Contact us
1 (951) 955-6200

accrmail@asrclkrec.com

Taxable Business Property

What Business Property is Taxable?

The California Constitution and the Revenue and Taxation Code state that all property is taxable, including business property, unless it is specifically exempt by law. Examples of taxable business property are:

  • Supplies
  • Machinery and Equipment
  • Tools
  • Office Furniture and Equipment
  • Computer Hardware and Operating Systems
  • Building / Fixture / Land Improvements
  • Leasehold Improvements
  • Property Leased to Others
  • Construction in Progress

The Commercial Property Division of the Assessor's office assesses the land and real property structures to the land owner, and the Business Personal Property Division assesses the remaining taxable business property (outlined above) to the owner of the business.

Exemptions and Tax Relief

Property used exclusively for a church, college, cemetery, museum, school, or library may qualify for an exemption. Properties owned and used exclusively by a non-profit, religious, charitable, scientific, or hospital corporation also are eligible.

NOTE: Receiving an exemption does NOT relieve the business entity from filing the Business Property Statement.

For more information regarding exemptions, call (951) 413-2890.

The Business Property Statement

Every year around the first of March, identified businesses will receive a request from the Assessor to file the Business Property Statement (Form 571-L) or Agricultural Property Statement (Form 571-F) for business property owned as of 12:01 a.m., January 1 (lien date) of that year. The property statement should be completed in its entirety, signed, and returned to the Assessor by April 1. Each person or business entity owning taxable personal property with an aggregate cost of $100,000 or more is required to file a property statement even if the Assessor does not request a filing. In addition, the Assessor may request any person within his or her county to file a property statement.

Specific instructions are provided with the property statement. The Assessor requests general information regarding the business ownership, type of business, business location, and mailing address, etc. In addition, the owner is required to report business property by acquisition cost, year acquired, and category.

Please contact the Assessor's office if you have not received your property statement by March 1st.

General overview of filing instructions for the Business Property Statement:

Part I - General Information

This section is for general information such as business type, location of records, contact name, etc.

Part II - Declaration of Property Belonging To You

This section is entitled "Declaration of Property Belonging to You."  This is where you provide a summary of fixed asset costs by type.  This "summary" is for cost detail which should be reported on Schedules "A" and "B" (which are discussed later) or attachments.

Part III - Declaration of Property Belonging to Others

This is where you provide detail pertaining to leased property or property owned by other entities which are operating  at your business location.

Signature Section

The 571-L form must be signed to constitute a valid filing.  This is an official document which must be filed under penalty of perjury by a legal owner, partner, or authorized agent. Unsigned statements could result in penalties.

Schedule A

On this schedule, report the cost of your business equipment by acquisition year and category. The breakdown for Schedule A is as follows:

A1 - Machinery and Equipment (Trade)  

A2- Office Furniture and Equipment

A3 - Other Equipment - Use for miscellaneous equipment which should be assessed separately. NOTE: If used, please specify property type.

A4 - Tools, Dies, Mold, Jigs

A5 - Computers (P.C. and Mainframe systems)

Schedule B

This schedule is where the full cost of your improvements should be reported by acquisition year and category. The breakdown for Schedule B is as follows:

B1 - Structure Improvements

B2 - Fixture Improvements

B3 - Land Improvements

B4 - Land and land Development

A structure is an improvement which has a primary use or purpose for housing or accommodation of personnel, personalty, or fixtures and has no direct application to the process or function of a trade, industry, or profession. A fixture improvement is one in which its use or purpose directly applies to or augments the process or function of a trade, industry, or profession. Land Improvements include things such as blacktop, curbs, fences, grading, etc. Examples of improvements are provided on page 3 of the 571-L instructions. When costs are reported on Schedule B, the Assessor must rely on the detail provided on the property statement to verify that no duplication has occurred with the assessment of the secured property. For example, if a business tenant reports improvements on Schedule B, the Assessor needs to verify that they haven't been assessed to the building and land owner. Details of additions and deletions of improvements for Schedule B should be reported on page 4 of the 571-L.

Confidentiality

"All information requested by the assessor or furnished in the property statement shall be held secret by the assessor. The statement is not a public document and is not open to public inspection, except as provided in Section 408". (Revenue and Taxation Code Section 451)

Valuation

Business property is appraised at fair market value as of the lien date. The tax rate is the same as for real estate. (approximately 1% of value, plus special assessments).

In valuing property, the Assessor uses three approaches:

1. The Comparative Sales Approach
This approach is used when reliable comparable sales information is available. It is not commonly used for business property valuation because sales of personal property items are often not recorded or are not available. It may be appropriate in the valuation of boats/vessels, non-commercial aircraft, and agricultural or construction equipment.

2. The Income Approach
This approach is used for properties which produce income. It has limited application for business property valuation because of the difficulty in allocating income and expenses to specific pieces of personal property. It may be appropriate in the valuation of leased equipment and power plants.

3. The Cost Approach
This approach is used for all types of property. It determines the replacement cost new (RCN) of the subject property, then applies depreciation for determination of fair market value. The cost approach is most frequently used in the valuation of business personal property and fixtures.

Fixtures and other improvements are classified as "real property" and are subject to Proposition 13 restrictions. Proposition 13 (which is for real property only) allows no more than a 2% increase in value from the prior year, unless there is a change of ownership (sale or transfer of property) or new construction (other than normal maintenance).

Click here for the equipment valuation factors used in the cost approach by Riverside County.

Assessor's Estimate of Value

If a business fails to file a property statement, Revenue and Taxation Code Section 501 allows the Assessor to value the property by estimation. Such estimates are based on information in our possession, which quite often is simply what the Assessor has found to be a typical value for that business type. It is in the best interest of the business to file the property statement annually as required.

