California law exempts public agencies from paying property taxes on the property they own. However, persons renting property owned by an agency of the federal, state or local government, may, under certain circumstances, acquire a taxable possessory interest in that property.
A possessory interest may exist whenever there is a private, beneficial use of publicly-owned, non-taxable real property. Such interests are typically found where private individuals, companies or corporations lease, rent or use federal, state or local government owned facilities and/or land for their own beneficial use.
To be taxable, the interest must be sufficiently independent, last for a determinable time, and provide a private benefit of exclusive use beyond mere entry and exit, or momentary occupancy.
Possessory interests include such things as:
- A boat dock built on a public lake, bay or river;
- An airplane tie-down at a county airport;
- Cattle grazing rights on Federal or State land;
- Private companies leasing government buildings;
- The right to have food vending machines located in a government building;
- Cable television right-of-way easements;
- Employee housing on government-owned land.
Questions and Answers
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- Why are possessory interest holders being charged property tax in addition to the rent they pay the government?
People or entities who receive possessory interest assessments are often puzzled. They are often confused as to why they are asked to pay property tax in addition to paying rent to the governmental agency.
The explanation is that government entities do not have to pay property tax. At the same time, the private individual or company still receives the services and benefits that other similar taxable properties enjoy. The possessory interest tax helps to pay the holder’s share of those costs.
Property taxes pay for many services provided to the public, including schools, police and fire departments, flood control, community health and recreational organizations and the services of many other public agencies. The taxes generated by possessory interests contribute to the funding of these same services.
- Why are possessory interests assessed on the unsecured roll?
Possessory interests are normally assessed on the unsecured tax roll because the property rights being assessed are not owned by the assessee and cannot provide security for the taxes owed. In other words, the county cannot seize the property in order to satisfy any delinquent property tax.
- How do possessory interest unsecured tax bills differ from secured roll tax bills?
The payment schedule for unsecured roll tax bills is significantly different than for secured roll tax bills and taxpayers should be aware of this difference. Unsecured bills are due and payable in full no later than August 31 each year. Unsecured bills are not split into two installments with two different delinquency dates, as is the case with secured roll tax bills. For more information regarding unsecured tax bills, please contact the Marin County Tax Collector at (415) 473-6133.
- How are possessory interests valued?
The Assessor considers the actual permitted use under a lease or special use permit. Assessor will also consider that there is only a lease held by the occupant, not the fee ownership of the property. The Assessor will also consider the actual or anticipated term of possession. For example, property leased from the government for ten years, will revert back to the government at that time. It is the present value of the rights for ten years, which are held by the occupant, which are assessed. The rights that will revert back to the government after the ten-year occupancy are not assessed to the holder of the Possessory Interest.
- Who is responsible for paying the taxes?
All taxable possessory interests are assessed as of the lien date, January 1, of each year. The person or entity in possession of the property on the lien date. There is no provision made for the Assessor to prorate the taxes if the possessory interest is terminated after the lien date, January 1.
- How does the Assessor's Office find possessory interests?
Every year the Assessor's staff requests that every government agency in the county provide information regarding all occupancies of the property they own. The Assessor analyzes the data received from the governmental agencies and makes the appropriate assessments.
By law, every governmental agency in the county must respond to the Assessor’s annual request for information. The information assists the Assessor in conducting fair and accurate possessory interest assessments.
- Where can I get more information on possessory interests?
The California State Board of Equalization publishes a series of Assessor's Handbooks to provide guidance to local Assessors, including a Assessment of Taxable Possessory Interests handbook.
If you need additional information or have more questions, please contact the Marin County Assessor at (415) 473-7215 or by email. The office of the Marin County Assessor is located at Marin Civic Center Room 208, 3501 Civic Center Drive, San Rafael, CA. Office hours are 9:00 a.m. – 4:00 p.m., Monday through Friday.