Value of $350,000 ($1,600,000 full cash value minus $1,250,000 Excluded Amount). Therefore, the New Taxable Value of the family farm is $600,000 ($250,000 factored base year value plus $350,000 Excess Value). The New Taxable Value of the entire legal parcel is $800,000 ($200,000 plus $600,000).

Example 10: Calculation of Taxable Value on Exclusion Removal. Three years after the transfer in Example 9, Child moves out of state and leases the farm to Cousin for five years. The residence no longer qualifies for the exclusion. The family farm remains eligible for the exclusion. If the inflation factor was 2 percent each of the three years the property was Child's principal residence, the taxable value of the family farm is $636,725 ($600,000 multiplied by the 2 percent adjustment for 3 years). The taxable value of the principal residence at the time Child moves out is $1,273,450 ($1,200,000 multiplied by the 2 percent adjustment for 3 years). Therefore, the New Taxable Value of the entire parcel is $1,910,175.

(e) DEFINITIONS. The following definitions govern the construction of the words or phrases used in this section.

(1) "Children" means any of the following:

(A) Any child born of the parent or parents, except a child, as defined in subparagraph (D), who has been adopted by another person or persons.

(B) Any stepchild of the parent or parents and the spouse of that stepchild while the relationship of stepparent and stepchild exists. For purposes of this paragraph, the relationship of stepparent and stepchild shall be deemed to exist until the marriage on which the relationship is based is terminated by divorce, or, if the relationship is terminated by death, until the remarriage of the surviving stepparent.

(C) Any son-in-law or daughter-in-law of the parent or parents. For the purposes of this paragraph, the relationship of parent and son-in-law or daughter-in-law shall be deemed to exist until the marriage on which the relationship is based is terminated by divorce, or, if the relationship is terminated by death, until the remarriage of the surviving son-in-law or daughter-in-law.

(D) Any child adopted by the parent or parents pursuant to statute, other than an individual adopted after reaching 18 years of age.

(E) Any foster child of a state-licensed foster parent, if that child was not, because of a legal barrier, adopted by the foster parent or foster parents before the child aged out of the foster care system. For purposes of this paragraph, the relationship between a foster child and foster parent shall be deemed to exist until terminated by death. However, for purposes of a transfer that occurs on the date of death, the relationship shall be deemed to exist on the date of death.

(2) "Disabled veterans' exemption" means the exemption authorized by subdivision (a) of section 4 of article XIII of the California Constitution.

(3) "Eligible transferee" means a parent, child, grandparent, or grandchild of an eligible transferor.

(4) "Eligible transferor" means a grandparent, grandchild, parent, or child of an eligible transferee.

(5) "Factored base year value" means the amount determined pursuant to subdivision (f) of section 110.1 of the Revenue and Taxation Code.

(6) "Family farm" means any real property which is under cultivation or which is being used for pasture or grazing, or that is used to produce any agricultural commodity, as that term is defined in section 51201 of the Government Code as that section read on January 1, 2020. As of January 1, 2020, Government Code section 51201 defined "agricultural commodity" as follows: "Agricultural commodity" means any and all plant and animal products produced in this state for commercial purposes, including, but not limited to, plant products used for producing biofuels, and industrial hemp cultivated in accordance with Division 24 (commencing with Section 81000) of the Food and Agricultural Code.

(7) "Full cash value" means full cash value, as defined in section 2 of article XIII A of the California Constitution and section 110.1 of the Revenue and Taxation Code, with any adjustments authorized by those sections, and the full value of any new construction in progress, determined as of the date immediately prior to the date of a purchase by or transfer to an eligible transferee of real property subject to this section.

(8) "Grandchild" or "grandchildren" means any child or children of the child or children of the grandparent or grandparents.

(9) "Homeowners' exemption" means the exemption provided by subdivision (k) of section 3 of article XIII of the California Constitution.

(10) "Legal parcel" means any parcel of real property that may be separately sold in compliance with the Subdivision Map Act (Division 2 (commencing with Section 66410) of Title 7 of the Government Code), or for which a certificate of compliance has been recognized and recorded.

