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BILL AS INTRODUCED 2007-2008

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S.298

Introduced by Senator Lyons of Chittenden District

Referred to Committee on

Date:

Subject:  Taxation; property tax; homestead appraisal based on most recent sale price plus a growth factor pegged to Social Security payment inflation

Statement of purpose:  This bill proposes to base homestead grand list values on the most recent sale price, plus an annual inflation factor; and end the use of the common level of appraisal for homesteads.

AN ACT RELATING TO HOMESTEAD GRAND LIST VALUE BASED ON LAST SALE PRICE AND NO COMMON LEVEL OF APPRAISAL

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1.  32 V.S.A. § 3481 is amended to read:

§ 3481.  DEFINITIONS

The following definitions shall apply in this Part and chapter 101 of this title, pertaining to the listing of property for taxation:

(1)  “Appraisal value” shall mean, :

(A)  with respect to property enrolled in a use value appraisal program, the use value appraisal as defined in subdivision 3752(12) of this title, multiplied by the common level of appraisal,; and

(B)  for a homestead declared in accordance with section 5410 of this title, the property’s most recent sale price or, if the sale was not an arm’s length sale or for new construction which has not yet been listed on the grand list, the price which the property would bring in the market when offered for sale and purchased by another at arm’s length; adjusted each year thereafter, until the time of the next sale, by:

(i)  the most recent annual inflation index used to adjust to Social Security payments, as published by the director of property valuation and review on January 1 each year; plus

(ii)  the fair market value of any improvements to the property in the year preceding the April 1 grand list date; and further adjusted by

(iii)  other factors to be taken into account in determining appraisal value, in accord with formal and informal rules adopted by the director of property valuation and review governing loss or destruction of property and other similar factors; and

(C)(i)  with respect to all other property, the estimated fair market value.  The estimated fair market value of a property is the price which the property will bring in the market when offered for sale and purchased by another, taking into consideration all the elements of the availability of the property, its use both potential and prospective, any functional deficiencies, and all other elements such as age and condition which combine to give property a market value.  Those elements shall include a consideration of a decrease in value in nonrental residential property due to a housing subsidy covenant as defined in section 610 of Title 27, or the effect of any state or local law or regulation affecting the use of land, including but not limited to chapter 151 of Title 10 or any land capability plan established in furtherance or implementation thereof, rules adopted by the state board of health and any local or regional zoning ordinances or development plans.  In determining estimated fair market value, the sale price of the property in question is one element to consider, but is not solely determinative.

(ii)  For residential rental property that is subject to a housing subsidy covenant or other legal restriction, imposed by a governmental,

quasi-governmental, or public purpose entity, on rents that may be charged, fair market value shall be determined by an income approach using the following elements:

(A)(I)  market rents with utility allowance adjustments for the geographic area in which the property is located as determined by the federal office of Housing and Urban Development or in the case of properties authorized under 42 U.S.C. § 1437, 12 U.S.C. § 1701q, 42 U.S.C. § 1485, 12 U.S.C. § 1715z-1, 42 U.S.C. § 1437f, and 24 CFR Part 882 Subpart D and E, the higher of contract rents (meaning the amount of federal rental assistance plus any tenant contribution) and HUD market rents;

(B)(II)  actual expenses incurred with respect to the property which shall be provided by the property owner in a format acceptable to the commissioner and certified by an independent third party, such as a certified public accounting firm or public or quasi-public funding agency;

(C)(III)  a vacancy rate that is 50 percent of the market vacancy rate as determined by the United States Census Bureau with local review by the Vermont housing finance agency; and

(D)(IV)  a capitalization rate that is typical for the geographic area determined and published annually prior to April 1 by the division of property valuation and review after consultation with the Vermont housing finance agency.

(2)  “Listed value” shall be an amount equal to 100 percent of the appraisal value.  The ratio shall be the same for both real and personal property.

Sec. 2.  TRANSITION RULE

All homesteads on the grand list of April 1, 2008, shall, until the next date of sale, remain on the grand list at the 2007 grand list value, adjusted by the cumulative annual inflation index used to adjust to Social Security payments from the year following the last townwide reappraisal through 2007, as calculated by the director of property valuation and review and published on June 1, 2008.

Sec. 3.  32 V.S.A. § 5402(b) is amended to read:

(b)  Calculation of education tax.

(1)  The commissioner of taxes shall determine for each municipality the education tax rates under subsection (a) of this section, divided and shall divide the nonresidential tax rate by the municipality’s most recent common level of appraisal.  The legislative body in each municipality shall then bill each property taxpayer at the homestead or nonresidential rate determined by the commissioner under this subdivision, multiplied by the education property tax grand list value of the property, properly classified as homestead or nonresidential property and without regard to any other tax classification of the property.  Each homestead property tax bill shall include notice of the education spending per equalized pupil in the taxpayer’s district and its relation to the base education payment; and the effect of the education spending in the district upon the homestead tax rate and the applicable percentage for income sensitivity; and shall also include an insert supplied by the commissioner of taxes which explains the relationship of district education spending and the common level of appraisal to nonresidential property tax rates.  Tax bills shall show the tax due and the calculation of the rate determined under subsection (a) of this section, divided by the municipality’s most recent common level of appraisal, multiplied by the current grand list value of the property to be taxed. Each homestead property tax bill shall include a copy of the two page

two-page document attached to the May 11, 2007 memorandum from the speaker of the house to the commissioner of taxes, which shall be updated annually for each town by the commissioner of taxes.

