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Proposition 19 (Prop 19) was passed in California in 2021, and contains two relevant changes in California property tax assessments that may impact your estate planning. To ensure that you are not unaware of or adversely impacted by these changes, here is a summary of relevant planning information for your review.

Proposition 19 (Prop 19) was passed in California in 2021 and contains two relevant changes in California property tax assessments that may impact your estate planning. To ensure that you are not unaware of or adversely impacted by these changes, below is a summary of relevant planning information for your review.

Changes to the Transfer of Taxable Value for Certain Property Owners

Prop 19 expands the class of people who qualify for a transfer of their taxable value (i.e., property tax assessed value) from their current home to a new property.

Under prior law, only homeowners over 55 years of age or certain disabled persons could make use of this benefit one time during their lifetime. And they could do so only if (1) their new home is in the same county as their old home or in a few other select counties, (2) the value of their new home is less than or equal to the value of their old home, and (3) the sale and new purchase were done within a two year period.

The new law, which took effect on April 1, 2021:

• Expands the class of homeowners who are able to transfer their taxable value to include victims of wildfire or other natural disasters, regardless of age or disability status;
• Permits homeowners to take advantage of this provision three times during their lifetime.
• Removes the restriction that the replacement home must be in the same county as the old home. Now such replacements must simply be in the state of California.
• Allows homeowners to buy a replacement home that is worth more than their old home, provided, however, that the increase in value is added to the transferred taxable value of the old home. For example, assume a homeowner is over 55. Her house has a taxable value of $500,000. She sells it for $3,000,000. If she buys a new home anywhere in California for $3,000,000 or less, she can transfer her $500,000 taxable value to the new home, and it will become its taxable value. However, if she wants to upgrade to a $5,000,000 home, her new home's taxable value will be $2,500,000 – the taxable value of her old home transferred ($500,000) plus the upgrade value ($5,000,000 - $3,000,000.)

The new law keeps the two-year window requirement.

Changes to the Parent-Child Exclusion

Prop 19 limits the availability of the parent-child exclusion for purposes of real estate tax assessments. This aspect of Prop 19 took effect on February 16, 2021.

Under prior law, when a parent (or grandparent) transfers ownership of his or her principal residence to a child, the property's value for tax assessment purposes is not reassessed, regardless of how the child uses the residence. In California, transferring a parent's home to one or more children is permissible under current law without triggering reassessment, and the child or children could use it as a vacation home or a rental property.

Prop 19 changed this by requiring that the child or children use the residence as their own principal residence, or it will be reassessed. Furthermore, even if the child uses the residence as his or her own, there is a cap of $1,000,000 on the exclusion, as explained below. Technically, the new and old rules apply where a child transfers the residence to a parent, but this is much less common.

If your home has increased in value significantly from its taxable value, Prop 19 adds certain limitations that could result in an increased assessment. This new rule will apply to outright transfers and to transfers in trusts, such as the QPRT transfer illustrated below. If the increase in value is less than or equal to $1,000,000, no adjustment is made. If the increase in value is more than $1,000,000, the increase in value after the first $1,000,000 is added to the tax assessed value. For example, assume a parent's home has a taxable value of $500,000. Because the parent purchased the home many years ago, its value is now $5,000,000. In other words, it has increased by $4,500,000. The new reassessed value if the parent gifts the home to her child will be $3,500,000. There are inflation adjustments that apply to the $1,000,000 increase limitation for subsequent years.

This change to the parent-child exclusion may also affect many common estate planning trusts that were established several years (or even decades) ago. For example, a qualified personal residence trust (QPRT) allows the transfer of a residence to a trust while that residence can still be occupied for a fixed number of years. The parent(s) continue to live in the residence as their primary residence, and at the end of the fixed number of years, the residence transfers to someone else (typically their children or a trust for their benefit). Most parents who establish QPRTs want to continue living in the house after the fixed term ends. They may do so, but they need to pay rent to the trust or to their children, depending on who owns the residence at the end of the fixed term.

Under prior law, when the children become the owners they would qualify for the parent-child exclusion. Now, however, the children need to use the residence as their primary residence or trigger reassessment. They could not rent it back to the parent, and if siblings are entitled to the residence at the end of the fixed term, they would need to move in together and share a household to qualify for the exemption – which perhaps is not ideal for most adult children. If parents have QPRTs whose fixed term ends on or after February 16, 2021, the value of their home may be reassessed to its current value. This could lead to a massive property tax increase, though it may be possible to mitigate this. A review of your estate planning documents is recommended.

Full text of Proposition is available at https://vig.cdn.sos.ca.gov/2020/general/pdf/topl-prop19.pdf

The IRS has announced that, under the phased implementation of the One Big Beautiful Bill Act (OBBBA), there will be no changes to individual information returns or federal income tax withholding tables for the tax year at issue. 

