POSSESSORY INTERESTS 1. What is a possessory interest A by paulj

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									      POSSESSORY INTERESTS                    c.    Space leased for privately owned       or constructive possession (right to use
                                                    trailers/manufactured homes.           the property even if not actually using it).
1. What is a possessory interest?             d.    Lease of classroom/school space        For example, the possessory interest
A possessory interest is generally defined          to private entities.                   starts with the date of commencement of
as the use of real property owned by a        e.    Airport tie-downs, spaces, or          the lease and not with the actual
government agency.         These interests          hangers.                               occupation by the tenant.
result from either an actual possession of    f.    Auto parking leases.
real property, or the right to possess real   g.    Residences or mobile home              6. When is a possessory interest
property.    They may also relate to                spaces provided as compensation        appraised or re-appraised?
improvements that have been made to, or             for security/guard purposes.           Possessory interests are appraised or
placed on, land owned by a government         h.    Any lease or use by an individual,     re-appraised whenever a possessory
agency.                                             corporation or business.               interest is created, renewed, extended,
                                              i.    Lease of boat berth in public          subleased, or assigned.
2. What is a taxable possessory                     marinas.
interest?                                                                                  7.     Is a lease, or other written
A taxable possessory interest exists when     4. What are the requirements for a           document, necessary to establish a
a person or entity has the right to a         taxable possessory interest?                 possessory interest?
beneficial use of tax exempt, government-     The    requirements      for  a    taxable   No. The essential requirement for a
owned real property with or without a rent    possessory interest include:                 possessory interest is that there is an
or fee. These interests result from either    a.    The interest must be in real           “exclusive right to a beneficial use of tax-
an actual possession of government-                 property.                              exempt publicly owned real property.”
owned real property, or the right to          b.    The real property must be publicly     The possession may be by a verbal
possess       government-owned        real          owned and tax-exempt.                  agreement, a tacit approval, a written
property. The interests may also relate to    c.    The right to possession or use         document or even an encroachment by a
taxable improvements that have been                 must be held by a taxable              private entity. If written documents do
made to, or placed on, tax-exempt land.             individual or entity.                  exist, they may be in the form of a
                                              d.    The possession or use must be          contract, permit, lease, agreement, letter
3. Examples of taxable possessory                   less than a fee simple interest.       of authorization, reservation, etc.
interests.                                    e.    The possession or use must be
In Solano County, a partial list of taxable         continuous or be on a recurring        8. How are possessory interests
possessory interests would include any of           basis.                                 valued?
the following, which exist or occur on                                                     The assessor is required, as with all
government-owned,     tax-exempt       real   5. Must the individual or entity be          locally assessed real property, to
property:                                     physically using or occupying the            establish a base year value of all taxable
                                              property to qualify as a taxable             possessory interest assessments under
a.    The right to graze and/or keep          possessory interest?                         Proposition 13. The major components
      livestock.                              No. Possession may be either actual          for estimating the value include
b.    Employee or other private housing.      possession (physical use of the property),   permitted use, term of possession, and
economic rent and/or estimated value of                                                                                   R & T Section 107
land and/or improvements.
Traditional valuation methods are used                                                                                 Property Tax Rules 21-28




                                                                   Solano County Assessor/Recorder
where appropriate, including the Sales




                                              Requested Material




                                                                     675 Texas Street, Suite 2700
                                                                      Fairfield, CA 94533-6338
Comparison Approach, the Income




                                                                                                     MARC TONNESEN
Approach, and the Cost Approach.
                                                                                                                         Possessory
NOTE:   ALL TAXABLE POSSESSORY
INTERESTS ARE ASSESSED YEARLY AS
                                                                                                                          Interests
OF THE LIEN DATE (JANUARY 1). THE
                                                                                                                             Questions
PERSON OR ENTITY IN POSSESSION OF
THE PROPERTY ON THE LIEN DATE IS
                                                                                                                               and
LIABLE FOR THE TAX FOR THE ENTIRE                                                                                            Answers
YEAR. THERE IS NO PROVISION FOR
PRORATION OF THE TAXES.       UPON
TERMINATION   OF    THE    TAXABLE
POSSESSORY       INTEREST,     THE
TAXPAYER IS STILL RESPONSIBLE FOR
THE REMAINING PORTION OF THE TAX
BILL

LEGAL AUTHORITY FOR TAXATION
OF A POSSESSORY INTEREST.
Section 1 of Article XIII of the California
State Constitution, Section 107 of the
Revenue and Taxation Code, and                                                                                            MARC TONNESEN
Property Tax Rules 21-28 of Title 18,                                                                                    Assessor/Recorder
Public Revenue, California Code of                                                                                        County of Solano
Regulations provide the legal basis for                                                                              675 Texas Street, Suite 2700
taxable possessory interests in California.                                                                            Fairfield, CA 94533-6338
Under the California State Constitution
and case law, there is clear legal                                                                                    Telephone (707) 784-6200
authority  for    taxation     of  private
possessory interests in government
owned tax-exempt property.
Revised: 12.09.05

								
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