The Branches - New homes in Woodbridge (Alderwood) by William Lyon

[irvinehomeowner]

https://www.ftb.ca.gov/individuals/real_estate_tax_deduction/index.shtml

Looks like they are deductible.

Depends on how you interpret this:

Assessments on real property owners, based other than on the assessed value of the property, may be deductible if they are levied for the general public welfare by a proper taxing authority at a like rate on owners of all properties in the taxing authority?s jurisdiction, and if the assessments are not for local benefits (unless for maintenance or interest charges).

So are Mello Roos and 1915 taxes:

1. For the general public
2. At a like rate on owners of ALL properties
3. Not for local benefits

Gets a bit cloudy... which is why this issue has always been confusing and not something the government has been a stickler on. Does anyone know someone who's been audited for declaring MR  and 1915 as deductible?

EDIT: Looks like PS9 had the same questions.

 

[qwerty]

here is publication 530 for the 2012 returns
http://www.irs.gov/pub/irs-pdf/p530.pdf

from page 3 of the publication

Assessments for local benefits:

"You cannot deduct amounts you pay for local benefits that tend to increase the value of your property. Local benefits include the construction of streets, sidewalks, or water and sewer systems. You must add these amounts to the basis of your property.

You can, however, deduct assessments (or taxes) for local benefits if they are for maintenance, repair, or interest charges related to those benefits. An example is a charge to repair an existing sidewalk and any interest included in that charge.

If only a part of the assessment is for maintenance, repair, or interest charges, you must be able to show the amount of that part to claim the deduction. If you cannot show what part of the assessment is for maintenance, repair, or interest charges, you cannot deduct any of it. An assessment for a local benefit may be listed as an item in your real estate tax bill. If so, use the rules in this section to find how much of it, if any, you can deduct."

Mello roos is for the infrastructure which to me seems not deductible. Notice the FTB says they conform to federal law, not once has the FTB said MR taxes are deductible and neither has the IRS.

 

[Irvinecommuter]

here is publication 530 for the 2012 returns
http://www.irs.gov/pub/irs-pdf/p530.pdf

from page 3 of the publication

Assessments for local benefits:

"You cannot deduct amounts you pay for local benefits that tend to increase the value of your property. Local benefits include the construction of streets, sidewalks, or water and sewer systems. You must add these amounts to the basis of your property.

You can, however, deduct assessments (or taxes) for local benefits if they are for maintenance, repair, or interest charges related to those benefits. An example is a charge to repair an existing sidewalk and any interest included in that charge.

If only a part of the assessment is for maintenance, repair, or interest charges, you must be able to show the amount of that part to claim the deduction. If you cannot show what part of the assessment is for maintenance, repair, or interest charges, you cannot deduct any of it. An assessment for a local benefit may be listed as an item in your real estate tax bill. If so, use the rules in this section to find how much of it, if any, you can deduct."

Mello roos is for the infrastructure which to me seems not deductible. Notice the FTB says they conform to federal law, not once has the FTB said MR taxes are deductible and neither has the IRS.

They are deductible.  FTB tried to do something else but backed off because the IRS didn't agree with them.
http://www.sfgate.com/business/article/Calif-drops-property-tax-deduction-campaign-3486711.php

IRS opinion
http://www.irs.gov/pub/irs-wd/12-0018.pdf

Assessments on real property owners, based other than on the assessed value of the property, may be deductible if they are levied for the general public welfare by a proper taxing authority at a like rate on owners of all properties in the taxing authority?s jurisdiction, and if the assessments are not for local benefits (unless for maintenance or interest charges).

That would make HOAs not deductible but mello roos deductible

 

[irvinehomeowner]

From what I'm reading, the confusion here is that Mello Roos and 1915 are not for the general public, proceeds from those "taxes" do not benefit city, state and fed governments... they go to local infrastructure improvements. Additionally, they are not assessed at the same rate for all owners in each "district", MR and 1915 are often charged by a size range of home so not all owners pay the same taxes.

 

[qwerty]

Irvine commuter- in you own post it says that the assessments can not be for local benefits, in publication 530, page 3, it explicitly says what the local benefits are (sidewalks, sewer systems, streets, etc) - I believe mello Roos are exactly for these types of benefits, so therefore they would not be deductible. But u disagree?

 

[qwerty]

That's the other thing, as iho pointed out, mello Roos taxes don't go into general purpose funds for the benefit of the general public, they go to cover the repayment of local benefits, which are local streets, sidewalks, sewer systems, etc.

 

[Irvinecommuter]

Irvine commuter- in you own post it says that the assessments can not be for local benefits, in publication 530, page 3, it explicitly says what the local benefits are (sidewalks, sewer systems, streets, etc) - I believe mello Roos are exactly for these types of benefits, so therefore they would not be deductible. But u disagree?