The IRS has announced that, under the phased implementation of the One Big Beautiful Bill Act (OBBBA), there will be no changes to individual information returns or federal income tax withholding tables for the tax year at issue. Specifically, Form W-2, existing Forms 1099, Form 941 and other payroll return forms will remain unchanged for 2025. Employers and payroll providers are instructed to continue using current reporting and withholding procedures. This decision is intended to avoid disruptions during the upcoming filing season and to give the IRS, businesses and tax professionals sufficient time to implement OBBBA-related changes effectively.

In addition to this, IRS is developing new guidance and updated forms, including changes to the reporting of tips and overtime pay for TY 2026. The IRS will coordinate closely with stakeholders to ensure a smooth transition. Additional information will be issued to help individual taxpayers and reporting entities claim benefits under OBBBA when filing returns.

IR-2025-82

The IRS issued frequently asked questions (FAQs) relating to several energy credits and deductions that are expiring under the One, Big, Beautiful Bill Act (OBBB) and their termination dates. The FAQs also provided clarification on the energy efficient home improvement credit, the residential clean energy credit, among others.

The IRS issued frequently asked questions (FAQs) relating to several energy credits and deductions that are expiring under the One, Big, Beautiful Bill Act (OBBB) and their termination dates. The FAQs also provided clarification on the energy efficient home improvement credit, the residential clean energy credit, among others.

Energy Efficient Home Improvement Credit

The credit will not be allowed for any property placed in service after December 31, 2025.

Residential Clean Energy Credit

The credit will not be allowed for any expenditures made after December 31, 2025. Due to the accelerated termination of the Code Sec. 25C credit, periodic written reports, including reporting for property placed in service before January 1, 2026, are no longer required.

A manufacturer is still required to register with the IRS to become a qualified manufacturer for its specified property to be eligible for the credit.

Clean Vehicle Program

New user registration for the Clean Vehicle Credit program through the Energy Credits Online portal will close on September 30, 2025. The portal will remain open beyond September 30, 2025, for limited usage by previously registered users to submit time-of-sale reports and updates to such reports.

Acquiring Date

A vehicle is “acquired” as of the date a written binding contract is entered into and a payment has been made. Acquisition alone does not immediately entitle a taxpayer to a credit. If a taxpayer acquires a vehicle and makes a payment on or before September 30, 2025, the taxpayer will be entitled to claim the credit when they place the vehicle in service, even if the vehicle is placed in service after September 30, 2025.

FS-2025-5

IR-2025-86

The IRS has provided guidance regarding what is considered “beginning of constructions” for purposes of the termination of the Code Sec. 45Y clean electricity production credit and the Code Sec. 48E clean electricity investment credit. The One Big Beautiful Bill (OBBB) Act (P.L. 119-21) terminated the Code Secs. 45Y and 48E credits for applicable wind and solar facilities placed in service after December 31, 2027.

The IRS has provided guidance regarding what is considered “beginning of constructions” for purposes of the termination of the Code Sec. 45Y clean electricity production credit and the Code Sec. 48E clean electricity investment credit. The One Big Beautiful Bill (OBBB) Act (P.L. 119-21) terminated the Code Secs. 45Y and 48E credits for applicable wind and solar facilities placed in service after December 31, 2027. The termination applies to facilities the construction of which begins after July 4, 2026. On July 7, 2025, the president issue Executive Order 14315, Ending Market Distorting Subsidies for Unreliable, Foreign-Controlled Energy Sources, 90 F.R. 30821, which directed the Treasury Department to take actions necessary to enforce these termination provisions within 45 days of enactment of the OBBB Act.

Physical Work Test

In order to begin construction, taxpayers must satisfy a “Physical Work Test,” which requires the performance of physical work of a significant nature. This is a fact based test that focuses on the nature of the work, not the cost. The notice addresses both on-site and off-site activities. It also provides specific lists of activities that are to be considered work of a physical nature for both solar and wind facilities. Preliminary activities or work that is either in existing inventory or is normally held in inventory are not considered physical work of a significant nature.

Continuity Requirement

The Physical Work Test also requires that a taxpayer maintain a continuous program of construction on the applicable wind or solar facility, the Continuity Requirement. To satisfy the Continuity Requirement, the taxpayer must maintain a continuous program of construction, meaning continuous physical work of a significant nature. However, the notice provides a list of allowable “excusable disruptions,” including delays related to permitting, weather, and acquiring equipment, among others.

The guidance also provides a safe harbor for the Continuity Requirement. Under the safe harbor, the Continuity Requirement will be met if a taxpayer places an applicable wind or solar facility in service by the end of a calendar year that is no more than four calendar years after the calendar year during which construction of the applicable wind or solar facility began. Thus, if construction begins on an applicable wind or solar facility on October 1, 2025, the applicable wind or solar facility must be placed in service before January 1, 2030, for the safe harbor to apply.

