Slideshow — Introduction to Property Tax Administration in Utah 2012

INTRODUCTION
TO
PROPERTY TAX
ADMINISTRATION IN
UTAH
Arthur L. Partridge
Washington County Assessor
State-Certified General Appraiser
1

PROPERTY TAX ADMINISTRATION IN UTAH
COURSE OUTLINE
1. Housekeeping Issues
• Please sign the Role; fill in your license # for CE credit
• Please turn off cell phones or put on vibrate
• Restroom facilities
• Feel free to ask questions at any time.
2. Introduction
3. Taxes – Revenue governments use to provide public services
4. Property Tax exemptions
5. How is property valued
6. Assessor/Appraiser qualifications
7. The roll of all county offices in the property tax process
8. How tax rates are set and the tax calculated
9. Truth-in-Taxation
10. How to object to the value determined by the county
2

Property Tax
THE GOOD, THE BAD, THE INEVITABLE
“THE INCONVENIENT
TRUTH”
Where does it fit in Utah’s taxing scheme?
3

What are the three main
sources of revenue that allow
governments to provide
services to their citizens?
4

Role of the Property Tax in
Utah’s Taxing System
• Income Tax
• Sales Tax
• Property Tax
5

Why do we have a property tax?
• To help pay for public schools, fire and
police protection, roads, parks, libraries
and other public benefits
• The property tax is part of a well balanced
revenue system.
• It is a more stable source of revenue than
sales and income taxes because it does
not fluctuate when communities
experience changes in economic
conditions. 6

Where does your property tax dollar go?
School 62.6%
County Go
Bond - 2.2%
Local A&C
3.4%
Multi-Co A&C
1.3%
Library 2.3%
County
General 6.6%
Water Con
District 7.5%
St. George
City 14.1%
7

Article XIII of
Utah Constitution
“All Tangible Property…
assessed at a uniform and
equal rate in proportion to its
value”
8

Types of Tangible Property
•Real Property
• land and buildings
•Personal Property
• business equipment
•Motor Vehicle
•Central Assessment
9

Property Tax Exemption
• Some property is exempted from property taxes.
• Government Exemption – Federal, State, Local, SITLA
• Privilege Tax
• Exclusive Use Exemption
• Religious
• Charitable
• Educational
• By application and a non-profit organization
10

• Tax Relief Exemption
• Veteran’s Exemption
• Blind Exemption
• Indigent Deferral or Abatement
• Circuit Breaker
• All Personal Property (except if used in a business)
• Household furnishings
• Farm equipment & animals
• Intangible property
• Inventory
• Business furniture & equipment (up to $3,900)
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All properties in Utah are assessed at
100% of their “Fair Market Value”
with two exceptions:
•Farm Land
•Primary Residences
12

Farmland Assessment Act (F.A.A.)
“Greenbelt”
Allows qualifying agricultural property to be assessed
and taxed based upon its productive capability instead
of the prevailing market value.
• Vital to agricultural operations in close proximity to expanding
and growing areas
How does land qualify?
• Must be at least five contiguous acres (some exceptions)
• Be actively devoted to agricultural use with a reasonable
expectation of profit
• Actively devoted to agricultural use for two successive years
preceding the year of application
• Land meets average annual (per acre) production requirements
13

• Application deadlines – New application must be
submitted to Assessor by May 1 st . New
application is required with any change in
ownership, legal description, or at Assessor’s
request.
• Requires all owners to sign application
• What happens when use of land changes:
“Rollback Tax”
14

Primary Residential Exemption
• Purpose for Exemption
• Qualifying residential properties are granted a
45% exemption for their primary residence. The
residential exemption is limited to one primary
residence per household.
Example: Assume a residential property taxed
at its full market value has an annual property
tax of $3,000. Tax on the same property with
the exemption applied is reduced to $1,650.
15

Primary Residential Exemption
• A primary residence is any dwelling used as “full
time” residence and can include up to one acre of
land.
• Rented homes and apartments also qualify for the
exemption provided the home is the “full time”
residence of the renter.
• Second homes, vacation homes, time-shares or
other types of transitory housing and vacant land
do not qualify.
• It is use – not ownership that qualifies for exemption.
16

