A change in ownership or control of a corporation, partnership, LLC or other legal entity which owns or leases interests in California real property can trigger a reassessment of the real property. In addition, the entity must file with the California State Board of Equalization a Form BOE-100-B, Statement of Change in Control and Ownership of Legal Entities within 90 days from the date of a change in control or ownership of the legal entity.
The two transfer events that cause a change in control or ownership include:
- If a person or legal entity acquires more than 50% of the ownership interest in a legal entity. In the case of corporations, an ownership interest is in the voting stock and in the case of partnerships or limited liability companies, an ownership change is by the total interest in capital and profits. This type of transfer is referred to as a change in control.
- A transfer of ownership interest in a legal entity that results in a cumulative transfer of more than 50% of original co-owner interests in that entity is a change in ownership of the real property owned by the entity. This type of transfer is referred to as a change in ownership.
For a change in control or change in ownership purposes, an interest in real property includes any of the following:
- Owned land, buildings and structures, or fixtures;
- Land, buildings and structures, or fixtures held under lease from a private owner if the remaining term of the lease exceeds 35 years;
- Land, buildings and structures, or fixtures held under lease from a public owner for any term; or
- Mineral rights, including working interest in oil, gas and geothermal properties owned or leased.
Under current law, a penalty will be imposed if the taxpayer fails to file the Form BOE-100-B within 90 days from the date it is due.
The penalty is generally equal to:
- 10% of the taxes applicable to the new base year value reflecting the change in control or change in ownership
- 10% of the current year taxes on the property if no change in control or change in ownership of the entity occurs.
The law does not provide for any extensions.
A change in ownership can result from mergers, acquisitions, year-end tax or estate planning. If you have triggered an event that has a caused a change in control or ownership of a legal entity, make sure you file Form BOE-100-B within 90 days. The tax professionals at RINA can provide any help you need.