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A vote for would
Require a four-year phase-in of tax liability for homes subject to the homestead exemption when a reappraisal increases assessments by more than 50%
All property subject to taxation is constitutionally required to be reassessed at least every four years. Property is either reassessed as it is sold or as part of a periodic parish-wide assessment. Assessors determine the value of properties, other local authorities such as parish councils determine the millage rates applied to the assessments, and the local tax collector (often the sheriff) sends out notices and collects the property taxes owed. Increases in assessments will result in the owners paying more property taxes unless the taxing authorities take action to adjust the millage rates.
According to the legislation, if a reassessment of a primary residence is greater than 50% of the prior assessment, the tax collector will phase-in the additional liability over four years. The assessor’s job does not change; the assessor will register the higher assessment on the books as the new value of the home. It would be the tax collector who implements the phase-in for lower taxes by artificially calculating the appraisal at a lower rate. The first year would recognize 25% of the additional tax liability with an additional 25% recognized for the next three years. In the fourth year, all 100% of the additional tax liability would be owed.
The reduction only applies to dwellings that qualify for the homestead exemption. This phase-in would cease if the property is sold to another owner. The amendment would not apply to any increase in assessment that is a result of construction or improvement in the property. Any resulting negative impact on property tax revenue must be absorbed by the taxing entity and cannot be used to create additional tax liability for other taxpayers.
Through no fault of their own, some property owners can receive large increases in their property tax bill. This might be because the surrounding neighborhood has shot up in value or because some neighbors are using their homes for short-term rentals, such as Airbnb. While such large increases might be rare, they do happen. This amendment gives owners time to adjust to the higher payments and eases the sticker shock of a large reassessment. Although the resulting revenue gain to local governments might be a little less with this new system, the amendment helps those experiencing a sudden boost in the value of their property.
This amendment is unfair to homeowners with assessment increases of less than 50% and further compounds a fundamental problem and inequity in the property tax methods of Louisiana. Under the proposed system, a homeowner with a 40% increase in assessment would be paying approximately 8% more in taxes over four years than a homeowner with an increase of just over 50%. In fact, for homes valued at more than $75,000, a 31% assessment increase would result in about the same amount of tax over four years as a 50% assessment increase. As studies and investigative reports have shown, home values in some parishes can differ widely even for comparable houses. The result is an inequitable system that burdens some homeowners more than others and potentially shortchanges the local governments and schools that depend on fair and reliable tax collections. This amendment exacerbates that problem. The amendment also provides an unnecessary cushion for property owners using their homes for short-term rentals. The amendment will complicate the role of the tax collector, who would have to distinguish different taxing methods depending on whether an assessment increase is based on a sale, improvement or simply higher value. Finally, this is a relatively rare problem and does not warrant amending the state Constitution.
Ballot language advisory
Voters should be aware that the ballot proposition for Amendment No. 6 that will appear on the statewide ballot does not completely match the content of the legislation. A House floor amendment was adopted to Senate Bill 164 to switch the responsibility for the phase-in from the assessor to the tax collector. The House floor also changed the bill to limit the special tax reduction only to properties subject to the homestead exemption. Although the central body of this bill was duly amended with those changes, the final section containing the ballot language was not amended to reflect these important changes.
The ballot language says that any “reappraisal” by more than 50% “be phased in over the course of four years.” According to the legislation, the reappraisal is not phased in over time. Homes with a reappraisal of more than 50% would be listed by the assessor at the new, fully assessed amount. It is the tax liability that is subject to the phase in, which would be computed by the tax collector according to a new formula. Proponents of the amendment might argue that the eventual impact on the taxpayer would be the same even if the ballot language had been updated. But PAR points out this issue because it could lead to confusion and misinterpretation by voters and homeowners. For those qualifying under this legislation, if you have a super-sized assessment increase it will be registered as a super-sized assessment increase, but your tax bill would be reduced.
A second omission in the ballot proposition is a House floor change that limits any effect of this bill to those residential properties that qualify for the homestead exemption, which of course must be the owner’s primary home. Consequently, a voter owning residential property not subject to the exemption, such as those who own rental property or a second home, may be surprised to learn that they will not receive the benefit of this reduced property tax, contrary to the understanding they might get from reading only the ballot proposition.
Legislation for a constitutional amendment must contain the actual proposition that will appear on the ballot. The proposition must be in a yes-or-no question form and should provide reasonable notice to the voters of the amendment’s impact. The House Committee on Civil Law and Procedure specifically is responsible for reviewing the ballot language of a proposed constitutional amendment. In this case, Senate Bill 164 was changed after the committee’s review. The bill was not referred to the committee for an additional hearing to review the ballot language in light of the changed legislation.
Legal Citation: Act 718 (Senate Bill 164 by Sen. Morrell) of the 2018 Regular Session to amend Article VII, Section 18(A) and (F).
Ballot language for Amendment No. 6
Do you support an amendment that will require that any reappraisal of the value of residential property by more than 50%, resulting in a corresponding increase in property taxes, be phased-in over the course of four years during which time no additional reappraisal can occur and that the decrease in the total ad valorem tax collected as a result of the phase-in of assessed valuation be absorbed by the taxing authority and not allocated to the other taxpayers?
The Public Affairs Research Council of Louisiana (PAR) is an independent voice, offering solutions to public issues in Louisiana through accurate, objective research and focusing public attention on those solutions. PAR is a private, nonprofit research organization founded in 1950 and supported by membership contributions, foundation and corporate grants and special events.
For more information, media interviews or public presentation requests regarding this constitutional amendment guide, please contact PAR President Robert Travis Scott at RobertScott@parlouisiana.org.