Succession Planning for Changes in Ownership Issues
and Post-Death Compliance Issues

Burke & Marquit advises and represents high net worth individuals and families, family offices, trustees and beneficiaries, estate planning attorneys, financial advisors, wealth planners and CPAs on the unique change in ownership property tax issues that arise with family residences and in family-owned real estate businesses--during the life of the business, in succession planning, and post-death.  


Most of the commercial property in California that is not institutionally owned is held by wealthy individuals and families, generally in partnerships, LLCs, and in trust. Many commercial properties have been owned in the same family for 40 years and longer. Given the special rules for transfers of interests in legal entities, and the availability of favorable exclusions from change in ownership for inter-generational transfers, it is important that these families and their advisors understand the options available to pass property to the next generation with as little reassessment as possible. Proper planning can minimize reassessment surprises and establish proper client expectations. Any advisor working with wealthy families in California will tell you that the family members are becoming increasingly sophisticated on property tax matters.

The specific issues Burke & Marquit advises on include:

  • Parent-Child Exclusions (Prop 58)

  • Grandparent-Grandchild Exclusions (Prop 193)

  • Transfers to and from Trusts

  • Transfers of Property to New Entities and Between Entities

  • Transfers of Income Interests at Death of Settlor

  • Base Year Value Transfers (Props 60 and 90)

  • Non-Pro Rata Trust Distributions

  • Sprinkle-Spray Trust Provisions

  • Rebut the Deed Presumption Re-Titling of Property

  • Pre-1975 Partnership Property

  • Transfers of Partnership and LLC Interests

  • Original Co-Owner Rule

  • Changes in Control and Majority Ownership

  • Leased Property

  • Joint Ventures With Unrelated Parties

  • Dynasty Trusts

  • Family Separations

  • Partitions


Acquisitions and Dispositions, Reorganizations, Joint Ventures and Transfers of Entities

Burke & Marquit advises and represents all types of institutional and corporate owners and managers of commercial real estate, including private equity funds, banks, pensions funds, sovereign wealth funds, private companies, publicly traded corporations, university endowment management companies, public and private REITs, fund managers, and large real estate asset managers on the complex Prop 13 change in ownership and documentary transfer tax issues that arise in real estate transactions, including:

  • Acquisitions and Dispositions of Fee Interests

  • Acquisitions of Portfolios

  • REIT Formations and Conversions

  • Sales of Joint Venture Interests and Formation
        of New Joint Ventures

  • Mergers and Acquisitions of Real Estate Entities

  • Internal Restructurings and Reorganizations

  • Changes in Control and Majority Ownership

  • Original Co-Owner Rule

  • Long-Term Lease and Ground Lease Transactions

  • Triple Net Leases and Prop 13 Protection Clauses 

  • Redemptions

  • Public Offerings

  • New Construction and Renovations


Development of Active Solar Energy Systems, Investments by Tax Equity Investors, and Partnership Flips

Burke & Marquit advises utility-scale photovoltaic solar developers and tax equity investors on the California property tax solar exclusion from new construction.  

Under California's Proposition 7 and Revenue and Taxation Code section 73, a newly constructed "active solar energy system" constructed before January 1, 2025 is generally not subject to property taxes unless and until it undergoes a change in ownership under Proposition 13. After a change in ownership, the system is fully subject to property taxes. This is a result of the unique way in which Proposition 7 was drafted--not as an outright exemption from property taxes, but as an exclusion from the definition of "new construction." 


Consequently, transaction structures commonly used by tax equity investors to finance solar systems (i.e., sale-leaseback and partnership flip structures) were considered to trigger the loss of the solar exclusion until after the Legislature passed AB XI 15 in 2011 (which added legislative intent language to Section 73) and the State Board of Equalization issued the Guidelines for Active Solar Energy Systems New Construction Exclusion in December 2012.  Unfortunately, the language used in the Guidelinesis somewhat ambiguous and has led to confusion over the types of permitted transactions, particularly with respect to partnership flip structures.  Extreme care must be taken to structure tax equity investments to comply with the Guidelines, as in most cases the property taxes on a solar system will significantly erode a project's profitability.


Frequently discussed concerns include:

  • What occurs on the partnership "flip"?

  • When is construction of the system considered "completed"?

  • What is the effect of a changes in ownership during construction? 


The Welfare, Church, Veterans and Religious Exemptions from Property Tax

Burke & Marquit advises and represents all types of organizations that may qualify for an exemption from California property taxes on all or a portion of their personal and real property.  

Property owned by an IRC § 501(c)(3) charitable organization or private foundation is not automatically exempt from property taxes, and may not qualify for exemption at all depending on how the property is used.  An exemption from federal and state income taxes in and of itself is not enough to confer exemption from property taxes.  

California's rules on property tax exemptions are complex, with many overlapping features (there is a Church and a Religious exemption, and certain religious properties may qualify for the Welfare Exemption). To further complicate it, the State Board of Equalization jointly administers the Welfare and Veterans Organizations exemptions with the local county assessors, whereas the county assessor administers the Religious and Church exemptions without involvement by the State Board of Equalization. Then there are special rules for leased properties, where the qualification depends on the exempt status of the property owner and the tenant. To receive the full exemption, qualifying organizations must timely file all of the required claim forms with the county assessor and State Board, where necessary. 

The types of properties that may qualify for exemption include the following:

  • Low Income Housing 

  • Elderly and Handicapped Housing

  • Churches

  • Nonprofit Colleges

  • Religious Schools 

  • Faculty and Student Housing

  • YMCA and YWCA Health Clubs

  • Veterans Organizations

  • Certain Hospitals and Clinics

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