State work group formed to modernize guidance on taxing intangible property

The California State Board of Equalization convened a work group to modernize guidance on valuing non-taxable intangible assets in property tax assessments, Deputy State Controller Cece Emer said at the meeting. The session opened at 10:08 a.m., with Cece Emer speaking for Controller Malia Cohen and explaining the group's origin in a taxpayer bill-of-rights hearing and the board's October 2025 decision to establish the group.

Board staff reviewed the constitutional and statutory framework for valuing intangibles, beginning with the 1933 amendment to the California Constitution (Article XIII, sections 1 and 2) that narrowed which intangibles could be directly taxed and left other intangible rights as non-taxable. David Young, deputy director of the property tax department at the Board of Equalization, and Richard Moon, the board's chief counsel, traced case law and legislative developments from Rome v. County of Orange (1948) and the Michael Todd film-negative decisions through later enterprise-intangible cases such as GTE/Sprint and significant modern rulings.

Young and Moon emphasized two longstanding principles: "intangible assets may not be directly taxed," and assessors may "assume the presence of intangible assets necessary to put the property to beneficial or productive use." They told the board those principles are heavily fact dependent in application and that the assessor's task is to isolate and value only the taxable portion of a going concern.

The presenters highlighted two recent, influential decisions. In a 2013 case involving a power plant, the court found emission-reduction credits were quantifiable independent intangible rights that could not simply be added to an assessment under a cost approach; the income approach required evidence that a separate income stream was attributable to those credits. In the 2025 Supreme Court decision in Olympic & Georgia Partners LLC v. County of Los Angeles, the court issued a split ruling: it permitted counties to include certain contract-based revenue streams in the taxable assessment (finding they flowed from the real estate's beneficial use) but unanimously remanded the county's use of a management-fee (so-called Rushmore) approach because the county had not shown that the fee accounted for all claimed enterprise intangibles.

The upshot from staff: the long-outdated Assessor's Handbook guidance (section 502, chapter 6, adopted in December 1998) needs revision to reflect recent judicial developments, contemporary valuation methods, and modern property types. Cece Emer told the board that the work group's mandate is to examine methodologies, evidence standards, and the legal standards that govern how intangibles are identified and excluded, and to develop recommendations the board can adopt.

Why it matters: inconsistent treatment of intangibles across counties leads to litigation, unpredictable outcomes for taxpayers, and inequities in assessments for comparable properties. The board and staff said the work group will solicit in-person testimony and written submissions, build a record on legal and operational issues, and return recommendations to the board in a timely manner.

The meeting proceeded to a question-and-answer exchange with board members about practical valuation examples (the liquor-license example was cited repeatedly as an easier case) and closed the presentation with public comment from taxpayers and property-tax agents who urged clear rules that avoid taxing intangibles the law exempts.

The work group paused for a short break and planned further sessions to hear county assessors and other stakeholders.