Mello Roos are levied by a tax entity authorized to do so. 

The FTB specifically backed off of its stance as to the non-deductibility of mello roos after the IRS opinion.
https://www.ftb.ca.gov/individuals/real_estate_tax_deduction/index.shtml

There was even a proposed bill to block the FTB. 
http://articles.hbindependent.com/2...516_1_mello-roos-fees-ftb-local-benefit-taxes

 

[Irvinecommuter]

That's the other thing, as iho pointed out, mello Roos taxes don't go into general purpose funds for the benefit of the general public, they go to cover the repayment of local benefits, which are local streets, sidewalks, sewer systems, etc.

They don't have to go into the general public fund, they just have to go levied on all properties within the district of the tax authorities.

More detailed explanation. 
http://www.caltax.com/spidellweb/public/marketing/pages/Taxletter_onecolumn.pdf

The IRS made mello roos tax deductible in 2003 and the FTB was trying to get around that by categorizing it as a ad-valorem tax.

 

[qwerty]

Commuter - all the IRS said was to change its forms that only taxes based on ad valorem could be deducted. Just because the FTb backed off does not mean they are deductible, just like their lack of enforcement does not make it deductible. You seem to view the FTB backing down to mean the MR are deductible. I've pointed out criteria to u that comes from the actual IRS publication, that at least to me make it seem that MR are not deductible as they don't satisfy the criteria

 

[irvinehomeowner]

That's the other thing, as iho pointed out, mello Roos taxes don't go into general purpose funds for the benefit of the general public, they go to cover the repayment of local benefits, which are local streets, sidewalks, sewer systems, etc.

They don't have to go into the general public fund, they just have to go levied on all properties within the district of the tax authorities.

That's not what this says:

"may be deductible if they are levied for the general public welfare"

Nor are they this:

"a like rate on owners of all properties in the taxing authority?s jurisdiction"

The letter you posted may make it seem like it's deductible but it also has that same paragraph at the end regarding general public, like rate, and local benefits.

 

[qwerty]

1. For the general public - do mello Roos benefit the general public, I would say no because they can't be spent on something else. They are to build the local infrastructure of a community

2. At a like rate on owners of ALL properties - I guess with the specific neighborhood, this one is grey, ill give u this one based on the fee being calculated on square feet

3. Local improvements - this is very clear in the IRS publication spells it out, it is unclear to me how this is not clear to you.

 

[Irvinecommuter]

Commuter - all the IRS said was to change its forms that only taxes based on ad valorem could be deducted. Just because the FTb backed off does not mean they are deductible, just like their lack of enforcement does not make it deductible. You seem to view the FTB backing down to mean the MR are deductible. I've pointed out criteria to u that comes from the actual IRS publication, that at least to me make it seem that MR are not deductible as they don't satisfy the criteria

Here is the 2003 IRS opinion.
http://www.caltax.com/spidellweb/public/editorial/MelloRoos.pdf

Mello Roos are an extension of county power to assess property taxes and an exception to prop 13.  It is not a "personal property tax" but a real property tax.

 

[Irvinecommuter]

That's the other thing, as iho pointed out, mello Roos taxes don't go into general purpose funds for the benefit of the general public, they go to cover the repayment of local benefits, which are local streets, sidewalks, sewer systems, etc.

They don't have to go into the general public fund, they just have to go levied on all properties within the district of the tax authorities.

That's not what this says:

"may be deductible if they are levied for the general public welfare"

Nor are they this:

"a like rate on owners of all properties in the taxing authority?s jurisdiction"

The letter you posted may make it seem like it's deductible but it also has that same paragraph at the end regarding general public, like rate, and local benefits.

The general welfare in this case is the people within the tax authority...the members within the mello roos district

 

[qwerty]

Commuter - all the IRS said was to change its forms that only taxes based on ad valorem could be deducted. Just because the FTb backed off does not mean they are deductible, just like their lack of enforcement does not make it deductible. You seem to view the FTB backing down to mean the MR are deductible. I've pointed out criteria to u that comes from the actual IRS publication, that at least to me make it seem that MR are not deductible as they don't satisfy the criteria

Here is the 2003 IRS opinion.
http://www.caltax.com/spidellweb/public/editorial/MelloRoos.pdf

Mello Roos are an extension of county power to assess property taxes and an exception to prop 13.  It is not a "personal property tax" but a real property tax.

Even in the 2003 opinion u just linked, on page 7, second to last paragraph, it says the taxes are not deducted if they are for local benefits.  How do you counter that?

