Opinion

Prang v. Los Angeles County Assessment Appeals Bd.

Court: California Supreme Court
Filed: May 30, 2024
Status: Published
Cited by: 0 cases
Authority: More cited than 16.2%

The opinion

IN THE SUPREME COURT OF

CALIFORNIA

JEFFREY PRANG, as County Assessor, etc.,

Plaintiff and Respondent,

LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD,

Defendant and Respondent;

LUIS A. AMEN et al., as Trustees, etc.,

Real Parties in Interest and Appellants.

S266590

Second Appellate District, Division Five

B298794

Los Angeles County Superior Court

BS173698

May 30, 2024

Justice Evans authored the opinion of the Court, in which

Chief Justice Guerrero and Justices Corrigan, Liu, Kruger,

Groban, and Jenkins concurred.

PRANG v. LOS ANGELES COUNTY ASSESSMENT

APPEALS BOARD

S266590

Opinion of the Court by Evans, J.

Article XIII A of the California Constitution, added by

Proposition 13, strictly limits increases in the assessed value of

real property unless the property undergoes a “change in

ownership.” (Cal. Const., art. XIII A, § 2, subds. (a), (b);

see Citizens for Fair REU Rates v. City of Redding (2018) 6

Cal.5th 1, 10.)

A change in ownership generally occurs with a transfer of

real property. In a typical real estate transaction where one

party transfers real property to another, there is

unquestionably a change in ownership as title passes from the

transferor to the transferee. Whether there has been a

“change in ownership” in transactions involving a legal entity,

however, is a more complex issue that can give rise to certain

anomalies. If individual owners transfer real property to an

entity they own, for example, it can be argued that the transfer

has not caused a change in underlying “ownership,” but merely

a change in the form of holding title. Likewise, when there is a

significant change in the ownership of a legal entity, it can be

argued that this causes a change in ownership of the entity’s

real property despite no change in title.

In enacting a statutory scheme to implement Proposition

13, the Legislature sought to account for these anomalies. It

also chose to adopt different rules to govern these different

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

situations. Governing the transfer at issue here, Revenue and

Taxation Code section 62, subdivision (a)(2)1 identifies

property transfers that, although they result in a change in

title, nonetheless do not constitute a “change in ownership.”

The statute excludes from change in ownership any

transaction involving a legal entity that “results solely in a

change in the method of holding title to the real property and

in which proportional ownership interests of the transferors

and transferees, whether represented by stock, partnership

interest, or otherwise, in each and every piece of real property

transferred, remain the same after the transfer.” (§ 62,

subd. (a)(2), italics added.)

Here, a family corporation transferred ownership of a

pair of supermarkets to one of its shareholders, a revocable

trust. The trust held all the corporation’s voting stock. The

corporation also had a small number of individual shareholders

who held nonvoting stock; those shareholders had no interest

in the trust. The transfer of the properties to the trust thus

eliminated whatever interests the individual shareholders held

in the corporation’s real property. The question presented is

whether this transfer of the properties nonetheless is excluded

from change in ownership under section 62, subdivision (a)(2);

that is, whether the proportional ownership interests in the

real property transferred, as “represented by stock,

partnership interest, or otherwise,” remained the same before

and after the transfer.

The trustees, appellants here, argue that no change in

ownership occurred because the trust held all the corporation’s

Unless indicated otherwise, subsequent statutory

citations are to the Revenue and Taxation Code.

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

voting stock. According to the trustees, the term “stock” in

section 62, subdivision (a)(2) must be interpreted to mean

voting stock. In advancing this argument, the trustees point to

another Revenue and Taxation Code section concerning

transfers of ownership interests in legal entities, which

expressly refers to “voting stock” (§ 64, subd. (c)(1)), and argue

that sections 62 and 64 must be read together. Section 64

provides a transfer of ownership interests in a corporation will

result in a change in ownership of its real property only when

there is a change in corporate “control,” which is determined by

ownership of a majority of its “voting stock.” (§ 64, subd.

(c)(1).) The county assessor, respondent here, argues section

62, subdivision (a)(2) is unambiguous and measures ownership

interests in real property transferred to or from a corporation

by all stock. Under that measure, a change in ownership

occurred.

The Court of Appeal agreed with the county assessor and

held the transfer of the property from the corporation to the

trust resulted in a change in ownership. The trustees

challenge that holding on the ground that the Court of Appeal

failed to accord proper deference to the implementing

regulation and interpretative materials issued by the state

Board of Equalization. We conclude the agency’s

implementing regulation and interpretative materials do not

support the trustees’ reading of section 62, subdivision (a)(2).

To understand why that is the case, however, it is necessary to

begin with the plain language of the statute and the usual

statutory interpretation framework.

Applying this framework, we conclude that section 62,

subdivision (a)(2) measures proportional beneficial ownership

interests in corporate real property by corporate stock

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

generally. Further, because sections 62 and 64 concern

different ownership interests — ownership interests in real

property and ownership interests in legal entities,

respectively — section 64 does not compel a contrary reading of

section 62. The Board of Equalization’s guidance either

concerns section 64, and is therefore not pertinent, or fails to

directly consider the issue presented here, and is therefore

unpersuasive. Accordingly, we affirm the Court of Appeal,

which held in a manner consistent with these conclusions.

I. FACTUAL AND PROCEDURAL BACKGROUND

The real property at issue consists of two Los Angeles

supermarkets operating under the brand name “Super A

Foods” (the properties). In December 2014, Super A Foods,

Inc., a corporation (the corporation), transferred the properties

to the Amen Family 1990 Revocable Trust (the trust).

At the time of the transfer, the corporation had two

classes of stock, “Voting Common Stock” and “Non-Voting

Common Stock.” Under its articles of incorporation, the sole

difference between the rights possessed by holders of these

respective classes of stock concerned control over corporate

governance. Control over corporate governance was granted

exclusively to holders of the voting stock: “Except with respect

to all voting rights being vested exclusively in the holders of

the Voting Common Shares, as herein above provided, the

Voting Common Stock and the Non-Voting Common Stock

shall be equal in all other respects including, but not limited

to, dividend and liquidation rights.”

The trust owned 92.8 percent of the corporation’s stock,

which included 100 percent of the voting stock. The trust had

two beneficiaries, Louis Amen and Dolores Amen. Four

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

individuals — other members of the Amen family and a long-

time employee of the corporation — owned approximately

5.2 percent of the corporation’s stock, all nonvoting stock.

The Los Angeles County Assessor, respondent Jeffrey

Prang (assessor), determined that the transfer of the

properties from the corporation to the trust constituted a

change in ownership and conducted a reassessment of the

properties, doubling their assessed value from $5,140,120 to

$10,280,000. The assessor looked at all corporate stock and

determined that the proportional ownership interests in the

properties were not the same before and after the transfer

because the interests of the individual shareholders were

eliminated.

The Los Angeles County Assessment Appeals Board

(Appeals Board) reversed the decision of the assessor. The

Appeals Board asserted, without supporting authority, that

“the beneficial interest in [corporate] real property is

ultimately held by the persons who control the corporation

through its voting stock.” Looking at the corporation’s voting

stock only, the Appeals Board determined that the proportional

ownership interests in the properties were the same before and

after the transfer because they remained with the trust. In

reaching this conclusion, the Appeals Board also relied on

guidance issued by the Board of Equalization (State Board),

the agency responsible for promulgating property tax

assessment regulations and guidance.

The assessor filed a petition for writ of mandate in the

superior court. The superior court granted the petition and

issued an order directing the Appeals Board to vacate its

decision. The trustees appealed. In a published opinion, and

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

over a dissent, the Court of Appeal affirmed, rejecting the

Appeals Board’s interpretation of section 62 and agreeing with

the assessor. (Prang v. Los Angeles County Assessment

Appeals Bd. (2020) 58 Cal.App.5th 246, 261 (Prang).)

The Court of Appeal majority held that section 62,

subdivision (a)(2) is unambiguous and measures

proportionality by all corporate stock. (Prang, supra, 58

Cal.App.5th at p. 255, fn. 4; id. at pp. 254–261.) It rejected the

argument that the provision is rendered ambiguous when read

in light of the statute as a whole or in light of the overall

legislative scheme, which hinged on the trustees’ assertion that

sections 62 and 64 must be read together. (Id. at p. 259.) The

majority reasoned that the two sections address different kinds

of transactions: section 62 concerns the transfer of interests in

real property, whereas section 64 concerns the transfer of

interests in a legal entity. (Ibid.) For this reason, “section 64’s

rules relating to control of a corporation do not fit in the

proportionality exclusion under section [62, subdivision (a)(2)].”

