Calif Preparers

[S T]

Why we try our best as professionals preparing returns - FTB has recognized that sometimes property taxes in California reported on the Tax Returns are not correct. so more revenue seeking.

Spidell issued a bulletin on 8-25-11

The FTB is planning to add a line to Schedule CA of Form 540 asking taxpayers who deducted property tax to list the address and parcel number of the property. There will apparently be language cautioning taxpayers that certain payments, such as Mello Roos, are not deductible property tax payments.
Interestingly, Schedule CA is used to adjust federal income for California nonconformity items and California conforms to federal law as it pertains to individuals who claim deductions for property tax.
Spidell Publishing Inc.® is following up with the FTB to explain the potential problems with a program that might attempt to match property tax deducted with what is allowable.

More fun!

Sandy
________________________________________

[Uncle Sam]

To your knowledge at present - is this going to pertain to rental properties?

I have a client - NY resident - who is a partial owner of a California residential rental
property. I was not in on this joint venture from the beginning to get a partnership return prepared -
but what I've done is take the schedule the California partner provides my client
to report his share of the partnership data on Schedule E.

[S T]

Just what I posted

Asking about rentals is interesting - as I don't believe Calif has thought that part of the puzzel through - I believe, for now it only has to do with the Sched A - Property Tax Deduction - there currently is a separate adjustment on the Calif Sched CA for Sched E

Spidell is a very good resource for what is happening on Calif Tax Regulations - so they will publish more as this progresses and I will try to post as I receive more info.

Sandy

[WhiteOleander]

On the Federal Sch E the address of the property is listed at the top with the property description. Does this info also flo to the CA return?

[Gary2]

Curious. According to the FTB FAQ on Mello-Roos, they're sometimes deductible and sometimes not, depending on whether they're for improvements or maintenance. That's consistent with the federal rules, but still confusing to me, probably because the manner of local funding is different.

The MA equivalent to Mello-Roos would be a Proposition 2 1/2 debt override. But at least in the communities familiar to me, debt overrides are typically done for schools, libraries, waste treatment facilities, or other improvements that benefit the entire municipality. They're also not stated separately on tax bills, so I've never had occasion to treat one as non-deductible. Betterments, say extending a water or sewer line, would be stated separately, and aren't deductible. (I don't recall off the top of my head whether a betterment is subject to Prop. 2 1/2.)

If CA property tax bills only call out Mello-Roos taxes, without identifying them as for improvement or maintenance, it's going to be a mess.

[Burke]

Mello-Roos? Sounds like a candy bar.

[TaxmannEA]

Mello-Roos? Sounds like a candy bar.

Or a stoned wallaby!

[GTS1101]

I recently saw the same message from Spiedel regarding the Melo Roos tax. For the city in California where I live the Melo Roos Tax was a special tax that is calculated based on the square footage of the property and the funds are to be used to pay principal and interest on construction bonds to finance five elementary schools, two middle schools, a high school, and a community park. The reason it was added was because they could not collect enough money in regular property taxes due to Prop 13 which limits the amount of tax increase each year. So if this limitation was not there it would have just been included in the regular property tax fee but because of the limitation they had to create a special tax. The website for the melo roos says the IRS has never ruled on the issue and at least 25% would be deductible for interest on the bonds. The other question is do the schools increase the value of the properties. Some would say it does others would say it doesn't. I agree that this going to create a mess if CA is going to try to match to their property tax bills.

GTS1101

[Gary2]

I guess I always assumed that the rule about "increasing the property value" applied to things that were specific to the property or set of properties, and not something that increases the overall desirability, and hence property values, of the municipality in general. Pub. 530 lists, as specific examples, streets, sidewalks, water and sewer systems - things that are typically done in particular neighborhoods or streets. (I'm inferring, perhaps erroneously, that they don't mean new water or sewer treatment plants.)

So what makes Mello-Roos different? If a municipality extended sidewalks using their ordinary tax base, instead of Mello-Roos, wouldn't the same rule apply as far as the IRS is concerned? Is it that CA doesn't have a system, separate from taxes, for assessing betterments? Or that betterments, even if individually billed, must always be based on property value?

Or is it just that the Mello-Roos process is often needed for things that would be betterments, and thus a good place for CA to go hunting?

For what it's worth, water and sewer extensions in MA are typically done with betterment, often based on frontage, actual cost, or something other than the property value (and hence trivial to conclude that it's not deductible, even if it had no effect on property value). Sidewalk extensions, at least in my community, are extremely rare. I don't recall if significant ones would be funded via a betterment or general funds, but tiny ones often come from the general fund. I'd hate to have to calculate the proportionate share of property tax that applies to those.

[superman]

Mello-Roos

My understanding for the mello-roos was that it was to pay for streets,sewer,parks,and schools that the builder passed on to the new home buyers. Oout of all the returns that I do I have never seen the tax broken down on the tax bill. Another thought is that most of my clients have escrow accounts and the banks report the taxes paid on the 1098 and I never see the original tax bill.

This will create a nightmare for us but wait the lawmakers do not care just more money for them to spend Right?

I say they really need to look at catching tax cheats and non-filers instead of chasing pennies on this. The old saying they will spend a dollar to get a penny. It is the normal tax payer that will get hurt on this with higher tax prep fees.

Nothing makes sense anymore!!!

Superman

[OtisMozzetti]

rental properties: deduct all of what paid

[QUOTE=Uncle Sam;125038]To your knowledge at present - is this going to pertain to rental properties?

All of the money tax paid for rental properties will be deductible on Schedule E. It is the Schedule A deduction for property tax which is addressed by the FTB campaign.

The discussion of Mello-Roos is sort of beside the point. The key issue is that only that which is a percentage of the assessed valuation is deductible as a Schedule A deduction. On many property tax bills, that excludes a lot of flat rate charges, which aren't a percentage of the assessed valuation, for various government entities.

[S T]

I suspect then the Various Calif Counties had better do a better job at detailing their property tax assessments and prop tax bills.
I just recently retrieved some Prop Assessments from one County - and there was no detail - all of the Assessment Districts were listed - however, no $ amount assigned or percentage.

In some cases depending on the Counties, it is difficult to retrieve a prior period Tax Bill, once they close the Current Year Tax Rolls.



Sandy

[S T]

Update from Spidell

Here is the update 10-31-2011 From Spidell on the Calif Property Tax Issue

No parcel numbers on Schedule CA (10-31-2011)
Our sources at the FTB have confirmed that they will not include lines on Schedule CA requiring information on property taxes deducted as itemized deductions. Fortunately, the FTB listened to pleas from Spidell and others to hold off on this until it can be property vetted. Property tax statements do not clearly state what is and is not deductible, and Mello-Roos payments may be deductible if certain conditions exist.
This is only a reprieve. The FTB has stated that they will be going forward with “education and outreach” on this issue, and they will reassess requesting the information next year.

Sandy

[DTS]

Mello-Roos fees

Today's update from Spidell

Assembly member Jim Silva (R-Huntington Beach) introduced AB 1552, which, if passed, would codify Mello-Roos fees as tax deductible for California purposes. Whether certain portions of Mello-Roos fees are tax deductible for federal purposes remains uncertain.
If enacted, the bill would be effective for taxable years beginning on or after January 1, 2012. It would severely reduce the amount of revenue generated as part of the FTB’s plan to require parcel numbers and a computation of the nondeductible portion of property tax on 2012 personal tax returns.