STATE BOARD OF EQUALIZATION . 3

. 3
STATE OF CALIFORNIA
STATE BOARD OF EQUALIZATION
WUJAM M. BENNEll
FIrsI Dkbiu. KaUiisld
.ON STREET, SACRAMEMO, CALlFORNlA
BOX 942879. SACRAMENTO. CALFORNIA W2794001)
(916)
BRA0 SHERMAN
Sewnd Dhbi~, Los Angebs
445-4982
ERNESTJ. ~R~~~ENBuAG,JR
Third Dktria, San Diego
MEMBER
February
11,
Fourth Distrkt, Los hgdss
1991
GRAY DAVIS
Contm/l9c Saovnenro
CINOY RAM60
Execulive Dkf~
No.
TO COUNTY ASSESSORS:
MITSUI
FUDOSAN v. COUNTY OF LOS ANGELES
(1990)
219 CAL.APP.
3D 525
This
is to inform
you that
the California
Supreme Court
has denied
a hearing
the decision
of the Second District
Court
of
in the above matter;
hence,
A copy of the appellate
court
decision
is enclosed.
Appeal
is now final.
The decision
rules
that
transferable
and that
the conveyance
interests,
a change in ownership
which
permits
Further,
the court
recognized
that
property
should
be proportionately
development
rights
are taxable
property
of these development
rights
constitutes
a reappraisal
of that
property
interest.
the base year value
of the seller's
reduced.
This decision
resolves
an issue
not previously
ruled
on by the courts.
Assessors
may want to review
this
case when appraising
certain
transfers
The Board's
of property
rights
apart
from the entire
"bundle
of rights."
Legal
staff
feels
that
this
decision
is fairly
narrow
in its
findings.
If the assessor's
office
relies
on these
findings
in other
matters,
they
should
consult
with
their
county
counsel
on the interpretation
of these
findings.
If you have any further
questions,
Property
Technical
Services
Unit
at
please
(916)
feel
free
445-4982.
to
Sincerely,
iiiizLu&
Verne
Assessment
VW:sk
Enclosure
Walton,
Chief
Standards
Division
contact
our
Real
91/12
TIFIED
ILB THE COURTOF
APPEAL
THE
OF
FOR PVEUtTCATION
OF CALIFORNIA
STATE
SECONDAPPELLATE DISTRICT
DIVISION TWO
MITSUI FuIx)SAN {U.S.A.),
Plaintiff
No. B043779
Inc.,
and Respondent,
j
(Super.Ct.No.
C684349)
COURT
0):llpPE& - SECOHDLUST.
v.
FIILED
COUNTYOF LOS ANGELES, et al.,
Defendants
AP2 F. - \Ssg
and Appellants.'
i?OBERTN. WILSON
-.....
Clerk
Deputy Clerk
APPEAL from a judgment
Los Angeles
with
County.
Ernest
of the Superior
G. Williams,
Judge.
Court
of
Reversed
directions.
De Witt
Ramseyer,
W. Clinton,
Associate
County Counsel,
County Counsel,
and Albert
for Defendants
and
Appellants.
Allen,
Patricq;E.
&!atkins,
Leek,
Gamble b Mallory,
Breen and John K. McKay, for Plaintiff
and
Respondent,
Ajalat
Ajalat,
and Terry
b Polley,
L. Polley,
Richard
J. Ayoob, Charles
Amicus Curiae.
R,
“.
.
2.
McCutchen,
Curtis
Black,
Verleger
b Shea, John J.
and Judd LL. Jordan@ Amicus Curiae,
America,
acquired
(Mitsui),
three
downtown Los Angeles
subject
the Central
District
City
Business
drtnsity
of Mitsui's
area ratio
of 6/l,
to one square
permitted
planned
foot
that
conditions,
of parcel
level
from other
use of t;hese so-called
'TDRs~" Xitsui
landowners
permit
it
Redevelopment
this
area,
within
it
at a cost
to construct
to reflect
increased
Mitsui's
the value
.
area
nevertheless
subject
to certain
area
area.
