Board workgroup opens statewide review of how assessors handle intangible assets

The California State Board of Equalization met in a work group session on updating guidance for non‑taxable intangible assets and rights, a topic board staff said has been unsettled by decades of case law and by recent high‑profile decisions.

Deputy State Controller Emerron, who chaired the session for Controller Malia Cohen, opened the meeting by citing the age of the current guidance: "Assessor Handbook section 502 chapter 6 ... has not been updated since December 1998," and said that the work group was created to respond to court developments and produce clearer statewide direction staff, assessors and taxpayers can apply consistently.

Why it matters: courts and practitioners in recent years have produced divergent results about when revenue or contract payments are attributable to the real property itself and therefore taxable, and when they reflect enterprise activity that must be deducted. Staff traced the legal arc from earlier precedents through the state Supreme Court's split decision in Olympic & Georgia Partners and the Elk Hills power decision, noting that those rulings emphasize fact‑specific analysis and, in some circumstances, allow assessors to include government‑created revenue streams linked to property use while rejecting valuation methods that lack evidence they remove the full intangible value.

County assessors who presented examples urged the board to translate legal principles into operational tools. Albert Tapia and Michael Triggeros of the San Diego County Assessor's Office illustrated how similar hotels and resorts yield widely different intangible allocations in practice, with applicant claims ranging across franchise/flag value, return on furniture/fixtures, management returns and assembled workforce adjustments. "We can provide more guidance on assessing the value of real property when using operating income while excluding any non‑taxable intangible assets and rights," Tapia said.

Assessors and county counsel described three recurring operational problems: (1) there is no clear trigger or standard checklist that alerts an assessor to probe for intangibles when a transfer or valuation is presented; (2) taxpayers and practitioners often present incomplete evidence or use diverse terminology for the same underlying economic rights; and (3) many county offices lack resources or specialized training to perform complex enterprise‑level analyses. Panelists proposed a standardized statewide information‑request template, a screening checklist of property types or transaction features that flag intangible issues, and advanced training for appraisers and appeals boards.

Private‑practice attorneys and valuation specialists urged changes at the earliest point in the tax workflow. James Pasquali and other taxpayer representatives recommended that standard transaction forms (preliminary change of ownership reports, change‑in‑ownership statements and business property questionnaires) be revised to include a dedicated section for intangibles and allocation details so assessors know when to request additional evidence. "If information or data is not mentioned to the assessor on the front end, how would they know that they need to address intangibles?" Pasquali told the board.

Practitioners described established appraisal methods for valuing intangibles that can be tailored to property‑tax purposes. Mary O'Conor, an appraiser who specializes in intangible valuation, said the appraisal community already uses standards and templates that could be adapted to generate a concise, property‑tax oriented report for assessors and taxpayers. Several lawyers recommended supplementing — not replacing — the current Assessor's Handbook chapter: keep the existing framework, add a BOE guidance letter or technical guidance document that summarizes applicable case law and provides step‑by‑step valuation examples for common intangibles (franchise/flag value, assembled workforce, management/operational rights, food and beverage operations).

On the question of property‑type guidance, panelists favored templates organized by common intangible types and valuation methods rather than a separate playbook for every conceivable property class. They also warned that the most consequential rulings often turn on narrow, fact‑heavy contract features (the Olympic decision focused on a government‑created rebate structured to flow to the developer when rooms were occupied), so any guidance must preserve the case‑by‑case analytic approach the courts require while giving assessors clearer procedures and evidence checklists.

Next steps: Deputy Controller Emerron asked participants to submit written comments and specific proposed handbook edits, and the office committed to circulating minutes and scheduling follow‑up workshops. Board members signaled support for an initial BOE technical guidance letter (LTA) and for exploring updates to transaction forms and a statewide template for intangible‑asset submissions.

The work group adjourned after the board requested concrete, written proposals to inform future draft guidance and training programs.