Substandard Housing Program - Individuals and Sole Proprietors
Notice of Property Noncompliance
A regulatory agency issues this notice when a property is noncompliant with state or local health and safety codes. We cannot review or amend the determination of the regulatory agency. If you receive a Notice of Property Noncompliance and need more information on why a property is substandard, contact the regulatory agency that issued the notice.
Notice of Property Compliance
A regulatory agency issues this notice after they reinspect a property previously determined substandard and certify it is now compliant with state and local health and safety codes.
Notice of Property Noncompliance Filed in Error
A regulatory agency issues this notice when they previously issued a Notice of Property Noncompliance in error.
Period of noncompliance
A property is substandard from the date of noncompliance to the date of compliance as determined by the regulatory agency. Even if you repair the property, it remains substandard until the regulatory agency reinspects it and issues a Notice of Property Compliance.
If the regulatory agency issues a Notice of Property Noncompliance Filed in Error, they revoke the Notice of Property Noncompliance and consider the property never substandard.
When you receive a Notice of Property Compliance or Notice of Property Noncompliance Filed in Error
Mail a copy of the notice to us:
Substandard HOUSING UNIT MS F340
FRANCHISE TAX BOARD
PO BOX 1673
SACRAMENTO CA 95812-1673
Disallowed income tax deductions
When a regulatory agency notifies us of a noncompliant property, we disallow any income tax deductions claimed for interest, taxes, amortization, or depreciation on that property (R&TC Sections 17274 and 24436.5 relating to substandard property) during the period of noncompliance. These expenses are not deductible even if you paid them during the period of noncompliance.
When the property is noncompliant for part of a year, we disallow the deductions at a rate of 1/12 for each month the property is noncompliant. If you no longer own the property, we disallow the deductions from the date of noncompliance to the date you sold the property. If you own more than one property, we only disallow deductions on the noncompliant property.
Notice of Proposed Assessment – additional tax due
A Notice of Proposed Assessment is not a fine or fee for substandard property. It is a notice of additional tax due. The disallowance of claimed income tax deductions in a particular tax year can increase the taxable income amount and subsequently the tax due.
If the disallowed deductions result in additional tax due, we send you an FTB 5830, Notice of Proposed Assessment (NPA). If the period of noncompliance includes more than one tax year, we send you a separate NPA for each tax year with an additional tax due.
We do not disallow income tax deductions on property considered never substandard.
Prevent future assessments
To prevent future assessments:
- Bring the property into compliance with health and safety codes:
- Repair the property.
- Request a reinspection by the regulatory agency.
- Do not take income tax deductions for interest, taxes, amortization, or depreciation expenses associated with the property during the substandard period.
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