(Ibid.)

The dissent did not undertake its own statutory

interpretation. (Prang, supra, 58 Cal.App.5th at pp. 261–263

(dis. opn. of Baker, J.).) Rather, the dissent found it persuasive

that the State Board “interpreted the term ‘stock’ to mean

voting stock” in “related statutes” (i.e., § 64) and in “guidance

. . . that discusses . . . section 62, subdivision (a)(2).” (Id. at

p. 262.) The dissent saw “no good reason to deviate from” the

agency’s interpretation. (Ibid.)

We granted review to resolve these issues of statutory

interpretation and agency deference.

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

II. DISCUSSION

Whether transfer of the properties from the corporation

to the trust constitutes a “change in ownership” is a question of

statutory interpretation, a task governed by long-settled

principles. “Our fundamental task in interpreting a statute is

to determine the Legislature’s intent so as to effectuate the

law’s purpose.” (Coalition of Concerned Communities, Inc. v.

City of Los Angeles (2004) 34 Cal.4th 733, 737.) “We first

consider the words of the statutes, as statutory language is

generally the most reliable indicator of legislation’s intended

purpose.” (McHugh v. Protective Life Ins. Co. (2021) 12 Cal.5th

213, 227 (McHugh).) “We consider the ordinary meaning of the

relevant terms, related provisions, terms used in other parts of

the statute, and the structure of the statutory scheme.” (Ibid.)

If the relevant statutory language permits more than one

reasonable interpretation, we look to appropriate extrinsic

sources, such as the statute’s purpose, legislative history, and

public policy. (Coalition of Concerned Communities, Inc.,

supra, at p. 737.) We also extend some deference to the State

Board’s constructions of the Revenue and Taxation Code, “to

the extent that [they] are embodied in quasi-legislative

regulations or constitute long-standing, consistent, and

contemporaneous interpretations.” (McHugh, supra, at p. 227,

citing Yamaha Corp. of America v. State Bd. of Equalization

(1998) 19 Cal.4th 1, 12–13 (Yamaha).)

A. Proposition 13

Proposition 13, adopted in 1978, limits the ad valorem

tax on real property to one percent of its “full cash value.”

(Cal. Const., art. XIII A, § 1, subd. (a); Auerbach v. Assessment

Appeals Bd. No. 1 (2006) 39 Cal.4th 153, 160 (Auerbach).) The

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

full cash value may be adjusted for inflation but only at a

maximum rate of two percent per year. (Cal. Const., art. XIII

A, § 2, subd. (b).) “Full cash value” is defined as the county

assessor’s valuation of the property on the 1975–1976 tax bill

“or, thereafter, the appraised value of real property when

purchased, newly constructed, or a change in ownership has

occurred after the 1975 assessment.” (Cal. Const., art. XIII A,

§ 2, subd. (a); Auerbach, supra, at p. 160.) As stated above,

this case turns on whether a “change in ownership” occurred

when the properties were transferred from the corporation to

the trust.

1. Section 60

Because Proposition 13 did not define “change in

ownership,” it fell to the Legislature to do so. (Pacific

Southwest Realty Co. v. County of Los Angeles (1991) 1 Cal.4th

155, 160–161 (Pacific Southwest).) To accomplish this task,

the Assembly Committee on Revenue and Taxation created a

35-member task force to study this and other aspects of

Proposition 13 and to make recommendations “as to

appropriate law changes.” (Assembly Com. on Revenue &

Taxation, Rep. of the Task Force on Property Tax

Administration (Jan. 22, 1979) p. 1 (Task Force Report); see

Pacific Southwest, supra, at p. 161.) The work of the task force

culminated in the Task Force Report. (Pacific Southwest,

supra, at p. 161.)

The task force “sought to distill the basic characteristics

of a ‘change in ownership’ and embody them in a single test

which could be applied evenhandedly to distinguish between

‘changes’ and ‘non-changes’, both those which the Task Force

could and those which it did not foresee.” (Task Force Report,

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

supra, at p. 38.) The task force formulated a three-part test

intended to be generally “consistent with the normal

understanding of ‘change in ownership.’ ” (Ibid.) Adopted

verbatim by the Legislature as Revenue and Taxation Code

section 60, and unchanged since, it provides: “A ‘change in

ownership’ means a transfer of a present interest in real

property, including the beneficial use thereof, the value of

which is substantially equal to the value of the fee interest.”

(Id. at p. 48; Pacific Southwest, supra, 1 Cal.4th at p. 161;

see Stats. 1979, ch. 242, § 4.)

2. Section 62, subdivision (a)(2)

To aid in the implementation of section 60, the task force

proposed the adoption of “specific statutory examples” to

elaborate on “common transactions.” (Task Force Report,

supra, at p. 40.) The task force stressed that the examples

were designed to be “consistent with the general test,” as the

“entire statutory design would be destroyed” if specific

transfers were treated in an inconsistent manner. (Id. at p. 40;

id. at p. 41.) The task force was concerned that inconsistency

might result in the invalidation of the statutory scheme based

on “the lack of any consistent, rational interpretation of the

constitutional phrase, ‘change in ownership.’ ” (Id. at pp. 40–

41; Pacific Southwest, supra, 1 Cal.4th at pp. 161–162.) The

examples were embodied primarily in two statutes — section

61, setting forth types of common transfers that do result in a

change in ownership, and section 62, setting forth types of

transfers that do not result in a change in ownership. (Task

Force Report, supra, at pp. 49–51; Auerbach, supra, 39 Cal.4th

at p. 161.)

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

Section 61 provides, in pertinent part, “[e]xcept as

otherwise provided in Section 62, change in ownership, as

defined in Section 60, includes, but is not limited to . . . [t]he

transfer of any interest in real property between a corporation,

partnership, or other legal entity and a shareholder, partner,

or any other person.” (§ 61, subd. (j).) The parties do not

dispute that transfer of the properties from the corporation to

the trust must be deemed a change in ownership under section

60 and section 61, subdivision (j) unless it qualifies for

exclusion under section 62, subdivision (a)(2) (section 62(a)(2)).

Section 62(a)(2), which addresses transfers of real

property involving legal entities, is intended to exclude

transfers that constitute merely a change in the form of

holding title. It provides that “change in ownership” does not

include “[a]ny transfer between an individual or individuals

and a legal entity or between legal entities, such as a

cotenancy to a partnership, a partnership to a corporation, or a

trust to a cotenancy, that results solely in a change in the

method of holding title to the real property and in which

proportional ownership interests of the transferors and

transferees, whether represented by stock, partnership

interest, or otherwise, in each and every piece of real property

transferred, remain the same after the transfer.” (§ 62(a)(2),

italics added.) For example, if two individuals who own real

property in equal shares transfer the property to a corporation

they own in equal shares, such transfer is excluded from

change of ownership.

3. Section 64, subdivisions (c)(1) and (d)

Section 64, which concerns the purchase or transfer of

ownership interests in legal entities, is not directly implicated

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

by the facts of this case. The trustees do not argue otherwise.

Instead, they contend section 64, namely subdivisions (c)(1)

and (d), bear on the proper interpretation of the term

“ownership interests” in section 62(a)(2). According to the

trustees, statutory uniformity requires that “ownership

interests” have the same meaning across these three

subdivisions.

Section 64, subdivision (a) (section 64(a)) begins by

declaring the general rule that a transfer of ownership

interests in a legal entity does not cause a change in ownership

of the entity’s real property. Section 64, subdivision (c)(1)

(section 64(c)(1)) provides an exception to this rule: “When a

corporation, partnership, limited liability company, other legal

entity, or any other person obtains control through direct or

indirect ownership or control of more than 50 percent of the

voting stock of any corporation, or obtains a majority

ownership interest in any partnership, limited liability

company, or other legal entity through the purchase or transfer

of corporate stock, partnership, or limited liability company

interest, or ownership interests in other legal entities,

including any purchase or transfer of 50 percent or less of the

ownership interest through which control or a majority

ownership interest is obtained, the purchase or transfer of that

stock or other interest shall be a change of ownership of the

real property owned by the corporation, partnership, limited

liability company, or other legal entity in which the controlling

interest is obtained.” As to a corporation, then, a change in

ownership of its real property occurs when there is a change in

“control” of the corporation, which is determined by ownership

of a majority of its voting stock.