(11) "Principal residence" means a dwelling that is eligible for a homeowners' exemption or a disabled veterans' exemption as a result of the transferor's or transferee's ownership and occupation of the dwelling. "Principal residence" includes that portion of the land underlying the residence that consists of an area of reasonable size that is used as a site for the residence.

(A) A principal residence shall include property owned by a decedent's estate, whether directly or through a trust, if it was the decedent's principal residence immediately prior to their death.

(B) A principal residence shall include an accessory dwelling unit or junior accessory dwelling unit in its appraisal unit if the accessory dwelling unit or junior accessory dwelling unit is not separately alienable from the title of any other dwelling unit on the property and the eligible transferee occupies one of the structures as their primary residence.

(i) "Accessory dwelling unit" has the same meaning as defined in subdivision (j)(1) of section 65852.2 of the Government Code.

(ii) "Junior accessory dwelling unit" has the same meaning as defined in subdivision (h)(1) of section 65852.22 of the Government Code.

(12) "Real property" means real property as defined in section 104 of the Revenue and Taxation Code. Real property does not include any interest in a legal entity, except as provided in this paragraph. For purposes of this section, real property includes any of the following:

(A) An interest in a unit or lot within a cooperative housing corporation, as defined in subdivision (i) of section 61 of the Revenue and Taxation Code.

(B) A pro rata ownership interest in a mobilehome park, as defined in subdivision (b) of section 62.1 of the Revenue and Taxation Code.

(C) A pro rata ownership in a floating home marina, as defined in subdivision (c) of section 62.5 of the Revenue and Taxation Code.

(13) "Transfer" includes, and is not limited to, any transfer of the present beneficial ownership of property through the medium of an inter vivos or testamentary trust.

(14) "Transfer between grandparents and their grandchildren" means a transfer from a grandparent or grandparents to their grandchild or grandchildren or a transfer from a grandchild or grandchildren to their grandparent or grandparents.

(15) "Transfer between parents and their children" means either a transfer from a parent or parents to their child or children or a transfer from a child or children to their parent or parents.

(f) FILING.

(1) Homeowners' or Disabled Veterans' Exemption Claim.

(A) A transferee who files a claim for the homeowners' or disabled veterans' exemption within one year of the purchase or transfer of the family home shall be entitled to a refund of taxes previously owed or paid, as a result of not having filed a homeowners' or disabled veterans' exemption, between the date of the transfer and the date the transferee claims the homeowners' exemption or disabled veterans' exemption.

(B) A transferee who is otherwise eligible for this exclusion and files a claim for the homeowners' or disabled veterans' exemption after one year of the purchase or transfer of the family home shall only receive the intergenerational transfer exclusion commencing with the lien date of the assessment year in which the claim is filed.

(2) Exclusion Claim Form. To request the intergenerational transfer exclusion, an eligible transferor and eligible transferee shall file a claim form, designed by the State Board of Equalization, with the county assessor in the county in which the principal residence is located.

(A) The claim form shall include a written certification signed and made under penalty of perjury, of the following:

(i) that the transferee is a parent, child, grandparent, or grandchild of the transferor and that the transferor is their parent, child, grandparent, or grandchild;

(ii) in the case of a grandparent-grandchild transfer, that all the parents of the grandchild or grandchildren who qualify as children of the grandparents were deceased as of the date of the transfer;

(iii) that the transferor will not file a claim to transfer the base year value of the property under either section 2, subdivision (a) or section 2.1, subdivision (b) of article XIII A of the California Constitution;

(iv) that the real property is the transferor's principal residence or family farm; and

(v) that the real property is or will become within one year the transferee's principal residence or family farm and a homeowners' exemption claim form will be filed, the property will continue to be the principal residence or the family farm of an eligible transferee, and the eligible transferee will notify the assessor if the real property is no longer the principal residence or the family farm of an eligible transferee.

(B) The claim form may be filed and the certification made by the transferor's or eligible transferee's legal representative, the trustee of the transferor's or eligible transferee's trust, or the executor or administrator of the transferor's or eligible transferee's estate.