Primary Residential Exemption
• To Qualify For Exemption
• Lien date January 1 st
• Owner of record on that date
• Use of property on that date
• Must apply by April 30th
• $50 Administrative Fee assessed to those
who miss April 30 th deadline for filing the
application.
• Application for Residential Exemption forms
17

How do we determine
how much a property
tax should be?
23

What is Market Value?
• 59-2-102(12)
• “Fair market value” means the amount
at which property would change hands
between a willing buyer and a willing
seller, neither being under any
compulsion to buy or sell and both
having reasonable knowledge of the
relevant facts.
24

Why do we use market value to
determine how much a property
should pay in property taxes?
WHY NOT:
• A home’s size (Sq. Ft.)?
• Size of the lot (acres)?
• How many windows?
25

Market Value
is the only common denominator
shared by all types of property.
26

The concept of market value is
founded in the economic principle of
27

What the Law Requires
59-2-301
“The County Assessor shall assess all property
located within the county…”
59-2-303
“Prior to May 22 of each year, the county assessor
shall ascertain the names…”
59-2-303.1
“Each county assessor shall annually update
property values,…based on a systematic review of
current market data. In addition, the Assessor shall
complete a detailed review of property
characteristics for each property at least once
every five years.”
28

17-17-2.
Assessor to be State Qualified
(a) “…any person elected to the office of county assessor
after November 1, 1993 shall be a state-licensed or
state-certified appraiser as defined in Title 61, Chapter
2g, …before the expiration of 36 months from the day
on which the person’s term of office begins.”
In addition, after January 1, 2010, a county assessor of
a first through third class county shall be state-licensed
or state-certified before filing for the office of county
assessor.
(2) (a) “If an assessor fails to meet the requirement of
this section, the assessor’s office is automatically
vacant.”
29

Taxpayer’s burden must be based on
“equality” and a “fair-share” concept
• The Utah Constitution ---
• “All tangible property in the state, not
exempt under the laws of the United
states, or under this constitution, shall
be taxed at a uniform and equal rate in
proportion to its value, to be
ascertained as provided by law….”
32

• The Utah Constitution --
• The Legislature shall provide by law a
uniform and equal rate of assessment on all
tangible property in the state, according to
its value in money.
• 1.0 Cyclical Appraisal. For each piece of real
property in the county, each assessor is required
by statute to:
• Annually update the property value based on a
systematic review of current market data
• Complete a detailed review of property characteristics
at least once every five years
33

Result of Equalization
ST GEORGE CITY – APPRAISAL DISTRICT 45
• Boundaries of District 45
• Red Hill on the North
• Virgin River on the South
• East Ridge to Black Hill – East and West
34

Valuation
Three approaches to market value:
• Sales Comparison
• Based on actual sales of “comparable properties”
• Cost Approach
• Based on current material and labor cost necessary to
replace the subject property with similar function and
utility
• Income Approach
• Based on current rental or lease income and associated
expenses of the subject property and/or like properties
35

State Tax Commission Oversight
(59-2-303.1)
Measuring Compliance With Required Standards
• Annual Sales/Assessment Ratio Study
• Statistically measures assessment levels & uniformity
• Stratifying properties by characteristics
• Audit of unsold properties
Corrective Actions (Failure to Comply)
• 1 st year – order adjustments or factoring of values by class,
type, or location of properties
• If county fails to implement the order or does not correct in
future years:
• USTC takes jurisdiction of Assessor’s Office
• Charges county 100% of costs to perform valuations
• Fails to comply two consecutive years, the county shall lose its allocation
of multi-county assessing & collecting levy 36