 

[Irvinecommuter]

From what I'm reading, the confusion here is that Mello Roos and 1915 are not for the general public, proceeds from those "taxes" do not benefit city, state and fed governments... they go to local infrastructure improvements. Additionally, they are not assessed at the same rate for all owners in each "district", MR and 1915 are often charged by a size range of home so not all owners pay the same taxes.

The rate is the same but the amounts are different.  Just like the regular property tax is based upon assessed value, which varies.

They don't have to benefit city, state, or federal government.  Just like each county collects its own taxes, each mello roos district collects for its own benefit.

 

[irvinehomeowner]

More detailed explanation. 
http://www.caltax.com/spidellweb/public/marketing/pages/Taxletter_onecolumn.pdf

The IRS made mello roos tax deductible in 2003 and the FTB was trying to get around that by categorizing it as a ad-valorem tax.

Your newly added link still does not say MRs ARE deductible... they say they **MAY** be.

It still has the provisions I've listed multiple times:

? For the general public welfare;
? By a proper taxing authority;
? At a like rate; and
? On owners of all properties in the taxing authority?s jurisdiction.

And also goes on to say:

Amounts assessed only on specific properties for a local benefit (such as for streets, sidewalks, and like
improvements) cannot be deducted as real property taxes. However, taxpayers are permitted a deduction for
the portion of the local benefit assessments that were imposed to repair, maintain, or meet interest charges
for these local benefits.

Although the law is unclear, it appears that this portion of the assessment is deductible even if made on a
principal residence.

So even they are unsure... and it does seem like a portion of MR/1915 can be deductible if used for maintenance, but the majority of those assessments are used for the building not really maintaining (at least from what I've read).

 

[qwerty]

Irvine commuter - ill agree with u that they are deductible if u can show me how MR taxes are not for local benefits ( criteria #3 even in documents u have linked to)

 

[Irvinecommuter]

Commuter - all the IRS said was to change its forms that only taxes based on ad valorem could be deducted. Just because the FTb backed off does not mean they are deductible, just like their lack of enforcement does not make it deductible. You seem to view the FTB backing down to mean the MR are deductible. I've pointed out criteria to u that comes from the actual IRS publication, that at least to me make it seem that MR are not deductible as they don't satisfy the criteria

Here is the 2003 IRS opinion.
http://www.caltax.com/spidellweb/public/editorial/MelloRoos.pdf

Mello Roos are an extension of county power to assess property taxes and an exception to prop 13.  It is not a "personal property tax" but a real property tax.

Even in the 2003 opinion u just linked, on page 7, second to last paragraph, it says the taxes are not deducted if they are for local benefits.  How do you counter that?

Because the IRS already determined that mello roos are not for "local benefit".  They are a general property tax.  Only requirement is that they are levied for the general public and at a like rate.

Page 6 could not be any clearer about the deductibility of mello roos.

 

[irvinehomeowner]

The rate is the same but the amounts are different.  Just like the regular property tax is based upon assessed value, which varies.

I disagree. The regular property tax varies based on assessed value but the rate is the same (usually ~1.05% in most Irvine jurisdictions). For MR/1915, it's done by square footage and even by area... some tracts in the same development have higher MR/1915 assessments.

They don't have to benefit city, state, or federal government.  Just like each county collects its own taxes, each mello roos district collects for its own benefit.

This is part of where the confusion lies. By "general public", I am led to believe that a portion of MR/1915 assessments has to go to city, state (maybe not fed), if they are only staying with the "jurisdiction", isn't that a "local benefit"?

Find a link that says *absolutely* that MRs are deductible... I'm still seeing "may be" and provisions on the ones you have provided.

 

[qwerty]

Commuter - all the IRS said was to change its forms that only taxes based on ad valorem could be deducted. Just because the FTb backed off does not mean they are deductible, just like their lack of enforcement does not make it deductible. You seem to view the FTB backing down to mean the MR are deductible. I've pointed out criteria to u that comes from the actual IRS publication, that at least to me make it seem that MR are not deductible as they don't satisfy the criteria

Here is the 2003 IRS opinion.
http://www.caltax.com/spidellweb/public/editorial/MelloRoos.pdf

Mello Roos are an extension of county power to assess property taxes and an exception to prop 13.  It is not a "personal property tax" but a real property tax.

Even in the 2003 opinion u just linked, on page 7, second to last paragraph, it says the taxes are not deducted if they are for local benefits.  How do you counter that?

Because the IRS already determined that mello roos are not for "local benefit". 

Page 6 could not be any clearer about the deductibility of mello roos.

What paragraph on page 6. I just read page 6 and I don't see anything that says MR are not for local benefits.