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

Section 64, subdivision (d) (section 64(d)) provides

another exception to the general rule of subdivision (a),

applicable only to real property that was previously

transferred to an entity in a transaction covered by section

62(a)(2). Following such a transfer, “the persons holding

ownership interests in that [transferee] entity immediately

after the transfer shall be considered the ‘original coowners.’ ”

(§ 64(d).) “Whenever shares or other ownership interests

representing cumulatively more than 50 percent of the total

interests in the entity are transferred by any of the original

coowners in one or more transactions, a change in ownership of

that real property owned by the legal entity shall have

occurred . . . .” (Ibid.) In effect, after an entity has obtained

real property in a transfer covered by section 62(a)(2), a change

in ownership of that property occurs if the original coowners

subsequently transfer more than 50 percent of the total

interests in the entity, even if no one person or legal entity

thereby obtains control of the transferee entity so as to trigger

the exception set forth in section 64(c)(1).

B. The Language of Section 62(a)(2)

As always, our inquiry begins with the language of the

statute. The parties agree that change in ownership here is

governed by section 62(a)(2), which excludes “[a]ny transfer

between an individual or individuals and a legal entity or

between legal entities . . . that results solely in a change in the

method of holding title to the real property and in which

proportional ownership interests of the transferors and

transferees, whether represented by stock, partnership

interest, or otherwise, in each and every piece of real property

transferred, remain the same after the transfer.” We conclude

the language of section 62(a)(2) indicates that: the statute

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

concerns ownership interests in real property; for legal entities,

those ownership interests are the beneficial ownership interests

that those who own the entity have in its real property; and for

a corporation, those beneficial ownership interests are

measured by corporate stock generally.

1. “Proportional ownership interests” in section

62(a)(2) refers to interests in real property

A principal requirement of the exclusion set forth in

section 62(a)(2) is that the proportional “ownership interests”

remain the same before and after transfer of the real property.

The Court of Appeal majority agreed with the assessor that the

ownership interests to which section 62(a)(2) refers are

interests in the real property transferred, whereas the

ownership interests at issue in section 64 are interests in a

legal entity. The trustees dispute that “[s]ections 62 and 64

measure different kinds of ownership,” arguing that “both

statutes measure ‘ownership interests’ in legal entities.”

Based on this understanding, the trustees assert that

ownership interests in a corporation must be measured by

voting stock only, because corporate ownership is measured by

voting stock for purposes of section 64, subdivisions (c)(1)

and (d).

The assessor is correct that the statute must be

interpreted to refer to proportional ownership interests in the

transferred real property, rather than in any entities involved

in the transfer. This is the construction dictated by the

express language of section 62(a)(2), which requires that the

“proportional ownership interests . . . in each and every piece of

real property transferred” remain the same. (Italics added.)

This interpretation also is necessary for the full application of

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

the statute. Section 62(a)(2) applies to transfers involving both

entities and individuals. If “proportional ownership interests”

referred to interests in an entity, it could not be applied to a

transfer involving individuals; there would be no entity in

which their ownership interests could be measured.

2. With regard to a legal entity, “proportional

ownership interests” refers to beneficial ownership

interests

Though it is clear that section 62(a)(2) refers to

ownership interests in real property, there is a further

analytical inquiry we must engage with: how are those

ownership interests represented. For an individual, ownership

interests are represented by the individuals’ direct ownership

interests in the real property. As explained below, that cannot

be the case when the transferor or transferee of the property is

an entity. With respect to entities, we conclude “proportional

ownership interests” must be understood to refer, not to direct

ownership interests, but to the beneficial ownership interests

that the persons who own the entity hold in the property.

(See § 60 [defining “change in ownership” as “a transfer of a

present interest in real property, including the beneficial use

thereof”].) Two features of section 62(a)(2) compel this

understanding.

First, the statute refers to the proportional ownership

interests “of the transferors and transferees” in the transferred

property. When real property is transferred by or to an entity,

the entity conveys or obtains 100 percent of the direct

ownership interests in the property. For that reason, any

transfer of real property involving an entity necessarily results

in a change in the proportional direct ownership interests of

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

the transferors and transferees. In this case, for example,

100 percent of the direct ownership interests in the properties

transferred from the corporation to the trust. Yet the statute

plainly contemplates that such transfers fall within the ambit

of section 62(a)(2). It follows then, that with respect to

entities, we must look, not to the transfer of direct ownership

interests, but to the transfer of beneficial ownership interests

to assess proportionality. Although a corporation has full

direct ownership of its property, its shareholders will have

partial, proportional beneficial ownership interests therein.

Second, this reading of the statute squares the mandate

that “proportional ownership interests . . . in each and every

piece of real property transferred” must remain the same with

the assertion that those interests may be “represented by

stock, partnership interest, or otherwise.” (§ 62(a)(2).) Stock

and partnership interests represent ownership interests in

entities. Possession of an ownership interest in an entity

owning real property does not afford a direct ownership

interest in the entity’s property. Thus, it is apparent that,

when the transferor or transferee is an entity, “proportional

ownership interests” refers to beneficial ownership interests in

the real property as represented by indicia of ownership in the

entity.

This interpretation is consistent with the first mandate

of section 62(a)(2) — that a transfer “results solely in a change

in the method of holding title to the real property.” (Italics

added.) A transfer results “solely” in a change in the method of

holding title if ownership of the property does not change

beyond a change in the identity of the titleholder(s). That

condition is satisfied, when two entities are involved, if the

proportional beneficial ownership interests of the owners of the

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

entities remain the same, or, when individuals and an entity

are involved, the proportional direct ownership interests of the

individuals are identical to their proportional beneficial

ownership interests as owners of the entity. In such

circumstances, the identity of the titleholder(s) of the real

property will change, but the underlying “ownership” of the

property will not. In contrast, if the beneficial owners change,

or the proportionality of their ownership interests change, the

transfer will result in something more than a change in the

method of holding title; it will result in a change in the

property’s underlying “ownership.” The proportionality

requirement gives substance to the first mandate of the

statute.

3. By the statute’s terms, as well as general corporate

legal principles, beneficial ownership interests in

corporate property are measured by corporate

“stock” generally

Although we reject the trustees’ threshold assertion

regarding the “ownership interests” to which section 62(a)(2)

refers, that does not fully dispose of their argument. As section

62(a)(2) recognizes in stating that proportional ownership

interests are “represented by stock, partnership interest, or

otherwise,” the beneficial ownership interests of the owners of

a transferor or transferee entity in that entity’s real property

are measured by, and are therefore identical to, their

proportional ownership interests in the entity. That is, a

50 percent shareholder of a corporation owns a 50 percent

beneficial ownership interest in the real property of the

corporation. The trustees argue that ownership interests in a

corporation should be measured by voting stock only, rather

than all stock. We reject this argument as inconsistent with

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

both the language of the statute and general corporate legal

principles.

Taken strictly as a matter of statutory construction, the

argument falters because it seeks to “ ‘insert what has been

omitted’ ” from the statute. (Security Pacific National Bank v.

Wozab (1990) 51 Cal.3d 991, 998, quoting Code Civ. Proc.,

§ 1858.) “ ‘Where the words of the statute are clear, we may

not add to or alter them to accomplish a purpose that does not

appear on the face of the statute or from its legislative

history.’ ” (In re Jennings (2004) 34 Cal.4th 254, 265.) Section

62(a)(2) refers to “ownership interests . . . represented by stock,

partnership interest, or otherwise.” (Italics added.) The

trustees point to nothing in the language of section 62(a)(2) or

its legislative history that suggests the Legislature intended

the term “stock” to refer only to voting stock.

