WHAT BUSINESS PROPERTY IS TAXABLE?
The California Constitution and the Revenue & 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 & Equipment
- Office Furniture & Equipment
- Computer Hardware & Operating Systems
- Buildings/Fixtures/Land Improvements
- Leasehold Improvements
- Property Leased to Others
- Construction in Progress
Most business property is assessed by the Cost Approach. The Replacement Cost New (RCN) is determined by indexing the historical cost, and then an allowance for depreciation is applied.
The Real Property Division of the Assessor’s Office assesses the land and real property structures to the land owner. The Business/Personal Property Division assesses the remaining taxable business property (above) to the owner of the business.
THE BUSINESS PROPERTY STATEMENT
Every year in January, identified businesses receive a request from the Assessor to file the Business Property Statement (form 571-L) or the Agricultural Property Statement (form 571-A) for business property owned as of 12:01 a.m., January 1st (lien date) of that year. The property statement should be completed in its entirety, signed, and returned to the Assessor by April 1st. All businesses that receive a property statement are to file; Businesses owning $100,000 (cost) or more of taxable personal property are required to file a property statement even if the Assessor does not send one and will be penalized if they do not file.
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.
If a business fails to file the Business or Agricultural Property Statement, or if it is filed late (postmarked after May 7th) (exception: If May 7 falls on a Saturday, Sunday, or legal holiday, a property statement that is mailed and postmarked on the next business day shall be deemed to have been filed between the lien date and 5 p.m. on May 7.), a 10% penalty will be applied as required by Revenue & Taxation Code Section 463. Willful concealment of tangible personal property may result in a 25% penalty (R & T Sec 504). Fraud causing the escape of taxable tangible property may result in a penalty of 75% (R & T Sec 503).
All businesses are subject to audit in order to verify the accuracy of the reported information and the correctness of the Assessor's work in valuing. Some audits are required by the State Board of Equalization ("mandatory") per R & T Code Section 469. Any other audit is considered a "non-mandatory" audit. Information requested by the Assessor per Sections 441 or 442 of the Revenue & Taxation Code must be provided by the Assessee.