Five Percent Safe Harbor for Low Output Solar Facilities

A safe harbor is available for a low output solar facility, which is defined as an applicable solar facility that has maximum net output of not greater than 1.5 megawatt. A low output solar facility may also establish that construction has begun before July 5, 2026, by satisfying the Five Percent Safe Harbor (as described in section 2.02(2)(ii) of Notice 2022-61).

Additional Guidance

The notice provides additional guidance regarding: construction produced for the taxpayer by another party under a binding written contract; the definition of a qualified facility; the definition of property integral to the applicable wind or solar facility; the application of the 80/20 rule to retrofitted applicable wind or solar facilities under Reg. §§ 1.45Y-4(d) and 1.48E-4(c); and the transfer of an applicable wind or solar facility.

Effective Date

Notice 2025-42 is effective for applicable wind and solar facilities for which the construction begins after September 1, 2025.

Notice 2025-42

The Treasury Inspector General for Tax Administration suggested the way the Internal Revenue Service reports level of service (ability to reach an operator when requested) and wait times does not necessarily reflect the actual times taxpayers are waiting to reach a representative at the agency.

The Treasury Inspector General for Tax Administration suggested the way the Internal Revenue Service reports level of service (ability to reach an operator when requested) and wait times does not necessarily reflect the actual times taxpayers are waiting to reach a representative at the agency.

"For the 2024 Filing Season, the IRS reported an LOS of 88 percent and wait times averaging 3 minutes," TIGTA stated in an August 14, 2025, report. "However, the reported LOS and average wait times only included calls made to 33 Accounts Management (AM) telephone lines during the filing season."

TIGTA stated that the agency separately tracks Enterprise LOS, a broader measure of of the taxpayer experience which includes 27 telephone lines from other IRS business units in addition to the 33 AM telephone lines.

"The IRS does not widely report an Enterprise-wide wait time- as the reported average wait time computation includes only the 33 AM telephone lines," the report states. "According to IRS data, the average wait times for the other telephone lines were much longer than 3 minutes, averaging 17 to 19 minutes during the 2024 Filing Season."

TIGTA recommended that the IRS adjust its reporting to include Enterprise LOS in addition to AM LOS and provide averages across all telephone lines.

"The IRS disagreed with both recommendations stating that the LOS metric does not provide information to determine taxpayer experience when calling, and including wait times for telephone lines outside the main helpline would be confusing to the public," the Treasury watchdog reported. "We maintain that whether a taxpayer can reach an assistor is part of the taxpayer experience and providing average wait times across all telephone lines for the entire fiscal year demonstrates transparency."

The Treasury watchdog also noted that the National Taxpayer Advocate has stated the AM LOS is "materially misleading" and should be replaced as a benchmark.

TIGTA also warned that the reduction in workforce at the IRS could hurt recent improvements to LOS and wait times, noting that the agency will lose about 23 percent of its customer service representative employees by the end of September 2025.

"The staffing impact on the remainder of Calendar Year 2025 and the 2026 Filing Season are unknown, but we will be monitoring these issues."

It also noted that the IRS is working on a new metric – First Call/Contact Resolution – to measure the percentage of calls that resolve the customer’s issue without a need to transfer, escalate, pause, or return the customer’s initial phone call. TIGTA reported that analysis of FY 2024 data revealed that 33 percent of taxpayer calls were transferred unresolved at least once.

By Gregory Twachtman, Washington News Editor

The Financial Crimes Enforcement Network (FinCEN) has granted exemptive relief to covered investment advisers from the requirements the final regulations in FinCEN Final Rule RIN 1506-AB58 (also called the "IA AML Rule"), which were set to become effective January 1, 2026. This order exempts covered investment advisers from all requirements of these regulations until January 1, 2028.

The Financial Crimes Enforcement Network (FinCEN) has granted exemptive relief to covered investment advisers from the requirements the final regulations in FinCEN Final Rule RIN 1506-AB58 (also called the "IA AML Rule"), which were set to become effective January 1, 2026. This order exempts covered investment advisers from all requirements of these regulations until January 1, 2028.

The regulations require investment advisers (defined in 31 CFR §1010.100(nnn)) to establish minimum standards for anti-money laundering/countering the financing of terrorism (AML/CFT) programs, report suspicious activity to FinCEN, and keep relevant records, among other requirements.

FinCEN has determined that the regulations should be reviewed to ensure that they strike an appropriate balance between cost and benefit. The review will allow FinCEN to ensure the regulations are consistent with the Trump administration's deregulatory agenda and are effectively tailored to the investment adviser sector's diverse business models and risk profiles, while still adequately protecting the U.S. financial system and guarding against money laundering, terrorist financing, and other illicit finance risks. Covered investment advisers are exempt from the obligations of the regulations while the review takes place.

FinCEN intends to issue a notice of proposed rulemaking (NPRM) to propose a new effective date for these regulations no earlier than January 1, 2028.

This exemptive relief is effective from August 5, 2025, until January 1, 2028.

FinCEN Exemptive Relief Order