(2)  Taxes assessed under this section shall be assessed and collected in the same manner as taxes assessed under chapter 133 of this title with no tax classification other than as homestead or nonresidential property.

(3)  If a district has not voted a budget by June 30, an interim homestead education tax shall be imposed at the base rate determined under subdivision (a)(2) of this section, divided by the municipality’s most recent common level of appraisal, but without regard to any district spending adjustment.  Within 30 days after a budget is adopted and the deadline for reconsideration has passed, the commissioner shall determine the municipality’s homestead tax rate as required under subdivision (b)(1) of this subsection.

Sec. 4.  32 V.S.A. § 5404(a) is amended to read:

(a)  Municipalities shall determine the education property tax grand list by calculating one percent of the listed value of nonresidential and homestead real property as provided in this section.  The listed value of all nonresidential and homestead real property in a municipality shall be its fair market appraisal value determined under section 3481 of this title, its value established under a stabilization agreement described in section 5404a of this title, or the use value of property enrolled in a use value program under chapter 124 of this title.  If a homestead is located on a parcel of greater than two acres, the entire parcel shall be appraised at fair market value; the appraisal value of the housesite shall then be appraised determined under section 3481 of this title as if it were situated on a separate two-acre parcel, and the value of the housesite shall be subtracted from the value of the total parcel to determine the value of the remainder of the parcel.

Sec. 5.  32 V.S.A. § 5405 is amended to read:

§ 5405.  DETERMINATION OF NONRESIDENTIAL EQUALIZED

              EDUCATION PROPERTY TAX GRAND LIST AND

              COEFFICIENT OF DISPERSION

(a)  Annually, on or before April 1, the commissioner shall determine the nonresidential equalized education property tax grand list and coefficient of dispersion for each municipality in the state.

(b)  The sum of all municipal nonresidential equalized education property tax grand lists plus the sum of all municipal homestead grand lists shall be the equalized education property tax grand list for the state.

(c)  In determining the fair market value of property which is required to be listed at fair market value, the commissioner shall take into consideration those factors required by section 3481 of this title.  The commissioner shall value property as of April 1 preceding the determination, and shall take account of all homestead declaration information available before October 1 each year.

(d)  Any determination of fair market value made by the commissioner under this section shall be based upon such methods, as in the judgment of the commissioner, and in view of the resources available for that purpose, shall be appropriate to support that determination.  If the common level of appraisal is calculated using the weighted mean of ratios, any outlier shall be carefully reviewed and deleted if it will significantly affect the weighted mean, particularly if the outlier is a high-value property.

(e)  Individual appraisals performed by the division of property valuation and review may be used to supplement actual sales when necessary to obtain a representative sample.

(f)  Within the limits of the resources available for that purpose, the commissioner may employ such individuals, whether on a permanent, temporary, or contractual basis, as shall be necessary, in the judgment of the commissioner, to aid in the performance of duties under this section.  The commissioner shall pay each municipality the sum of $1.00 per nonresidential grand list parcel in the municipality, for services provided to the commissioner in connection with his or her duties under this section.  Such payment shall be made from the equalization and reappraisal account within the education fund.


Sec. 6.  32 V.S.A. § 5406 is amended to read:

§ 5406.  NOTICE OF FAIR MARKET VALUE AND COEFFICIENT OF

              DISPERSION; NONRESIDENTIAL COMMON LEVEL OF

              APPRAISAL

(a)  Not later than January 1 of each year, the director of the division of property valuation and review shall notify the town clerk and chair of the board of listers of each municipality of the nonresidential equalized education property value and the coefficient of dispersion of that town for the prior year, and of the manner by which the nonresidential equalized education property value and coefficient of dispersion were determined by the director.

(b)  Not later than April 1 of each year, the director shall certify to the commissioner of education the nonresidential equalized education property value and coefficient of dispersion for the prior year of every municipality of the state.

(c)  If the director of property valuation and review certifies that a municipality has completed a townwide reappraisal, the nonresidential common level of appraisal for that municipality shall be equal to its new grand list nonresidential value divided by its most recent equalized nonresidential grand list value, for purposes of determining nonresidential education property tax rates.


Sec. 7.  32 V.S.A. § 5408(a) and (b) are amended to read:

(a)  Not later than 30 days after the receipt by its clerk of a notice under section 5406 of this title, a municipality may petition the director of the division of property valuation and review for a redetermination of the municipality’s nonresidential equalized education property value and coefficient of dispersion.  Such petition shall be in writing and shall be signed by the chair of the legislative body of the municipality or its designee.

(b)  Upon receipt of a petition for redetermination under subsection (a) of this section, the director shall, after written notice, grant a hearing upon the petition to the aggrieved town.  The director shall thereafter notify the town and the commissioner of education of his or her redetermination of the nonresidential equalized education property value and coefficient of dispersion of the town or district, in the manner provided for notices of original determinations under section 5406 of this title.

Sec. 8.  32 V.S.A. § 6061(17) is amended to read:

(17)  “Equalized value of the housesite in the taxable year” means the value of the housesite on the grand list for April 1 of the taxable year, divided by the municipality’s common level of appraisal determined by equalization of the grand list for April 1 of the year preceding the taxable year.



Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont


www.leg.state.vt.us