The trustees nonetheless seek to impose this limitation

by reference to section 64, which expressly refers to “voting

stock.” (§ 64(c)(1).) Yet, “[a]s a general rule, when the

Legislature uses a term in one provision of a statute but omits

it from another . . . we generally presume that the Legislature

did so deliberately, in order ‘ “to convey a different

meaning.” ’ ” (Scher v. Burke (2017) 3 Cal.5th 136, 144–145

(Scher), quoting Klein v. United States of America (2010) 50

Cal.4th 68, 80; In re Ethan C. (2012) 54 Cal.4th 610, 638

[“When language is included in one portion of a statute, its

omission from a different portion addressing a similar subject

suggests that the omission was purposeful.”].) If the

Legislature intended to limit section 62(a)(2)’s reference to

“stock” to the single class of voting stock, it could have said so

expressly, as it did in similar Revenue and Taxation Code

provisions, such as section 64(c)(1). Instead, the Legislature

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

used the general term “stock,” suggesting it intended to refer

more broadly to other classes of stock.2 Specifically, in this

context, “stock” is most naturally understood to refer to all

stock that carries a beneficial interest in the property of a

corporation.

We observe that this construction of section 62(a)(2) is

consistent with general corporate legal principles. Shares of

stock are “the units into which the proprietary interests in a

corporation are divided in the articles.” (Corp. Code, § 184.) A

corporation “may issue one or more classes or series of shares

or both, with full, limited or no voting rights and with such

other rights, preferences, privileges and restrictions as are

stated or authorized in its articles.” (Corp. Code, § 400,

subd. (a).) “Voting stock” refers to a class of stock that has

voting rights, which means, generally, “the power to vote for

the election of directors.” (Corp. Code, § 194.5.) The authority

to manage the business and affairs of a corporation is vested in

its board of directors. (Grosset v. Wenaas (2008) 42 Cal.4th

1100, 1108.) Holders of voting stock exercise indirect control

over corporate affairs, however, through their voting power.

(See Corp. Code, § 160, subd. (a).)

The legal relationship between the shareholders of a

corporation and the corporation’s property was summarized

As the Court of Appeal majority noted, there are many

classes of stock: “The [Revenue and Taxation] code expressly

identifies numerous subcategories of stock: voting stock (§ 64),

nonvoting stock (§ 23361), capital stock (§ 212), treasury stock

(§ 24942), common stock (§ 23040.1), preferred stock

(§ 23040.1), and qualified small business stock (§ 18038.4).”

(Prang, supra, 58 Cal.App.5th at p. 259.) The statutory

references to these various classes of stock reaffirms our

reading of “stock” in section 62(a)(2) as a general term.

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

over a century ago in MacDermot v. Hayes (1917) 175 Cal. 95

(MacDermot): “A corporation is created and given a legal

existence in order that it may, in its legal capacity, hold and

manage the property transferred and business committed to it

by its stockholders. They are the beneficial owners of the

corporate property. The corporation is their agency and holds

the property for their benefit and in trust for them. The

interest of each stockholder in the property is the proportion

which his shares of stock bear to all the stock outstanding.

The [share] certificates are not property in the real sense, but

are merely evidences of the undivided interests of the several

stockholders in the corporate assets and business.” (Id. at

p. 114.) Although shareholders do not hold legal title to the

corporation’s property, they are said to have “an equitable

interest therein” as beneficial owners. (Newell-Murdoch Realty

Co. v. Wickham (1920) 183 Cal. 39, 45 [“A stockholder in a

corporation has a beneficial interest, in proportion to the

amount of his stock, in all the property of the corporation”].)

As the foregoing makes clear, beneficial ownership of

corporate real property lies with shareholders generally;

ownership of a share of a corporation’s voting stock ordinarily

confers no greater beneficial ownership interest in the property

of the corporation than ownership of a share of nonvoting

stock. That was certainly true in this case. 3 Under the

corporation’s articles of incorporation, the only difference

between voting and nonvoting stock was the right of the former

to exercise voting power. The voting and nonvoting stock were

The present case does not implicate, and we leave for

another day, questions regarding the proper application of

section 62(a)(2) if a corporation were to issue shares with

limited or subordinated interests in the corporate property.

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

“equal in all other respects including, but not limited to,

dividend and liquidation rights.” Voting and nonvoting stock

thus enjoyed identical economic rights in the corporation and

its property. If the corporation’s assets were liquidated, for

example, “[i]t is not inconceivable” that each individual

shareholder “would be entitled to between $92,520 and

$174,760” based on their proportional shareholdings and the

appraised value of the property. (Prang, supra, 58 Cal.App.5th

at p. 261, fn. 13.) For purposes of section 62(a)(2), then, all of

the corporation’s stock must be considered. The trustees’

contrary argument conflates corporate ownership with

corporate control. Because section 62(a)(2) makes no reference

to corporate control, the construction proposed by the trustees

is inapt.

C. The Language of Section 64

The trustees’ fundamental argument for construing the

term “stock” in section 62(a)(2) to mean “voting stock” is that

this interpretation is necessary to maintain a uniform

definition of “ownership interests” in section 62(a)(2) and other

statutory provisions, namely section 64, subdivisions (c)(1)

and (d). We reject this argument because our interpretation of

section 62(a)(2) creates no statutory conflict with section 64.

As stated above, the term “stock” in section 62(a)(2) is

used as a means for measuring the proportional beneficial

ownership interests of corporate shareholders in real property

transferred by or to a corporation. Section 64, on the other

hand, concerns the purchase or transfer of ownership interests

in a legal entity. Section 64(a) provides the general rule that

“the purchase or transfer of ownership interests in legal

entities, such as corporate stock or partnership or limited

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

liability company interests, shall not be deemed to constitute a

transfer of the real property of the legal entity.” Notably,

section 64(a) refers to “stock” generally, not just voting stock;

the general rule thus applies to both voting and nonvoting

stock, and neither the trustees nor the State Board have

suggested otherwise.

Section 64(c)(1) provides an exception to the general rule

of section 64(a). As set forth above, the exception provides

that, although the transfer of ownership interests in a legal

entity generally does not constitute a change in ownership,

there is a change in ownership when an individual or other

legal entity obtains a “majority ownership interest” or

“controlling interest” in the entity in question; for a

corporation, control is obtained through ownership of “more

than 50 percent of the voting stock.” (§ 64(c)(1).) To the extent

section 64(c)(1) refers to “ownership interests,” they are

interests in “any partnership, limited liability company, or

other legal entity,” not in transferred real property. (Italics

added.) Further, although the subdivision refers to “voting

stock,” it is used as a measure of corporate control, not of

beneficial ownership interests in corporate real property.

Section 64(d) is similar. It applies to property previously

transferred to a legal entity in a transaction covered by section

62(a)(2). Following such a transaction, “the persons holding

ownership interests in that legal entity immediately after the

transfer shall be considered the ‘original coowners.’ ” (§ 64(d).)

A change in ownership of the real property previously

transferred from the original coowners to the entity occurs if

the original coowners subsequently transfer “shares or other

ownership interests representing cumulatively more than

50 percent of the total interests in the entity.” (Ibid.) Like

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

section 64(c)(1), section 64(d) makes no reference to

proportional ownership interests in real property. Rather, it

refers to “ownership interests . . . in the entity.” (§ 64(d).)

Section 64(d) does not itself refer to “stock” or “voting stock.”4

In sum, because section 64, subdivisions (c)(1) and (d)

contain no reference to ownership interests in real property,

they cannot create a definitional conflict with section 62(a)(2).

Further, even insofar as section 62(a)(2) looks to ownership

interests in an entity, such as “stock,” it does so as an indicium

of beneficial ownership interests in the entity’s real property.

The sole reference to “voting stock” in the cited subdivisions of

section 64 indicates it is used as a measure of corporate

control, not of the shareholders’ beneficial ownership interests

in corporate real property. Given that sections 62 and 64 reach

Section 64(d) refers to “ownership interests representing

cumulatively more than 50 percent of the total interests in the

entity.” Because the relevant ownership interests are not

otherwise specified, section 64(d) may be ambiguous. The

trustees read section 64(d) as referring to the same majority or

controlling ownership interests expressly identified in section

64(c)(1). The relevant State Board regulation supports that

interpretation. (Cal. Code Regs., tit. 18, § 462.180, subd. (d)(2)

[specifying the relevant ownership interests are those “defined

in subdivision (d)(1),” which mirrors the language of section

64(c)(1)].) For a corporation, then, the relevant ownership

interests would be voting stock. We need not definitively

construe section 64(d), however, to conclude it creates no

conflict with our interpretation of section 62(a)(2). Even if a

majority or controlling ownership interest in a corporation is

measured by voting stock for purposes of section 64(d), that in

no way undermines the conclusion that ownership interests in

corporate real property are measured by stock generally for

purposes of section 62(a)(2).

