Tax Glossary

Tax principle that ties the burden of taxation to the taxpayer's economic circumstances. Taxation based on "ability to pay" is an alternative to taxation based on benefits or services received.

Computation of an income tax deduction that reduces taxable income by allowing the deduction to be taken earlier than the rules would ordinarily permit. For example, accelerated depreciation allows deductions for the wear and tear of property to be taken over a shorter period than the accepted useful life of the asset.

Property tax concept referring to the value of property when acquired. Acquisition value is embodied in Proposition 13. This is an alternative to the "ad valorem" concept. This term was used by the California Supreme Court in its Amador Valley decision and does not appear in Proposition 13 or related statutes.

According to value. Before Proposition 13, the property tax was considered an ad valorem tax, as it was based on current value of the property instead of its acquisition value. Currently, personal property tax is ad valorem, or based on current value.

Special assessment levied for operating purposes by many special districts, particularly water districts. The assessment is usually levied only on the value of land or land and improvements (not personal property).

Total gross income reported for income tax purposes, less certain specified deductions if applicable. Typically, California AGI equals federal AGI adjusted for differences in tax treatment of certain types of income (e.g., state income tax refunds, social security income, interest on state and municipal bonds from other states, etc). (See Chapter 2B for complete list of the components of AGI.)

Adjusted Gross Income

An additional tax which must be computed by
personal income and corporate taxpayers that take advantage of certain tax preferences.
If AMT liability exceeds regular tax liability, the excess must be paid in addition to the taxpayer's regular tax liability.
The purpose is to ensure that taxpayers that take advantage of special tax preferences pay minimum tax on income
receiving preferential treatment. Patterned after the AMT in federal law.

An accounting procedure used to reduce the value of an intangible asset by periodic charge-offs against income. For tax purposes, amortization is similar to depreciation. Also refers to the principal reduction of an outstanding debt through regular payments of interest and principal.

Alternative Minimum Tax

Method by which California determines how much of a multi- state or multi-national corporation's total net profits are subject to California income taxes. (See Chapter 2D.)

An authorization of money from a specific fund to a specific agency or program for expenditures or to incur obligations for a specified purpose and period of time. The amount expended may be less than the amount appropriated.

Maximum amount of tax proceeds that may be appropriated in a fiscal year by state or local government under Article XIIIB of the California Constitution (Proposition 4 of 1979). (See Chapter 5.)

The article of the California Constitution added by Proposition 13 of 1978.

The article of the California Constitution added by Proposition 4 of 1979 (Appropriations Limit).

The articles of the California Constitution added by Proposition 218 of 1996.

The measure against which the property tax rate is applied to compute the tax. Generally it is market value, unless a standard other than market value has been established by the Constitution for real property or by statute for personal property.

A countywide list of all taxable property. It identifies each property, its owner, and its value for assessment purposes.

For property tax law, the period beginning with a lien date and ending immediately prior to the succeeding lien date. Under current law, the assessment year begins on January 1 and is coterminous with the calendar year.

Assessed Valuation

A formula for measuring the full time equivalent number of students attending school. Most state aid to schools is based on ADA. An example of an ADA calculation for a regular full-time elementary school is the number of student-days of attendance divided by the number of actual school days.