(C) If there are multiple transferees, the claim form may be filed and the certification made by any one of the eligible transferees.

(D) The claimant shall provide substantiation of any matter certified pursuant to this paragraph at the request of the county assessor.

(3) Except as provided in paragraph (4), any claim under this section shall be filed within three years after the date of the transfer of real property for which the claim is filed, or prior to transfer of the real property to a third party, whichever is earlier. However, a claim shall be deemed to be timely filed if it is filed within six months after the date of mailing of a notice of supplemental or escape assessment, issued as a result of the transfer of real property for which the claim is filed.

Example 11: Exemption and Exclusion Forms Filed at Time of Transfer. Parent transfers their principal residence to Son and Daughter on March 1, 2021. The property is also the principal residence of Son. Son files a claim for the homeowners' exemption and the intergenerational transfer exclusion claim form at the time of the transfer. Because the homeowners' exemption claim form was filed within one year of the date of transfer as required by subdivision (a)(1)(A) and the intergenerational transfer exclusion claim form was filed within three years of the date of the transfer of the property as required by subdivision (f)(2), both filing requirements have been satisfied and, as long as Child meets all other eligibility requirements, the New Taxable Value as of March 1, 2021, will be calculated pursuant to subdivision (c) of this section.

Example 11-1: Exemption and Exclusion Forms Filed at Time of Transfer to Subsequent Eligible Transferee. A number of years later, Son moves out of the principal residence and Daughter moves in, making it her principal residence. Since Daughter was an eligible transferee of Parent, as long as Daughter files a homeowners' exemption claim form within one year and the intergenerational transfer exclusion claim form within three years of the date Son moves out of the property, the property remains eligible for the intergenerational transfer exclusion.

Example 12: Exemption and Exclusion Form Filed Within One Year of Transfer. Parent transfers their principal residence to Child on March 1, 2021. The property is also the principal residence of Child. Child does not file a claim for the homeowners' exemption at the time of transfer, but files the homeowners' exemption and intergenerational transfer exclusion claim forms on February 1, 2022. A change in ownership will be processed as of March 1, 2021, and a new base year value established as of that date. Assuming Child meets all other eligibility requirements, a New Taxable Value as calculated in subdivision (c) of this section will be restored as of March 1, 2021, and Child shall be entitled to a refund of property taxes previously paid or a cancellation of taxes previously owed between March 1, 2021, and January 31, 2022.

Example 13: Exclusion Form Filed Within Three Years of Transfer. Parent transfers their principal residence to Child on March 1, 2021. The property is also the principal residence of Child. Child files a claim for the homeowners' exemption at the time of the transfer. Child still owns the property as their principal residence on March 1, 2023, and files the intergenerational transfer exclusion claim form on that date. A change in ownership will be processed as of March 1, 2021, and a new base year value established as of that date. Assuming Child meets all other eligibility requirements, a New Taxable Value as calculated in subdivision (c) of this section will be restored as of March 1, 2021, and Child shall be entitled to a refund of property taxes previously paid or a cancellation of taxes previously owed between March 1, 2021, and February 28, 2023.

Example 14: Exclusion Form Not Filed Within Three Years of Transfer. Parent transfers their principal residence to Child on March 1, 2021. The property is also the principal residence of Child. Child files a claim for the homeowners' exemption at the time of the transfer. Child does not file an intergenerational transfer exclusion form and receives a notice of supplemental assessment on April 1, 2025. As long as Child files the exclusion claim form within six months of April 1, 2025, and meets all other eligibility requirements, the principal residence will be assessed at its New Taxable Value as of March 1, 2021, calculated pursuant to subdivision (c) of this section. Child shall be entitled to a refund of property taxes previously paid or a cancellation of taxes previously owed between March 1, 2021, and March 31, 2025.

Example 15: Exemption Form Not Filed Within One Year of Transfer. Parent transfers their principal residence to Child on March 1, 2021. The property is also the principal residence of Child. Child files an intergenerational transfer exclusion form at the time of transfer but does not file a claim for the homeowners' exemption until a notice of supplemental assessment is received on April 1, 2023. Because Child did not file the homeowners' exemption within one year of the transfer, he is only eligible for prospective relief. The New Taxable Value as calculated in accordance with subdivision (c) of this rule will be enrolled as of January 1, 2023.