Making
rights
from several
adjacent
sufficient
TDRs to
of building
area, raor% than doubling
t
otherwise
would have been pemitted.
Assessor
of building
development
an additional
in
of the
to a maximum floor
the project
of $8,209,000
Beginning
.
the
of unused floor
transferable
in 1983 purchased
Project
plan limited
square feet
the transfer
parcels
in
to the Redevelopment Plan for
to be erceeded,
through
of real property
development
sir
i.eo,
Fudosan (U.S.A.),
parcels
Although
of Los Angeles.
ratios
of
F.A.
Between 1980 and 1982, Mitsui
Inc,
Home Savings
the x984-1985
or
490,338 square feet
the density
tar year,
which
the County
base assessment by $8,2og,ooo
of the TDR transactions.
This
:
3.
resulted
in an increase
$266,821.10
for
taxes
protest
under
application
to
it
the 1984-1986
raised
a purely
The trial
court
In making its
recognized
that
for
resolve
its
legal
may be assessed
upon transfer.
art.
XIII,
purposes
or federal
'in
proportion
s l(b);
of taxation
serve
interests
il./
to its
full
as the
i.e.,
the
property
value.-
includes
to
whether
of which
value
state
in California
(Cal.
Rev. & Tax. Code, s 201.) "
"'1plroperty'
court
were seeking
impression,
all
for
trial
exempted by the
law,
County
payments
the
would merely
property
specifically
motion
however,
of first
real
taxable
its
prejudice
the challenged
th? parties
TDRs constitute
Constitution
after
action
Mitsui's
ruling,
since
issue
Unless
paid the
issue.
granted
decision
an appeal
a legal
this
Mitsui
denied without
and ordered
refunded.
basis
totaling
Assessment Appeals Boards of the
was summarily
sum-nary judgment
taxes
tax years.
and initiated
the
of Los Angeles
because
in property
all
is
Const.
For
matters
1.
As the court
expressed
it,
'Let me say this:.
Ro
matter which way I rule this is going up on appeal and,
obviously,
what I do here is going to have little
impact
on what the Court of Appeal decides to do.”
2.
All further
constitutional
references
are to the
California
Constitution
and all statutory
references
are
to the Revenue and Taxation Code if not otherwise
indicated.
.
.‘-
. .
.’
I
and things,
real,
ownership."
and mixed, capable of private
personal,
"Real
(S 103,)
encompasses *[t]he
in turn,
ownership
or right
of,
(fi 104, subd.
or "real
possession
property,"
of, claim
to,
of land."
to the possession
(a).)
The word "land"
is not specifically
the Revenue and Taxation
to force
land use concepts
Code or related
defined
property
by
tax
no purpose would be served by
However,
regulations.
attempting
estate"
relatively
recent
such as TDRs into
three-dimensional
one of the cubicles
(See
interests
in real property.
.
.
(1985) 164 Cal.App.3d
Lvncb v. aate
Bd. of ~~ua..N=t~
Virtually
since its inception
it has been
94, 99 et seq.)
reserved
for
traditional
the law of this
state
which
is taxable
title
in fee"
177 Cal.
include
mifora
"[tlhe
that
sort
of property
in land
under our laws is not limited to the
.
.
(L.E. mte
Lumber Co, v. Mendoclno (1918)
"but
710, 712),
is sufficiently
any usufructuary
interest
V. &,EUX? (1859)
comprehensive
. m . ."
12 Cal,
the definition
of air rights,
:classified
under the htading
18, s 124)~ or represent
are appropriately
which already
“land”
something
(f;ltate
to
of
56, 70.)
Whether or not TDRs are actually
interests
.
(Cal.
entirely
embodied within
have been
Code Regs.,
tit.
separate,
they
viewed as one of the fractional
in the complex bundle
.
~~
..-
of rights
arising
”
from the
1
m~p:--rr.