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

fundamentally different issues, the trustees’ call for statutory

uniformity is without basis.

The foregoing analysis points to a further infirmity in the

trustees’ reasoning. They assert that, “ ‘[i]f Section 62(a)(2)

means “all stock,” the exclusion under Section 62(a)(2) would

be measured under one standard — all stock — but under a

different standard — voting stock — to measure when the

exclusion ends under Section 64(d).’ ” Tellingly, the trustees do

not explain why application of these two measures would be

problematic. To be sure, if sections 62 and 64 used different

measures for an identical or indistinguishable purpose, that

might be problematic; but they do not. Contrary to the

trustees’ assertion, section 64(d) is not properly characterized

as governing when the exclusion set forth in section 62(a)(2)

“ends.” Section 62(a)(2) applies, if at all, when real property is

transferred to a corporation. Once the real property is held by

a corporation, it enjoys the benefit of the general rule set forth

in section 64(a) — that is, ownership interests in the entity

generally can be freely transferred without triggering a change

in ownership. Section 64, subdivisions (c)(1) and (d) set forth

exceptions to the general rule of section 64(a). Thus, section

64(d) is more aptly characterized as governing where the

benefit of section 64(a) ends, albeit only as to property

transferred to the corporation by the original coowners and not

all property held by the corporation.

D. The Legislative History and Public Policy

“Where statutory text ‘is unambiguous and provides a

clear answer, we need go no further.’ ” (Scher, supra, 3 Cal.5th

at p. 148.) Even if we were to assume that the statutory text is

ambiguous, however, extrinsic sources — including the

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

statute’s purpose, its legislative history, and public policy —

are consistent with our reading of section 62(a)(2).

1. The legislative history is consistent with our

construction of section 62(a)(2)

As discussed above, section 62 emerged from the work of

a legislative task force assigned to propose implementing

legislation for Proposition 13, including the definition of

“change in ownership.” One issue the task force “considered at

length” was how to deal with real property owned by legal

entities. (Task Force Report, supra, at p. 45.) It considered

two alternative approaches: the “separate entity” theory,

which respects an entity’s “identity separate from its owners,”

and the “ultimate control” theory, which “[l]ooks through the

legal entity” to changes in majority control. (Ibid.) The task

force adopted the separate entity theory and recommended

that it “be followed consistently and without special

exclusions,” though it recognized that this resulted in some

anomalous outcomes. (Id. at p. 46.) “For example,” the Task

Force Report observed, “incorporation of a sole proprietorship

would be, an ownership change under the separate entity

theory. On the other hand, under the separate entity theory,

the property of many corporations will never be fully

reappraised, since no ‘change in ownership’ will ever occur.”

(Ibid.)

In keeping with the task force’s commitment to

consistent application of the separate entity theory, its

legislative proposals contained no analog of section 62(a)(2),

which excludes transfers of real property to or from an entity

that result solely in a change in the method of holding title.

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

(See Task Force Report, supra, at p. 51.)5 In the absence of

such a provision, a transfer between entities or between

individuals and an entity was necessarily regarded as a change

in ownership because the identity of the titleholder changed,

even if the underlying beneficial ownership of the property did

not. As noted, the task force cited as an example the

incorporation of a sole proprietorship as perhaps the most

straightforward example of a change only in the form of

ownership. (Id. at p. 46.)

Although the task force’s approach had the virtue of

consistency, the failure to exclude transactions that result

merely in a change in the method of holding title proved

unacceptable. Within a year after the Legislature adopted the

task force’s recommended version of section 62, it enacted the

first version of the language now found in subdivision (a)(2),

excluding such transfers. (Stats. 1980, ch. 1081, § 2.3.) As a

contemporary bill analysis explained, the new provision “would

allow a transfer of title into a distinct entity to be excluded

from change in ownership, if . . . the proportionate share of

ownership is not altered.” (Department of Finance, Analysis of

Sen. Bill No. 1260 (1980–1981 Reg. Sess.) as amended Aug. 26,

1980, p. 2.)

The Legislature originally enacted Section 62 essentially

as proposed by the task force. Recommended subdivision (a)

excluded “[a]ny transfer between coowners which results in a

change in the method of holding title to the real property

without changing the proportional interests of the coowners,

such as a partition of a tenancy in common.” (Stats. 1979,

ch. 242, § 4.) It did not mention transfers involving legal

entities.

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

The language of the 1980 amendment did not specify

which ownership interests must remain unchanged. Rather,

the provision excluded from a change in ownership any

transfer involving an entity that results solely in a change in

the method of holding title and “in which the proportional

interests of the transferors and transferees, whether

represented by stock, partnership interest, or otherwise,

remain the same after the transfer.” (Stats. 1980, ch. 1081,

§ 2.3.) This oversight was remedied two years later, when

section 62(a)(2) was again amended and the language was

changed to its present form, excluding transfers in which

“proportional ownership interests of the transferors and

transferees . . . in each and every piece of real property

transferred, remain the same after the transfer.” (Stats. 1982,

ch. 1465, § 4.5, italics added.)

The legislation proposing the 1982 amendment,

sponsored by the State Board, explained, “[t]he proposal would

. . . make technical changes to Section 62(a)(2) for the purpose

of clarifying that the ‘proportional interests’ must remain the

same in each and every piece of real property transferred.”

(State Bd., Analysis of Assem. Bill No. 3382 (1982–1983 Reg.

Sess.) as amended Aug. 10, 1982, p. 4; see also id. at p. 1.) To

illustrate, the bill analysis provided the following example:

“Corporation A owns Blackacre and Whiteacre, each of equal

value. X and Y are each 50% of [sic] shareholders. Upon

dissolution of Corporation A, X and Y receive a 1/2 undivided

interest in both Blackacre and Whiteacre. This transfer is

excluded under proposed Section 62(a)(2), whereas a transfer

of Blackacre to X and Whiteacre to Y upon dissolution of

Corporation A would not be, since the proportional ownership

interests in each property is [sic] not the same before and after

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

the transfer.” (Id. at p. 4.) The example is fully consistent

with our interpretation of section 62(a)(2) because it compares

the beneficial ownership interests of the shareholders in the

property prior to the transfer with their direct ownership

interests afterwards. The example makes no reference to

voting shares.

Section 62(a)(2) was therefore expressly amended by the

Legislature, at the behest of the State Board, to make clear

that the phrase “proportional ownership interests” refers to

interests in real property. To interpret the phrase to refer

directly to interests in an entity, as the trustees urge, would

contradict the Legislature’s clearly expressed intent. Further,

in proposing the amendment, the State Board used an example

that makes no reference to voting shares, instead using

ownership of corporate stock generally to represent

proportional beneficial ownership interests. As stated above, a

beneficial ownership interest in corporate real property is not

dependent on ownership of shares having voting rights. To

accept the trustees’ contrary argument would expand the scope

of the exclusion provided by section 62(a)(2) beyond that

intended by the Legislature — i.e., to identify transfers of real

property that result solely in the method of holding title.

An example is illustrative. In the instant case, the

nonvoting stock represented a relatively small portion of the

outstanding stock. Imagine, however, a corporation with two

shareholders, one owning voting shares representing

50 percent of the outstanding corporate stock, and another

owning nonvoting shares representing the remaining

50 percent. If the corporation’s real property were transferred

to the holder of the voting stock, the proportional ownership

interests would remain unchanged when measured by voting

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

stock. Yet the beneficial ownership interests in the real

property would have changed dramatically. The interest of the

holder of voting stock would increase from 50 to 100 percent,

while the interest of the other shareholder would decrease

from 50 percent to nothing. The number of persons holding a

beneficial ownership interest likewise would be reduced by

half. To exclude this transaction from “change in ownership”

would be in considerable tension with the requirement of

section 62(a)(2) that the transfer result solely in a change in

the method of holding title.