Example 16: Property Does Not Become Principal Residence of Transferee Within One Year of Transfer. Parent transfers their principal residence to Child on March 1, 2021. Intending to move into the property, Child files an intergenerational transfer exclusion form at the time of transfer. However, Child does not move into the property until June 1, 2022, and files the homeowners' exemption form at that time. Because Child did not move into the property within one year of the transfer, she is not eligible for the exclusion.

(4) If the real property has not been transferred to a third party, a claim for exclusion filed subsequent to the expiration of the filing periods set forth in paragraph (3) shall be considered by the assessor; however,

(A) Any exclusion granted pursuant to that claim shall apply commencing with the lien date of the assessment year in which the claim is filed.

(B) Under any exclusion granted pursuant to that claim, the value of the real property upon which property taxes shall be based in the assessment year described in subparagraph (A) is the factored base year value calculated with full cash value determined as the date the property first qualified for the intergenerational transfer exclusion.

Example 17: Parent transfers their principal residence to Child on March 1, 2021. The property is also the principal residence of Child. Child files a claim for the homeowners' exemption at the time of the transfer. Child receives a notice of supplemental assessment on April 1, 2022, and files the exclusion claim form one year later, on April 1, 2023. Assuming Child meets all other eligibility requirements, the principal residence will be assessed at its New Taxable Value on March 1, 2021, as calculated pursuant to subdivision (c) of this rule, adjusted for inflation factor increases pursuant to subdivision (a) of section 51 of the Revenue and Taxation Code.

(5) If the exemption claim required by subdivision (a)(1) of this rule is filed one year after the transfer for which the claim for exclusion required by subdivision (a)(4) of this rule is filed, then the exclusion shall be granted commencing with the lien date of the assessment year in which the last of the two claims is filed.

(6) For purposes of this subdivision, a "third party" is any person, including any legal entity, who is not a transferor or transferee in the transfer for which the claim is being filed. However, a transfer of real property to a parent or child of the transferor or to a grandparent or grandchild of the transferor shall not be considered a transfer to a third party.

(g) ADJUSTMENT OF $1,000,000.

(1) On February 16, 2023, and every other February 16 thereafter, the one million dollar ($1,000,000) amount described in subdivision (c)(1)(B) of this rule shall be adjusted by the same percent change in the House Price Index for California for the prior calendar year, as determined by the Federal Housing Finance Agency.

(2) The State Board of Equalization shall calculate and publish the adjustments required by this subdivision.

1. New section filed 10-26-2021; operative 1-1-2022 (Register 2021, No. 44). Transmission deadline specified in Government Code section 11346.4(b) extended 60 calendar days pursuant to Executive Order N-40-20 and an additional 60 calendar days pursuant to Executive Order N-71-20. Filing deadline specified in Government Code section 11349.3(a) extended 60 calendar days pursuant to Executive Order N-40-20 and an additional 60 calendar days pursuant to Executive Order N-71-20.
2. Amendment filed 7-18-2022 as an emergency; operative 7-18-2022 (Register 2022, No. 29). A Certificate of Compliance must be transmitted to OAL by 1-17-2023 or emergency language will be repealed by operation of law on the following day.
3. Amendment refiled 1-18-2023 as an emergency, including amendment of subsections (c)(4) -- Example 6, (d)(2) -- Example 8B, (f)(1)(B) and (f)(3) -- Examples 11-1 to 14; operative 1-18-2023 (Register 2023, No. 3). A Certificate of Compliance must be transmitted to OAL by 4-18-2023 or emergency language will be repealed by operation of law on the following day.
4. Certificate of Compliance as to 1-18-2023 order transmitted to OAL 3-8-2023 and filed 4-18-2023 (Register 2023, No. 16).

Note: Authority cited: Section 15606, Government Code. Reference: Article XIII A, Section 2.1, California Constitution; and Sections 60 and 63.2, Revenue and Taxation Code.

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