Assessing Private Use Of Non-Taxable Property

When someone rents a hangar at the Napa County Airport, occupies employee housing at Napa State Hospital or at the California Veterans Home, leases grazing land from the Federal Bureau of Land Management or holds regular events at one of the fairgrounds, a taxable property right is created known as a possessory interest. The term possessory interest comes from the right to "possess" the property for the term allowed. Since the government agency that owns the property is not subject to property tax, the California Constitution requires the local assessor to assess the tenant for their possessory interest on the theory that the tenant is enjoying a right that has value.

When possessory interest holders receive their tax bills, they often call to ask why they are paying taxes on land and/or improvements that they do not own. We explain that they are being taxed only on their "right to possess" the property and that the value is based on the term of possession. Thus, while a person who builds a hangar on property they own is assessed for the full value of the land and improvements, the possessory interest holder's assessment for a comparable hangar is discounted since they only possess the property for a limited time.

Possessory interests are considered under the law to be real property and are subject to supplemental assessments. If someone occupies a hangar at the Napa County airport on November 1, 1997, they will receive a supplemental bill for the period December 1, 1997 through June 30, 1998 (the last seven months of the 1997-1998 tax year which runs from July 1, 1997 through June 30, 1998). Assuming they are still occupying the hangar on January 1, 1998 (the lien date when taxes become an obligation for the following tax year), they will receive a bill in July payable before August 31 in one installment. This regular bill covers the 1998-1999 tax year which covers July 1, 1998 through June 30, 1999.

Since the assessment is on the "right to possess" the property, not the property itself, possessory interest assessments are not pro-rated. Thus, if a tenant voluntarily leaves a hangar on October 31, 1998 they are still liable for the taxes through the end of that tax year, that is June 30, 1999. The theory is that they could have continued to exercise their right to possess through at least the end of the tax year. Should they leave, a new tenant who moves into that hangar November 1, 1998 is considered to have a brand-new and different "right to possess" which will generate a new supplemental assessment.

Should you have any questions about possessory interests, please contact Assessor John Tuteur at (707) 253-4459 or by e-mail at john.tuteur@countyofnapa.org.