Every taxing entity wants to make clear who has the responsibility for paying property taxes on real and personal property. California Revenue and Taxation Code Section 117 says the “lien date is the time when taxes for any fiscal year become a lien on property.” The owner of the property on a certain date and time has that responsibility. The owners on the lien date are shown as the roll assessee on tax bills issued after that lien date until tax bills are issued after the next lien date.
The word lien relates back to the Latin verb ligare meaning “to tie or bind” and entered the English language from the medieval French noun meaning a “band or tie.” Thus placing a lien against someone or their property is a way of “binding” that property to show an obligation owed by that owner to the person who holds the lien. In this case, the obligation is to pay the taxes and the “person” who holds the lien is the taxing entity. January 1 at 12:01 AM is the current lien date in California.
Secured Property Taxes
Secured property taxes on real property such as land, homes, commercial/industrial structures, and ranches/vineyards are usually prorated in escrow as of the date of the transfer. The lien date does not make a significant impact on these transactions. The lien date is important, however, because decline in value reviews are made as of the lien date which sets the value for the coming tax year.
Unsecured Property Taxes
Unsecured property taxes on boats, aircraft, unsecured business property, and possessory interests are usually not prorated when there is a transfer. Thus, someone who sells a boat in February that they owned on January 1 is still responsible for the property taxes for the fiscal year beginning July 1 after that February and running through June 30 of the next calendar year. Persons who sell their boat or aircraft between January 1 and when the bill comes out should collect the expected amount of taxes from the buyer. The reverse happens if someone buys a boat or aircraft after January 1. They will not receive a regular bill until July following the next January after their purchase.
Businesses often change hands through a process known as a bulk sale. If this transaction happens between January 1 and when the unsecured property tax bill for that business comes out, the seller will be responsible for the taxes for the next fiscal year unless provisions are made in the bulk sale escrow to prorate the taxes. Proration is not automatic in bulk sale transfers.
Possessory Interest Taxes
Finally, persons who rent hangars at the Napa County Airport, homes at Napa State Hospital or the California Veterans Home, use the property at the Napa Fairgrounds or from other non-taxable agencies are subject to possessory interest taxes. These taxes are for their private use of a non-taxable property. The person who holds the possessory interest on January 1 is responsible for the coming fiscal year taxes even if they move out on January 2. There is no proration with the new lessee. Anyone thinking of relocating from any of these premises should time their lease to end, if possible, as late in the calendar year as possible.