2. There is no policy basis for requiring a uniform

measure of “ownership interests” across these

provisions

We also find no policy basis to require a uniform measure

of “ownership interests” across these statutory provisions. To

reiterate, section 62(a)(2) and section 64, subdivisions (c)(1)

and (d) are intended to remedy anomalies created by the

“separate entity” theory but are otherwise dissimilar. Section

62(a)(2) describes transfers of real property by or to an entity

that do not result in a change in ownership despite a formal

change in the titleholder(s). Section 64, subdivisions (c)(1)

and (d) concern, in effect, the inverse of that situation.

Section 64 concerns the transfer of ownership interests in an

entity. Such transfers generally do not result in a change in

ownership of the real property owned by the entity because

they do not result in a change in the titleholder(s). However,

section 64, subdivisions (c)(1) and (d) describe the

circumstances in which the transfer of interests in an entity

will result in a change in ownership of the entity’s real

property despite no formal change in the titleholder(s). The

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

Legislature’s adoption of different rules to govern these

different situations is entirely reasonable.

As to section 62(a)(2), adoption of a rule governed by

control over an entity, rather than by beneficial ownership

interests in the entity’s real property, would be contrary to the

express purpose of the proportional ownership interest

exception: the persons having a beneficial ownership interest

in real property could be substantially changed without

triggering a change in ownership. So long as the persons

holding the voting stock remained the same, no change in

ownership would occur. Recall the example above involving a

corporation with two shareholders, one owning voting shares

representing 50 percent of the outstanding corporate stock, and

another owning nonvoting shares representing the remaining

50 percent. If section 62(a)(2) were governed by corporate

control, the real property owned by the corporation — in which

both shareholders have identical dividend and liquidation

rights — could be transferred to the voting shareholder

without triggering a change in ownership, even though doing

so would eliminate the beneficial ownership interests of the

nonvoting shareholder. The Legislature’s decision to measure

a change in ownership by proportional beneficial ownership

interests, rather than control, thus limits application of the

exception to transactions in which there is a change solely in

the method of holding title.

Conversely, a change in corporate control is a rational

measure for determining when an entity’s real property is

deemed to be subject to a change in ownership, despite no legal

change in the titleholder. In the absence of some such rule, the

property of a corporation would never experience a change in

ownership, even if the corporation itself changed hands

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

entirely. Yet a rule similar to that of section 62(a)(2), in which

a change in ownership occurs whenever beneficial ownership

changes, would put ownership of a public corporation’s real

property in perpetual flux and seriously hamper changes in

ownership of corporations. A middle ground was necessary.

The Legislature’s decision to equate a change in control of the

corporation to a change in ownership of its real property

represents a reasonable compromise.

Borrowing an argument advanced by the State Board

below, the trustees argue our construction “creates loopholes

that allow for tax evasion.” In the example they posit, if stock

in section 62(a)(2) means “all stock,” a corporation can issue a

new class of nonvoting stock and then dissolve, such that the

entity’s former real property would then be partially owned by

the new nonvoting shareholder.

As an initial matter, the trustees’ example acknowledges

that, upon dissolution, the corporation’s real property would be

proportionally divided among all shareholders, not just voting

shareholders. Setting that aside, we acknowledge that neither

our construction of the statute nor the one proposed by the

trustees is likely to prevent all tax avoidance. The trustees do

not, however, establish that our construction would “ ‘frustrate

the manifest purpose of the legislation as a whole or otherwise

lead to absurd results.’ ” (Siry Investment, L.P. v.

Farkhondehpour (2022) 13 Cal.5th 333, 362, fn. 17.) The so-

called “absurdity exception” requires “ ‘much more than

showing that troubling consequences may potentially result if

the statute’s plain meaning were followed or that a different

approach would have been wiser or better.’ ” (Id. at p. 356.)

We are not persuaded to a different view of the statutory text

based on the mere potential for loopholes. Of course, if the

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

Legislature becomes concerned that any loophole is being used

to the detriment of the statutory scheme, it can step in to

amend the statute.

Adopting another argument advanced by the State

Board — and endorsed by the dissent — below, the trustees

argue that reading “stock” in section 62(a)(2) to mean voting

stock “avoids significant administrative difficulties.” (Prang,

supra, 58 Cal.App.5th at p. 262 (dis. opn. of Baker, J.).)

According to the State Board, evaluating the proportional

ownership interests of voting stock is relatively

straightforward whereas evaluating the proportional

ownership interests of all stock would “ ‘necessitate an

evaluation of all the different classes and types of stock and

their attendant rights, having to assign what may amount to

random percentages of ownership to particular classes of stock

since . . . owners of corporations have no specific right to any

corporate real property.’ ” (Ibid.)

The trustees’ assertion regarding the practicalities of

assessing proportional ownership interests does not withstand

scrutiny. As noted above, corporations “may issue one or more

classes or series of shares or both, with full, limited or no

voting rights . . . .” (Corp. Code, § 400, subd. (a), italics added.)

Thus, evaluating the proportional ownership interests of

different classes or series of voting stock, some with full voting

rights and others with limited voting rights, is not necessarily

straightforward. Moreover, the notion that evaluating the

proportional ownership interests of all corporate stock is

unworkable seems to be based on a faulty premise, i.e., that

owners of corporations have “no specific right to any corporate

real property.” (Prang, supra, 58 Cal.App.5th at p. 262 (dis.

opn. of Baker, J.).) Although shareholders have no direct

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

ownership interest in corporate real property, each shareholder

enjoys a beneficial ownership interest in the property of the

corporation equal to “the proportion which his shares of stock

bear to all the stock outstanding.” (MacDermot, supra, 175

Cal. at p. 114.) This principle is not particularly complex to

apply; indeed, it is applied rather simply here.

Lastly, the trustees argue the construction of section

62(a)(2) we adopt today undermines uniformity in the

administration of property tax assessment practices

throughout the state — a goal the State Board is charged to

promote through its rulemaking authority. (See Gov. Code,

§ 15606, subds. (c), (e), (f).) The trustees echo the view of the

Court of Appeal dissent that our construction “permits the Los

Angeles County Assessor to disregard the [State] Board’s

instructions and expertise, thereby opening the door to a

patchwork, county-by-county system of differing reassessment

methods that is the opposite of what the Legislature intended.”

(Prang, supra, 58 Cal.App.5th at p. 262 (dis. opn. of Baker, J.).)

We do not question that uniform application of property

tax assessment practices throughout the state is an important

policy goal. There is no evidence that our construction of

section 62(a)(2) imperils that goal, however. Although the

trustees suggest that the Los Angeles County Assessor is an

outlier in its application of section 62(a)(2), we note that the

California State Association of Counties and the California

Assessors Association, which purport to represent all

58 counties, have filed an amicus curiae brief in support of the

assessor here. They note that “there is no information in the

record or known to amici to suggest that the Assessor is an

outlier in his interpretation of the statute or that other

counties are applying the law differently.” The State Board,

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

which elected not to file an amicus curiae brief before this

court, provided no evidence to the contrary below. Moreover,

as discussed in the section that follows, we conclude the State

Board has not promulgated any controlling guidance that

supports the trustees’ construction of section 62(a)(2).

E. The Agency Guidance

With the foregoing in mind, we turn to the trustees’

argument that the Court of Appeal majority failed to accord

proper deference to the State Board’s implementing regulation

and interpretative materials. As set forth above, we may

extend deference to the State Board’s constructions of the

relevant Revenue and Taxation Code provisions “to the extent

that [they] are embodied in quasi-legislative regulations or

constitute long-standing, consistent, and contemporaneous

interpretations.” (McHugh, supra, 12 Cal.5th at p. 227, citing

Yamaha, supra, 19 Cal.4th at pp. 12–13.)

Although “the proper interpretation of a statute is

ultimately the court’s responsibility” (American Coatings Assn.

v. South Coast Air Quality Management Dist. (2012) 54 Cal.4th

446, 462), an agency’s interpretation is one of several tools

available to the court. (Yamaha, supra, 19 Cal.4th at p. 7.)

Administrative rulemaking falls into two categories: quasi-

legislative rules, whereby an agency creates new substantive

standards under an express delegation of legislative authority,

and interpretative rulemaking, whereby an agency clarifies

existing substantive standards set forth in some law or

regulation that it is called upon to administer. (Alvarado v.