..
5.
ownership
of land.
increases,
new
diminishing
construction,
various
As
the
ways to
essential.
density
the
number
ability
achieve
such goals
hallmarks
of a transfer
the donor
parcels
million
themselves
interests
sale
agreements
issued,
restricting
were executed,
surveys
The agreements
variously
stated
IMitsui]"
be binding
of
their
to the benefit
title
owners,
the
%hall
and/or
successors,
of [Mitsuif,
real
run
as owner
for
all
the
of
over
divesting
interests,
.
the conveyances
and purchase
reports
and
and insurance
and covenants
against
donor
the
dealings
these
be appurtenant
property
with
the
of Seller's
encumbrancers
heirs
bear
The owners
with
the !X'DRs 'shall
they
case
taxation.
and owned by Mitsui.
memorializing
upon Seller,
upon any future
Parcel,
that
to
own property
were obtained
the benefit
and
i
as a means of
return
in
were recorded
parcels,
in
space
becomes
instructions
escrow
for
consideration,
in conjunction
that
air
subject
valuable
of their
development
and used for
exploit
are now possessed
property
available
property.
in fact,
of a portion
areas
sites
in the instant
received
were opened,
urban
which evolve
of real
In addition,
escrows
of
are properly
dollars,
which
in
expansion
vertical
The transactions
eight
to
rights
Property
furthering
the
or assigns
to
owned by
land
and
Parcel
of
shall
and
Seller's
and shall
as owner of the Benefited
inure
’
,
,
6.
Parcel
and each succeeding
thereof
and their
owner and/or
encumbrancer
respective
successors,
heirs
and
unpersuasive
PiIitsui's
suggestion
assigns .”
We find
merely
purchased
variance.*
As the
-[iIn
a typical
situation
correctly
of rezoning,
an owner does not negotiate
owners for
change in zoning
contracts,
that
zoning
TDR is essentially
befall
Similarly,
that
'easements
rights
title
reports,
etc."
sales
the value
s'ince the same fate
purchased
A
The mere fact
changes might diminish
Hitsui
rights.
of a
could
for purposes of development.
does not benefit
w directing
in 1485 the Legislature
on Assembly Bill
2224. As it notes in its
a committee
"the
with nearby
of property
commissions,
to the fact
took no action
brief,
the acquisition
irrelevant
any property
our attention
observes,
does not entail
brokerage
future
it
some type of "zoning
County quite
property
that
statutes
report
regarding
are silent
or appurtenant
and density
that
with
rights'
or development
this
bill
respect
(water
pointed
out
to the sale of
rights,
air
credits).""
ast present the only direct statutory
3. {Apparently
reference
to property
Interests
of this type is found in
lsection 61 which, in relevant part, provides:
‘Except
as
otherwise
provided in Section 62, change in ownership, as
defined in Section 60, includes,
but is not limited
to:
(a) The creation,
renewal, sublease, assignment, or other
(continued
to next page--)
.’
.
1
n..
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>
7.
5
This
conjoining
interests
than
of
of TDRs with
as easements and water
strengthens,
course,
taken
Mitsui's
by whatever
with
to this
have made property
either
XIII
taxable,
Having
property
(art.
event
XIII
it
within
A),
One percent
(art.
XIII
property
3.
r
(I,
tax on real
(1%) of the
not
or free
have
thereby
from taxation,
mandate provided
by
full(a))
that
thereafter,
when purchased,
a taxable
conveyance mai-ks a
of Proposition
^It]he
property
13
maximum amount
shall
not exceed
cash value of such property"
and specifies
assessor's
that
valuation
as shown on the 1975-76 tax bill
or,
might
could
their
the framework
means the county
cash value'
property
is clear
A, § 1, subd.
cash value
Furthermore,
TDRs constitute
which provides
of any ad valorem
rather
A of our Constitution.
determined
interest,
the
property
weakens,
here.
they
with
and XIII
real
our legislators
bill,
in a manner inconsistent
articles
rights
position
action
regard
taxable
such historic
the appraised
newly constructed,
'full
of real
under
*full
value
of real
or a chmae
(continued--)
.-*
transfer
of the right
to produce
or extract
oil,
gas or
other minerals
regardless
of the period during which the
right may be exercised.
