Possessory Interests

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; holds a concession agreement at Lake Berryessa; 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. Because 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.

Tax Bill for the Right to Possess

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, because they only possess the property for a limited time.

Real Property / Supplemental Assessments

Possessory interests are considered under the law to be real property and are subject to supplemental assessments. If someone occupies a home at the Napa State Hospital on November 1 2007, they will receive a supplemental bill for the period December 1, 2007, through June 30 2008, (the last seven months of the 2007 to 2008 tax year which runs from July 1 2007 through June 30 2008). Assuming they are still occupying the house on January 1 2008, (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 2008 to 2009 tax year (July 1, 2008, through June 30, 2009).

Not Prorated

Because 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 relinquishes a leasehold interest on July 3, 2013, they are still liable for the taxes through the end of that tax year (June 30, 2014) because they held the right to possess on the lien date of January 1, 2013. The theory is that they could have continued to exercise their right to possess through at least the end of the tax year. The new tenant who takes over the leasehold interest on July 3, 2013 has a brand-new and different "right to possess" which will generate a supplemental assessment for the same period of time.

More Information

Should you have any questions please contact Napa County Assessor-Recorder-County Clerk John Tuteur at 707-253-4459 or email John.