With money flowing into the state’s coffers since the end of the 2003 legislative sessions, the prevailing view was that the 2005 legislative session would be relatively easy compared to 2003. And generally it was, if you discount the legislative politics of the last 10 days. During that time, a record number of bills were put “on the desk” and more conference committees were held than in recent sessions. Unfortunately these circumstances led the governor to call the 22nd Special Session, which lasted nearly eight hours, causing the Legislature to exceed its 120-day limit.
For most property owners, 2005 was viewed as a good session, because property tax relief was provided. It was the issue that dominated the first two months of the session. To a lesser degree, meetings on property tax relief continued throughout the rest of session to address issues that were not addressed in the original bill (AB 489). Finally, by the last week of session a second bill (SB 509) – a companion to the original bill – was passed.
From the perspective of residential property owners, it was probably the best legislative session since 1981, when property taxes were reduced an average of 46 percent statewide. While the 2005 session did not reduce property taxes, it did minimize increases in property tax bills by capping the amount of increase. For homeowners, property tax bills are capped at a maximum of 3 percent over the prior year. For other property owners, the cap is 8 percent.
For local governments, including school districts, property tax relief has led them into uncharted territory. However, as long as sales tax revenue comes in at the current record levels, revenue reductions from property tax will be offset for most local governments.
It remains to be seen if property taxpayers will be satisfied with the relief they receive; if there will be constitutional challenges; or if a petition for a California-style property tax cap will qualify to be placed on the ballot and be approved by the voters. Only time will tell.
Major Provisions of Property Tax Legislation
CAP AMOUNTS
All property: 8 percent over the prior year’s property tax bill. Includes centrally assessed property.
Homeowners who occupy their residence: 3 percent. The cap still applies if the owner operates a home business out of the residence or if the title has been placed in a trust for the purpose of estate planning.
Residential Rental Property: 3 percent, if the rent charged meets federal requirements for low-income housing. This cap does not apply to hotels, motels or other transient lodging.
TO CALCULATE THE CAP
Add the greater amount of all property taxes levied the prior year on the property or what would have been levied without any exemptions that might have been applied; and
1. The percentage of the amount determined which is equal to the lesser of:
The average percentage change in the total assessed valuation of the county over the average of the current year plus the prior nine years; or 8 percent; and then take
2. The percentage amount that is equal to the greater of:
The resulting percentage amount calculated in number 1; or twice the percentage increase of the Consumer Price Index (CPI) for the prior calendar year. (Note: The CPI percentage used for this fiscal year, 2005-2006, is 5.4 percent.)
The resulting percentage becomes the tax cap for each parcel of property for the current fiscal year.
EXCLUDED FROM THE CAP
Any increase in the assessed valuation of the property from the prior year that is due to any improvement or change in the actual or authorized use of the property.
Ballot questions that indicate the property tax increase requested is outside of the cap.
Any property tax rate imposed by the Legislature.
DEFINITIONS
“Single family residence” – property occupied by one family with facilities for living, sleeping, cooking and eating. Includes: a mobile or manufactured home; a condominium; a home in a common-interest community, a planned unit development or a similar property.
“Primary residence” – designated by the owner in this state, exclusive of any other residence of the owner in Nevada that is not rented, leased or otherwise made available for exclusive occupancy by any person other than the owner of the residence and member of the family of the owner.
NOTESA taxpayer who believes the wrong cap has been applied may apply to the county treasurer to correct the cap.
Provides for a simplified form to be developed by the Department of Taxation to allow owners of business property to use the income approach to appeal their property.