The balance of the property,
other than the mineral rights,
shall not be reappraised
pursuant . to this
section."
(See
also Lunch v. &tate Bd,
sf EaWtlon, .
8~t)'fa, 164 Cal.App.3d 94, 103.)
a.
*
D.
owne&lr,
(Art,
XIII
.
has ocm
A, j$ 2# subd.
For purposes
in ownership*
present
in real
interest]
variety
of contingent
unintended
to protect
security
tit.
test
determine
who is the primary
any given
time,"
involving
leaseholds.
e.g.,
on Property
from
and transfers
with
use is necessary
fiduciary
change in ownership
a
including
guardianships,
'val ue equivalence'
TssX Force
treatment,
"LbJeneficial
and other
"[The
to protect
transfers
transfers
custodianships,
from unintended
of the fee interest."
is necessary
, revocable
interests
the
of which is
or inchoate
estates;"
of a
18, s 462(a)(2).)
change in ownership
life
a "change
including
the value
element
interests
*[t]he
property,
Code Regs.,
present
property,
by "a transfer
equal to the value
(§ 60; Cal.
retained
emphasis added.)
of revaluing
nse thereof,
substantially
future
(a);
is characterized
interest
beneficial
the 1975 assessmenf; . "
after
trusteeships,
relationships
treatment;"
is necessary
and
to
owner of the property
at
in the case of transfers
(Assem. Rev. & Tax. Corn., Rep. of
Tax Administration
(Jan. 22,
1979) ph. 39-40.)
The transactions
intended
to,
and did,
here under review were
involve
the transfer
of a most
m
I
l
:
4.
l
;
,I
*
.
.
,
‘I.
1
’
t
l
significant
The terms of that
Mitsui,
beneficial
present,
interest
in the
substantial
an inference
and convincing
was entitled
purposes
of determining
Code Regs.,
year
of the sellers'
reduced
TDRs
bore to the fair
improvements
as a whole
The judgment
to permit
reinstating
the superior
absence of
cash value,
at oral
remaining
market
for
(§ 110;
argument,
properties
that
the base
should
be
the value of$heir
value
is reversed
the assessment
the
as the
of their
land and
on the date ownership
court
fee
to the contrary,
Similarly,
acknowledged
the same proportion
in
the entire
In the
full
10, 5 2.)
counsel
paid by
upon the purchase price
their
assessor's
value
that
evidence
to rely
tit.
interest.&'
as the price
TDRs was transferred.
assessor
Cal.
as well
transfer,
amply supports
property
9.
changed.
and the cause remanded
to enter
previously
judgment
determined
by the
is not required when
4. Reassessment, of course,
"Except for a joint
relatively
minor transfers
occur.
tenancy interest
described
in 8UbdiViSiOn
(f) Of Section
62, when an interest
in 8 portion
of real property is
purchased or cbnnges
mmership,
only the interest
or
portion
transferred
shall
be reappraised.
A purchase or
change
in ownersh%p of an Anterest with a market value of
less
than 5 percent of the value of the total property
shall not- be reappraised
if the market value of the
interest
transferred
is less than ten thousand dollars
-that transfers
during any one
($10,000) provided,
however,
assessment year shall be cumulated for the purpose of
determining
the percentage
interests
and value
(§
65.1,
subd,
(a).)
transferred."
-,~
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10.
county
assessor,
make clear
appellate
was
determination
impression,
costs
this
it
since
However,
a test
that
court's
trial
case designed
of a legal
is appropriate
the
to obtain
question
each
remarks
of first
party
bear its
own
on appeal.
, J*
GATES
We concur:
:-
'