Property Tax Audits

All property statements are subject to audit in order to verify the accuracy of the information reported. The top several hundred largest business entities are required to be audited once every four years pursuant to Revenue and Taxation Code 469. In addition, several hundred other audits are conducted on varying sizes of businesses at the Assessor’s discretion to ensure proper reporting.

There are two Revenue and Taxation Code Sections that give the Assessor the authority to request and examine records:

- Section 441 states that the Assessor shall be furnished any required information or records for examination at any time.
- Section 470 states that any records relevant to an owned or claimed property shall be made available upon request from the Assessor.

Penalties

If a business fails to file the Business Property Statement or Agricultural Property Statement or it is filed late, a 10% penalty will be applied pursuant to Revenue and Taxation Code Section 463.  The last day to file without penalty is May 7 (postmarked) unless it falls on weekend or holiday, in which case the deadline is extended to the next business day. 

If a business willfully conceals requested information from the Assessor, a 25% penalty may apply pursuant to Revenue and Taxation Code Section 504.

Supplemental Assessment

This only applies to structures, land, and improvements which have changed ownership or resulted from new construction.  This is a one-time assessment which prorates the value of the property from the date of change of ownership or completion to the end of the fiscal year.

Frequently Asked Questions

How long has the business property tax been in existence?

The Revenue and Taxation Code was enacted in 1941 (R&T 27).  Supplemental assessments have existed since 1983. (R&T 75, annot.)

 

What is the fiscal year period?

For property taxes, July 1 to June 30. (R&T 75.6)

 

When is the lien date?

12:01 a.m., January 1. (R&T 2192)

 

What does "unsecured" mean? "Secured"?

Unsecured taxes are not a lien on the underlying land (R&T 134).  Secured taxes are a lien on the land. (R&T 109)

 

What is a fixture? Structure? Personal Property?

A fixture is attached to buildings or land, primarily for business use. (Rule 122.5)

A structure is a building or building improvement used primarily to house or accommodate people, personalty,  or animals. (R&T 105)

Personal property is not attached to land or buildings. (Rule 123)

 

When are the property taxes due?

Unsecured: by August 31.  (R&T 2922(a))
    Secured: in 2 installments--Dec 10 & Apr 10.  (R&T 2617; 2618; 2619)
    Escapes: the last day of the month following the new assessment. (R&T 2922(b))
    Supplemental: depends on when the bill is mailed:
    • Jul thru Oct--Dec 10 & Apr 10.
    • Nov thru Dec--last day of the 1st and 4th months after
      the month the bill is mailed.
(R&T 75.52)

 

How many years can you go back?

Usually 4 years, counting from July 1 of the year for which the assessment was made.    (R&T 532; 4831; 4831.5)

8 years, for property undervalued because of a willful or fraudulent act of the taxpayer.  (R&T 532)

 

Why do I have to pay taxes to the county and again to the state (and city)?

They are separate taxes. The county Assessor deals with property taxes.  The state administers sales and income taxes.  Cities collect business license taxes.

 

How much will I have to pay?

Most tax rates range from 1% to 1.25% of assessed value, depending on the location of the property. (R&T 135)

The exact rate is determined by the Board of Supervisors (R&T 2151) and shown on the tax bill.

 

What if I don't pay the tax?

Contact the Tax Collector's Office for this question.  They can be reached at (951) 955-3900.

 

How much does my business property have to be worth to be taxed?

$5,000--for a combination of all locations in the county. (R&T 155.20)

 

How did you find me? How did you get my name?

We discover businesses by several means: field canvass;  tenant lists; sales tax permits; telephone books; business licenses.

 

How come others don't have to do this?

We try to discover all business changes, but this isn't always possible.  If you know of someone who should be taxed, please provide us with the information.

 

Why do you have to know what assets my business has?

To determine the proper value.  Different factors apply to different types of equipment.

 

How did you arrive at this figure? I didn't report that. What's an appraiser's estimate?

If you didn't file a property statement an estimate was made based on information in our possession, which quite often is simply a typical value for that type of business.  (R&T 501)

 

How do you figure the tax?

Property statements are sent to business owners annually.  We generally base the value on the cost, age and type of property reported on the statement.  Valuation factors are applied to reported costs to arrive at an estimate of value.  The value is multiplied by the tax rate to arrive at the tax dollar amount.

 

What is an escape assessment?

An assessment made for prior years, for property that was not previously assessed before, or was undervalued.

 

Why are my business property taxes included on my home's tax bill?

When the owner of the business also owns the land and buildings, then only one bill is issued.  This is called a secured assessment.

 

What if my business permanently closed before January 1?

Submit  this information in writing to the Assessor.  Provide the date the business closed and the disposition of the assets.

 

I sold my business before July 1 (after January 1). Why am I responsible for taxes from July 1 to June 30, when I'm not the owner?

In California, property is valued as of January 1 for the following fiscal year. (R&T 401, R&T 2192)

Taxes pertain to the owner of record on January 1, the lien date.  The sale, removal or disposal of property after the lien date does not relieve the owner (on January 1) of the taxes.  This information is stated on the tax bill.  There is no provision in the law to prorate taxes in such cases.

What if I don't fill out the property statement?

We will estimate the value based on information in our possession, which quite often is simply a typical value for that type of business.  A 10% penalty for failure to file is added to the value.

 

If I mail my statement in now (late), will I still be penalized?

Statements postmarked after  May 7 have a penalty of 10% added to the value. The penalty is mandated by law.  The Assessor has no discretion in applying it.  (R&T 441; 463)