Dart Container Corp. of California (2018) 4 Cal.5th 542, 556,

citing Yamaha, supra, 19 Cal.4th at pp. 7–12.) Quasi-

legislative rules, such as the regulations implementing the

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

Revenue and Taxation Code, are afforded the “dignity of

statutes.” (Yamaha, supra, 19 Cal.4th at p. 10.) Interpretative

rules, such as the other State Board materials cited by the

trustees, are entitled to consideration and respect but are not

binding or necessarily even authoritative. (Id. at pp. 7–8.)

“[Their] power to persuade is both circumstantial and

dependent on the presence or absence of factors that support

the merit of the interpretation.” (Id. at p. 7.) “Depending on

the context, it may be helpful, enlightening, even convincing.

It may sometimes be of little worth.” (Id. at p. 8.)

Here, the trustees assert that the State Board has

consistently construed “stock” in section 62(a)(2) to mean

“voting stock,” and that the Court of Appeal should have

deferred to the agency’s construction. In advancing this

argument, they rely on the State Board’s regulation

implementing section 62(a)(2), which is published at California

Code of Regulations, title 18, section 462.180 (Rule 462.180).

They also rely on subsequent State Board publications

purporting to interpret Rule 462.180. We conclude Rule

462.180 supports our interpretation of section 62(a)(2) and the

remaining materials are unpersuasive.

1. Rule 462.180 is consistent with our interpretation

of section 62(a)(2)

Rule 462.180 addresses “Change in Ownership — Legal

Entities,” a topic the regulation divides into two subtopics,

“Transfers of Real Property to and by Legal Entities” (Rule

462.180, subd. (a)) and “Transfers of ownership interests in

legal entities” (Rule 462.180, subd. (c)). Rule 462.180,

subdivision (a) states the general rule, that “[t]he transfer of

any interest in real property to a corporation, partnership,

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

limited liability company, or other legal entity is a change in

ownership of the real property interest transferred.” This is a

straightforward application of the separate entity theory. The

general rule is followed, in subdivision (b), with two exceptions.

The first is not relevant here. The second, “Proportional

Transfers of Real Property,” reflects the exception contained in

section 62(a)(2), stated in essentially the language of the

statute. (Rule 462.180, subd. (b)(2).) It requires that “the

proportional ownership interests in each and every piece of

real property transferred remain the same after the transfer.”

(Ibid.) In this way, the rule provides no support for the

trustees’ argument.

Neither Rule 462.180, subdivision (b)(2), which reflects

the language of section 62(a)(2), nor the explanatory examples

that follow, mention voting stock. On the contrary, the

examples are fully consistent with our understanding of the

proper application of section 62(a)(2). Of particular interest is

Example 2, which states: “A transfer of real property from A

and B, as equal co-tenants, to Corporation X where A and B

each take back 50 percent of the stock. No change in

ownership. However, if A and B each take back 49 percent of

the stock and C receives 2 percent of the stock then there will

be a change in ownership of the entire property.” (Rule

462.180, subd. (b)(2).) Two aspects of this example are notable.

First, the “proportional ownership interests” referred to in the

regulation are measured by the shareholders’ beneficial

ownership interests in the property, as measured by their

shareholdings. Second, the example does not mention voting

stock; the beneficial ownership interests are measured by stock

generally. When the proportional beneficial ownership

interests of the shareholders are the same as the proportional

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

direct ownership interests of the individual owners, as in the

first part of the example, the exception applies; when they are

not, as in the second part of the example, the exception does

not apply. Example 5 is also of note. It provides: “A transfer

of real property from Corporation X to its sole shareholder A.

No change in ownership, even if A is an ‘original co-owner,’

because interests in real property, and not ownership interests

in a legal entity, are being transferred.” (Ibid.) This tends to

defeat the trustees’ argument that the distinction drawn by the

Court of Appeal majority “between Section 62(a)(2) and

Section 64 does not exist.”

The trustees point to a different subdivision of Rule

462.180. Subdivision (c) of the rule concerns the transfer of

ownership interests in legal entities, and it reiterates the

general rule that the transfer of interests in a legal entity does

not constitute a change in ownership of the real property

owned by the entity. Subdivision (d) then provides exceptions

to the general rule, with subdivision (d)(1), labeled “control,”

describing the exception set forth in section 64(c)(1). Like

section 64(c)(1), Rule 462.180, subdivision (d)(1)(A) describes

the measure of corporate control as “more than 50 percent of

the voting stock.” Subdivision (d)(2) of the rule describes the

exception set forth in section 64(d). Rule 462.180, subdivision

(d)(2) explains that the exception applies when original

coowners subsequently transfer “more than 50 percent of the

total control or ownership interests, as defined in subdivision

(d)(1) of this rule, in that partnership, corporation, limited

liability company or legal entity[.]” (Italics added.) The

trustees point to this italicized language to argue that Rule

462.180 measures ownership interests in a corporation as

voting stock for all purposes.

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

As discussed above, however, subdivisions (c) and (d) of

Rule 462.180 concern “[t]ransfers of ownership interests in

legal entities.” No portion of the rule suggests the definition in

subdivision (d)(1) has any applicability to subdivisions (a)

and (b), which concern “transfers of real property to and by

legal entities.” (Capitalization omitted.) Thus, although the

State Board’s regulation may be entitled to the dignity of

statute, nothing in Rule 462.180 can be read to suggest that

“stock” in section 62(a)(2) means voting stock. In short, Rule

462.180 does not support the trustees’ interpretation of section

62(a)(2). In the absence of any agency regulation to support

their contrary interpretation, we have no cause to deviate from

the plain meaning of the statute.

2. The State Board’s other guidance is unpersuasive

As the foregoing demonstrates, Rule 462.180, subdivision

(b)(2) does not support the trustees’ argument that

proportional ownership interests in corporate real property

must be measured by voting stock. Cognizant of this analytical

gap, the trustees rely heavily on interpretive materials

published by the State Board long after Rule 462.180 was

adopted. In deciding what deference, if any, to afford these

materials, we consider several factors that bear on whether the

agency’s interpretation is likely to be correct: “indications of

careful consideration by senior agency officials,” “evidence that

the agency ‘has consistently maintained the interpretation in

question, especially if [it] is long-standing,’ ” and “indications

that the agency’s interpretation was contemporaneous with

legislative enactment of the statute being interpreted.”

(Yamaha, supra, 19 Cal.4th at p. 13.)

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

In an amicus brief filed below, the State Board

represented to the Court of Appeal that its interpretation of

section 62(a)(2) was “consistent and longstanding.” Like the

trustees, the State Board pointed to Rule 462.180, which was

promulgated in 1981, as a “contemporaneous” interpretation of

the relevant statutes. As indicated, however, Rule 462.180

does not mention voting stock in connection with section

62(a)(2), and its examples refer only to “stock.” We have been

provided no State Board publication predating 2002 that can

be read to interpret the reference to “stock” in section 62(a)(2)

to mean “voting stock.” The State Board’s amicus brief in the

Court of Appeal did not acknowledge, let alone attempt to

explain, the failure of Rule 462.180 to refer to “voting stock” in

this context. Thus, contrary to the State Board’s

representations below, it appears the interpretation found in

its more recent materials is neither “consistent” nor

“longstanding.” It was certainly not made contemporaneously

with the enactment of section 62(a)(2).

Of the materials cited by the trustees, the most salient is

Section 401 of the Assessors’ Handbook, a 2010 publication

that discusses a variety of issues raised by sections 60 through

69.5.6 (State Bd., Assessors’ Handbook (2010) (Handbook) at

p. ii.) As the State Board acknowledges in its “Hierarchy of

The Assessors’ Handbook consists of over 30 independent

sections discussing various aspects of property appraisal and

assessment. (See generally, Assessors’ Handbook <https://

www.boe.ca.gov/proptaxes/ahcont.htm> [as of May 30, 2024]; all

Internet citations in this opinion are archived by year, docket

number, and case name at <http://www.courts.ca.gov/

38324.htm>.) Section 401 was approved by the State Board on

September 15, 2010. (Handbook, supra, at p. ii; see

https://www.boe.ca.gov/proptaxes/pdf/ah401.pdf.)