Your House As Seen By:
Yourself....
37

Your Buyer...
38

Your Lender...
39

Your Appraiser...
40

And....
Your County Tax Assessor...
41

Appraisal/Sales Ratio Study
Our Sales Ratio study shows the following:
• Property sales indicate:
• Single Family Residential…..95.59 - COD 7.3
• Townhome/Condo.……………96.46 - COD 6.7
• Vacant Land.………………….…99.37 - COD 12.78
• Commercial Properties.……..98.25 - COD 14.14
• Mobile Homes.………………….94.39 - COD 11.91
Total sales – 2,738 (2010 sales)
43

Property Tax Burden in Utah
Compared With Other States
2009
URBAN
LOCATION
MEDIAN
VALUE
NET
TAX
EFFECTIVE
TAX RATE
RATE
RANKING
Salt Lake City $216,500 $1,595 0.737 41
National Ave. $3,531 1.631
St. George $185,000 $1,332 0.720 41
RURAL
LOCATION
Unincorporated
Washington
County
$150,000 $936 0.567 45
National Ave. $1,852 1.235
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Effective Tax Rates - 2011
• RESIDENTIAL PROPERTY (PRIMARY)
• Market value x .55 = Taxable value
• Taxable Value x .0132 = Tax
• $100,000 x .55 = 55,000 x .0132 = 720
• Effective Tax Rate .0072
• COMMERCIAL NON-PRIMARY PROPERTIES
• Market value x .0132 = Tax
• $100,000 x .0132 = $1,320
• Effective Tax Rate .0132
45

Property Tax Administration is a
collective process shared by
many county offices
• Starts in the Recorder’s Office
• Ends in the Treasurer’s Office
46

Property Tax Administration Process
• RECORDER
• Records deeds of ownership
• Prepares maps illustrating location
• Determines size/acreage
• Assigns property I.D. numbers
• Delivers information to Assessor
• ASSESSOR
• Annually discovers/appraises all property as of Jan. 1 st
• Reviews property characteristic every 5 years
• Assists with exemptions
• Administers F.A.A. (Greenbelt)
• Completes Assessment Roll by May 22 nd
• Delivers roll to County Auditor
• Values and collects personal property – deposits monies with the
treasurer
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• AUDITOR
•Assists taxing entities in setting rates
•Mails Valuation Notices to property owners
•Acts as Clerk of the B.O.E.
• B.O.E.
•Reviews Assessor’s values
•Adjusts values when appropriate
•Exempts property for religious, education or charitable
purposes
•Delivers adjusted Roll to Treasurer
• TREASURER
•Calculates taxes
•Mails Tax Notice
•Collects real property taxes
•Distributes all taxes to taxing entities
48

Key Property Tax Dates
On January 1 Assessor Lien Date - All property appraised based upon situs and status as of this date
(real and personal)
On January 1
(suggested date)
On first Monday in
January
Assessor
Assessor,
Treasurer &
Auditor
Statements of personal property should be mailed to property owners
(suggested date)
Make annual settlement with county auditor for all revenues collected in the
previous year.
By January 31 Recorder Provide county assessors with maps and plats showing legal description
changes for previous year.
On or before March 1
County BOE
(Auditor)
Annual applications for exemptions based on use for religious, charitable or
educational purposes filed with county.
By March 31 Treasurer Submit the completed Report 750, “Year End Statements of Taxes Charged,
Collected and Disbursed” to the Tax Commission.
By April 30 Assessor “Residential Exemption Application” due
By May 1
By May 15
County BOE
/Auditor
Taxpayer
County
BOE/Auditor
County BOE shall hold hearings and render written decisions to determine
exemptions.
Greenbelt applications due.
The decision of the BOE on exemptions to be sent to person or organization
applying for the exemption.
Prior to May 22 Assessor Complete assessment roll and deliver to county auditor with required signed
statement.
On or before June 8
Auditor &
Assessor
Report taxable value to the Tax Commission (Report 232/233).
By June 8 USTC & Auditors State Tax Commission calculates the certified tax rates.
49

