What Is Split Roll
Split roll refers to a proposed change in California's property tax system that would assess commercial and industrial properties at market value, while keeping residential properties under Proposition 13's protections. Currently, Proposition 13 caps assessment increases at 2% annually for all property types regardless of market conditions. A split roll would break that unified system into two tracks, applying stricter assessment caps to residential properties while allowing commercial properties to reassess to current market value.
This distinction matters because commercial properties in California often carry assessments far below their true market value. A 10-story office building assessed at $50 million in 2005 might trade at $120 million today, but the owner still pays taxes based on the lower figure. Split roll proponents argue this creates revenue for schools and services. Opponents worry it will increase operating costs for small businesses and get passed to commercial tenants.
How Split Roll Affects Your Assessment
If split roll becomes law, the impact depends on your property type:
- Residential properties: Assessment ratios and annual increases remain locked under Proposition 13's 2% cap. A homeowner's assessment won't jump even if comparable sales show the home is worth 40% more than last year's assessment.
- Commercial and industrial properties: Assessors would revalue these properties based on current market data and comparable sales every three to four years. A strip mall assessed at $2 million in 2010 could face reassessment to $3.5 million based on recent comparable commercial sales in the area.
- Agricultural and certain exemptions: Property classification determines whether land qualifies for special use exemptions or stays subject to new valuation rules.
Split Roll and Board of Review Hearings
At a board of review hearing, split roll creates strategic differences in how you challenge an assessment. For residential properties, you can argue the assessor exceeded the 2% cap or made an error in the prior year's base value. For commercial properties under split roll, your appraisal methods and comparable sales evidence become central. You'll present market data showing similar properties sold for less, or that the income approach to valuation overstates the property's worth.
The county assessor must justify reassessments with specific comparable sales data, actual rents collected, or cap rates observed in the market. Your appeal strategy shifts from questioning the assessment ratio calculation to questioning the market value determination itself.
Assessment Methodology Under Split Roll
Split roll changes which appraisal methods the assessor emphasizes. Under unified Proposition 13, assessors use cost approach and income approach to establish initial value, then apply the 2% cap. Under split roll for commercial property, the assessor must use current market-based appraisal methods:
- Sales comparison approach: Comparable sales of similar properties in your market, adjusted for differences. A 15,000 square foot warehouse that sold for $180 per square foot provides stronger evidence than the assessor's $220 per square foot estimate.
- Income capitalization approach: Net operating income divided by market cap rate. If similar commercial properties cap at 5.5%, but the assessor applied 4.8%, the resulting value is overstated.
- Cost approach: Reproduction cost less depreciation. Useful for special-use properties but weighted less heavily for investment real estate.
Common Questions
Has split roll already passed into law? As of 2024, split roll remains a proposed ballot measure in California, not enacted law. Proposition 15 (2020) attempted this but failed. Monitor state ballot measures and county assessor guidance for current status. Your property tax appeal strategy today still operates under unified Proposition 13 rules.
If split roll passes, can I appeal my reassessment? Yes. You'll file an appeal with your county board of review within 30 days of receiving the notice of reassessment. Bring comparable sales data, income statements, and professional appraisals to support your position that the new value is too high.
How does split roll affect small business tenants in commercial space? Landlords may face higher property taxes under split roll reassessments. Some may adjust lease terms or pass costs to tenants. Triple-net leases (where tenants pay property taxes) will directly impact tenant costs. Review your lease language to understand tax allocation responsibility.
Related Concepts
- Property Classification determines whether your property qualifies for residential treatment, commercial treatment, or special exemptions in any assessment system.
- Proposition 13 is the current law that split roll would modify. Understanding Prop 13's protections and limitations is essential to understanding what split roll would change.