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

Property Tax Authorities,” issued May 29, 2003, the “Assessors’

Handbook and other Board-approved publications do not have

the force of law”; they are “advisory only.” Under the general

heading “ownership of legal entities,” the Handbook states that

“[f]or change in ownership purposes, ownership in a

corporation is determined by the percentage of ownership or

control of a corporation’s voting stock.” (Handbook, at p. 38,

italics added.) The language and its placement within the

Handbook suggest it is meant to apply only to ownership

interests in legal entities, which corresponds to section 64, not

to ownership interests in real property as may be represented

by ownership interests in a legal entity, which would

correspond to section 62(a)(2).7 In any event, no authority is

cited in support of the proposition.

Later, in a section discussing the “proportional

ownership interest transfer exclusion,” the Handbook

accurately states the statutory rule, essentially mirroring

section 62(a)(2)’s language: “Any transfer of real property

between an individual or individuals and an entity, or between

legal entities, that results solely in a change in the method of

holding title to the real property, and in which the proportional

ownership interests of the transferors and transferees in each

and every piece of real property transferred remain the same

The Handbook generally acknowledges the distinction

between interests in real property and interests in legal

entities. (See Handbook, supra, at p. 41 [“In general, there are

two types of transfers involving legal entities that may trigger

a change in ownership of real property. The first type is a

transfer of real property between an individual and an entity

or between entities. The second type is a transfer of an interest

in an entity.”].)

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

after the transfer, is excluded from a change in ownership.”

(Handbook, supra, at p. 48.) The Handbook contains the same

examples contained in Rule 462.180, subdivision (b)(2).

Example 2 under Rule 462.180, subdivision (b)(2), for instance,

is included in the Handbook as Example 6-10. Yet the

references to “stock” in Example 2 of Rule 462.180, subdivision

(b)(2), have been changed to “voting stock” in Example 6-10 of

the Handbook. (Handbook, at p. 49.)8 The Handbook contains

no explanation for, or acknowledgment of, this change, nor is

any authority cited to fill that void. Notably, the example

includes only a “single class of voting stock,” with no mention

of other classes of stock, voting or nonvoting. Consequently,

the example does not suggest that voting stock alone should be

considered for purposes of section 62(a)(2). For this reason,

even if we accept that the Handbook reflects the State Board’s

interpretation of the meaning of the term “stock” in section

62(a)(2), it fails to persuade. There is no indication that the

State Board’s new reference to voting stock was the product of

a deliberative process, let alone that it received careful

consideration by senior agency officials.

Example 6-10 from the Handbook states: “D and B,

equal co-tenants, transfer their real property to Corporation X

and each take back 50 percent of the single class of voting

stock. No change in ownership occurs, since the proportional

ownership interests remain the same before and after the

transfer. [¶] However, if D and B each take back 49 percent of

the voting stock and C receives 2 percent of the voting stock,

there will be a change in ownership of the entire property since

the proportional ownership interests did not remain the same

before and after the transfer.” (Handbook, supra, at p. 49.)

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

The opinion letters cited by the trustees are similar in

this respect — none directly address the question presented

here and none appear to discuss a situation where a

corporation had issued both voting and nonvoting stock. 9 The

State Board opinion letter regarding “Change of Ownership -

Transfer from Revocable Trust to Corporation,” issued May 31,

2007 to the Nevada County Assessor, for example, discusses

“the transfer of real property from a husband and wife’s

revocable trust to a corporation owned 51 percent by the wife

and 49 percent by the husband.” Although the letter, when

analyzing section 62(a)(2)’s exclusion, later refers to “voting

stock,” there is no indication that either spouse also held

nonvoting stock. Like the Handbook, then, the letter does not

suggest that voting stock alone should be considered for

purposes of section 62(a)(2). The State Board opinion letters

regarding “Exchange, Transfer and Conversion of Interests in

a Limited Partnership Owning Real Property,” issued April 12,

2002, and “Request for Legal Opinion - BOE-100-B, Statement

of Change in Control and Ownership of Legal Entities for

Summaries of the conclusions reached in selected opinion

letters may be posted on the State Board’s website as

“[a]nnotations.” (Cal. Code Regs., tit. 18, § 5700, subd. (a)(1);

Yamaha, supra, 19 Cal.4th at pp. 4–5; see State Board,

Property Tax Annotations <https://www.boe.ca.gov/lawguides/

property/current/ptlg/annt/property-tax-annotations.htm> [as

of May 30, 2024].) Not all opinion letters “qualify for

annotation.” (Cal. Code Regs., tit. 18, § 5700, subd. (b).) It

appears two of the opinion letters relied upon by the trustees

were never annotated. The other two — Annotations 220.0067

and 220.0267 — were previously posted but are now marked

“(Deleted 2020).” (See State Board, Property Tax Annotations,

220.0000 Change in Ownership

<https://www.boe.ca.gov/lawguides/property/current/ptlg/annt/

220-0000-all.html [as of May 30, 2024].)

PRANG v. LOS ANGELES COUNTY ASSESSMENT APPEALS BOARD

Opinion of the Court by Evans, J.

[Redacted] & Subsidiaries Assignment No. 10-265,” issued

September 30, 2011, each contain a general statement that

Rule 462.180, subdivision (d) defines “ownership interests” for

purposes of sections 64 and 62(a)(2). These letters, however,

address the transfer of partnership interests and a complex

merger of affiliated corporations, respectively; the definition of

“stock” in section 62(a)(2) does not dictate the result in either

case. Again, there is no indication the general statements

contained in these letters were the product of a deliberative

process. They provide no rationale to support the assertion

that Rule 462.180 subdivision (d) defines “ownership interests”

for purposes of section 62(a)(2). Moreover, for the reasons

discussed at length above, the statements conflict with our

interpretation of section 62(a)(2) and the State Board’s own

implementing regulation; the letters do not acknowledge, much

less explain, this disconnect. Accordingly, to the limited extent

the opinion letters may reflect an interpretation of section

62(a)(2), they are unpersuasive and entitled to no deference.

III. DISPOSITION

We affirm the judgment of the Court of Appeal.

EVANS, J.

We Concur:

GUERRERO, C. J.

CORRIGAN, J.

LIU, J.

KRUGER, J.

GROBAN, J.

JENKINS, J.

See next page for addresses and telephone numbers for counsel who

argued in Supreme Court.

Name of Opinion Prang v. Los Angeles County Assessment Appeals

Board

__________________________________________________________

Procedural Posture (see XX below)

Original Appeal

Original Proceeding

Review Granted (published) XX 58 Cal.App.5th 246

Review Granted (unpublished)

Rehearing Granted

__________________________________________________________

Opinion No. S266590

Date Filed: May 30, 2024

__________________________________________________________

Court: Superior

County: Los Angeles

Judge: James C. Chalfant

__________________________________________________________

Counsel:

Greenberg Traurig, Colin W. Fraser and Cris K. O’Neall for Real Party

in Interest and Appellant.

McDermott Will & Emery and Charles J. Moll III for Charles J. Moll

III as Amicus Curiae on behalf of Real Party in Interest and Appellant.

Lamb and Kawakami, Renne Public Law Group, Thomas G. Kelch,

Michael K. Slattery; Mary C. Wickham and Rodrigo A. Castro-Silva,

County Counsel, Nicole Davis Tinkham and Peter M. Bollinger,

Assistant County Counsel, Richard Girgado and Justin Y. Kim, Deputy

County Counsel, for Plaintiff and Respondent.

Jennifer B. Henning for California State Association of Counties and

the California Assessors Association as Amici Curiae on behalf of

Plaintiff and Respondent.

Ajalat, Polley, Ayoob & Matarese, Richard J. Ayoob, Christopher J.

Matarese and Gregory R. Broege as Amicus Curiae.

Xavier Becerra, Attorney General, Tamar Pachter, Assistant Attorney

General, Karen W. Yiu and Heather B. Hoesterey, Deputy Attorneys

General, for California State Board of Equalization as Amicus Curiae.

Counsel who argued in Supreme Court (not intended for

publication with opinion):

Colin W. Fraser

Greenberg Traurig, LLP

18565 Jamboree Road, Suite 500

Irvine, CA 92612

(949) 732-6663

Thomas G. Kelch

Renne Public Law Group

350 Sansome Street, Suite 300

San Francisco, CA 94104

(415) 848-7200

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.