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The Restatement real estate licensing course(Second) of Torts (1964) uses "licensee" in a different fashion, distinguishing licensees, such as social guests, from "invitees," such as business customers, whose invitation "carries with it an implied representation, assurance, or understanding that reasonable care has been used to prepare the premises, and make them safe for their reception." Advertisement inviting customers to "check and compare" merchandise granted only a license, which could be revoked when patron made written record of prices.
California cases have not in fact restricted the tax category of "possessory interest" to those interests meeting this standard of exclusivity. In determining which interests are possessory, they have addressed, although not always explicitly, the more basic question as to which interests should be taxable. This requires an investigation into the substantive rights to benefit from or make use of property that are conveyed by the interest rather than by its formal designation alone.
The identification of taxable possessory interests may have been encouraged by California's "Proposition 13," which limits the tax valuation of real property to its 1975-1976 level, with a maximum 2% annual inflation adjustment, until a change in ownership occurs. At that time, property may be revalued at its market or sale price. California Revenue and Taxation Code section 61(b) includes within the definition of a "change in ownership" the "creation, renewal, sublease or assignment of a taxable possessory interest in tax exempt real property for any term." This could be expected to produce more frequent reassessments of possessory interests than of other forms of taxable property.
California Decisions Defining "Possessory Interests"
The California Supreme Court's most complete analysis of possessory interest taxation came nearly a century after the initial cases of the gold rush era. Kaiser Co. v. Reid dealt with taxation of a government contractor's right to federal shipyard facilities during the Second World War. The court found that neither the government's ability to terminate the contract at will nor its prohibition upon any transfer of Kaiser's interest reduced this right to a nontaxable license, because Kaiser enjoyed "exclusive possession of the premises against all the world, including the owner." The restrictions upon this interest were held to affect its value rather than its taxable status. The court also emphasized the practical implications of Kaiser's position as a major shipbuilder in the midst of a war. Although in theory the government could have terminated the contract at will, "general views prevailing in early 1943 as to the war's prolongation for at least another year or two and the continued need of the United States for ships during such period would justify the one-year base period" used by the assessor in valuing Kaiser's interest.
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