We can all learn from the past as those valuable history lessons provides us with a solid foundation that builds on a better future. I believe that to be a true statement.
I also know that history can lead to a property tax savings’ program that preserves as well as saves money.
The Mills Act is an economic incentive program in California for the restoration and preservation of qualified historic buildings by property owners. Enacted in 1972, the Mills Act legislation grants participating cities and counties the authority to enter into contracts with owners of qualified historic properties who actively participate in the rehabilitation, restoration, preservation, and maintenance of their historic properties. The Mills Act permits property tax relief to offset the costs.
Mills Act contracts are for an initial term of 10 years. A contract automatically renews each year on its anniversary date and a new 10-year agreement becomes effective, creating a rolling contract term that is always equal to the initial terms of the contract.
How does the property tax relief work?
After a property owner enters into a contract, the local government agency notifies the Assessor – in this case my office – of the contract. We will then annually determine the value of a Mills Act property based upon a prescribed capitalization rate as provided for in Revenue and Taxation Code section 439.2 (b) or (c). This is a restricted value. We will then compare this restricted value to the current market value and the factored base year value (also known as the “Proposition 13” value). The lowest of the three values is then enrolled, which is most likely the restricted value.
In fact, that’s where the property tax savings comes in. The restricted value can be considerably lower, many times more than half, than the other values creating a tax savings for the owner. Since all properties are assessed annually, Mills Act properties may even undergo more decreases, possibly increases, in property taxes each year as market conditions change.
Each year all Mills Act enrolled properties are notified by mail of their Mills Act values for that year as determined by the Assessor. This notification is typically sent out when a new contract value is first enrolled, or annually in May for existing contracts.
How can I get my property registered or find out if my property qualifies for the Mills Act Program?
Each city and county (unincorporated Los Angeles County) may have different procedures for local historic designation. Contact the Planning Department or Community Development of your local municipality to confirm whether they participate in the Mills Act Program, the criteria that would need to be met, and the application process. Your building may already be considered a contributing structure to an established historic area. Also, many buildings that were not designated as historic on past surveys may now be eligible to qualify as historic.
For more information, please go to my website at assessor.lacounty.gov/tax-relief/mills-act or review the state guidelines at State Board of Equalization Guidelines.