Key Property Tax Dates (cont’d)
June 10 USTC Complete the annual Sales Ratio Study and issue any corrective action orders.
By June 22 Taxing Entity Adopt tentative budgets and proposed tax rates.
On or before July 1 Assessor Review and revise 5-year property inspection plans.
By July 15 USTC Send preliminary approval of proposed tax rates to the county auditor to be
used on the “Notice of Valuation and Tax Change.”
On or before July 22 Auditor Prepare and mail “Notice of Valuation and Tax Changes to all real property
owners.
By August 15 Recorder Report all ownership changes for the first seven months to county assessors.
September 15
By September 30
(suggested)
By October 1
Board of
Equalization
County
BOE/Auditor
County
BOE/Auditor
Deadline for filing appeals (or 45 days after Valuation Notice, (whichever is
later)
Final approval of the certified and proposed tax rates for each taxing entity.
County board of equalization issues decisions on real property appeals.
Before October 15 Auditor Make official record of all changes ordered by the county board of
equalization.
Prior to November 1 Auditor Deliver the corrected assessment roll to the county treasurer with signed
statement.
By November 1 Treasurer Mail tax notices.
December 1 Treasurer Unpaid taxes on real property become delinquent.
On or before
December 31
Treasurer
Mail notices of delinquency
50

How is the amount of
tax calculated?
Taxable Value x Rate = Amount of Tax
EXAMPLE
Market value Percent Taxable Value
$200,000 x .55 = $110,000
Rate
Tax
$110,000 x .013209 = $1,452.99
51

How is the tax rate calculated?
Approved Budget / Total Tax Base = Tax Rate
• Adjustments made for:
• 5 year collection rate
• Average of Board of Equalization adjustments
Total Tax Base may include:
• Locally assessed residential, commercial real
property
• Locally assessed personal property
• Fee in lieu of taxes:
• Motor vehicles, boats, motor homes, motorcycles, etc.
• Centrally assessed property – USTC assessed 52

Truth-In-Taxation
Truth-in-taxation prohibits units of
local government from obtaining
windfall revenues as a result of
revaluation or equalization
projects, as required by State law.
(59-2-303.1)
53

Truth-In-Taxation
Utah State property tax law requires that
when property values rise
property tax rates must fall.
The adjusted rate each year is called the
“certified tax rate.”
54

Truth-In-Taxation
Reasons why a property owner’s taxes
might go up despite truth-in-taxation:
• Centrally Assessed Shift
• Variation in Market Values Within a Taxing
Entity
• Above the average increase in value within Entity –
Taxes Increase
• Below the average increase in value within Entity –
Taxes Decrease
• Taxpayer Voted Leeway
• Taxpayer Voted Bond
• Property Tax Increase Following Truth-In-
Taxation Hearing
55

Truth-In-
Taxation
Notice for
the 2007
Tax Year in
Washington
County
56

NOTIFICATION OF VALUES
Appeal Process
• Valuation and Disclosure Notice to be
mailed in July - August
• Informal review with appraisers
• 45 Days - review value and initiate an
appeal
• Appeals must be based on market value -
not a change in amount of taxes owed
61

Duties of Board of Equalization
• Review values estimated by County Assessor
• Hold hearings to receive & review
complaints from property owners
• B.O.E. can lower, raise or sustain values.
• B.O.E. can exempt property used for
religious, educational or charitable purposes.
• Board is comprised of County Commission/
Council
• County Auditor serves as Clerk of the Board.
62

Appealing the Decision of the
Board of Equalization
Property Owner carries burden of proof
• Property Owner must file an appeal
• Within 30 days of mailing the decision of the Board of
Equalization
• Appellant and Assessor’s Office – right to full disclosure
of all information except classified confidential according
to statute or accepted archiving procedures
• Appeals must be based on market value of property
• Classification
• Primary vs. non-primary
• Greenbelt, exempt, other
63

FOUR TAX MAXIMS
By Adam Smith
“What Makes a Good Tax”
1. EQUITY - Fair Share
2. CERTAINTY - Transparent
3. CONVENIENCE - For Taxpayers
4. EFFICIENCY - Low Cost
64

Course Wrap-up
Questions & Answers
Washington County Assessor’s Website
www.washco.utah.gov
65