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:
- Machinery and Equipment
- 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.
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.
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)
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.
"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)
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.
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.
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