FINAL BILL REPORT

HB 1307

                                  C 283 L 90

BYRepresentatives Phillips, Holland, Wang and Appelwick; by request of Department of Revenue

Revising assessment levels for equalizing personal property.

House Committe on Revenue

Senate Committee on Ways & Means

SYNOPSIS AS ENACTED

BACKGROUND:

Both real and personal property is subject to state taxation. Real property consists of land and buildings.  Personal property includes all items not considered as real property.  Household personal property items, such as furnishings, are exempt from property taxation.

All property must be assessed at 100 percent of market value.  Due to disparate assessment practices among counties, actual assessment levels are generally less than 100 percent.  The Department of Revenue calculates the ratio of actual assessments to market value for each county, and calls this the "indicated ratio."  The indicated ratio is used in the next calendar year to adjust the state levy rate in each county so that the state levy applies uniformly across the state, regardless of variations in assessment levels among 10 counties.  To calculate the indicated ratio, the department conducts "ratio studies" that include audits of assessments of both real and personal property in each county.

Taxpayers must submit a list stating the value of their taxable personal property to the county assessor by March 31 of each year. These lists are known as "personal property affidavits."

Prior to 1982, the Department of Revenue established the personal property "indicated ratio"  using data from the previous assessment year.  Using data from the previous year had the advantage of giving taxpayers the time to complete and file accurate personal property reports and to complete the necessary records for subsequent audit verification.

In 1982, the state tax appeals board determined that the department should establish the personal property ratio using the current data from the current year's assessments.  Annual reports since 1983 have complied with this determination.

Using the current year's assessment data has caused problems. Taxpayers argue that they do not have time to prepare accurate reports.  In addition, because of time constraints, the department is not able to conduct a comprehensive study to determine the indicated ratio or to conduct a thorough on-site audit program.

In June 1988, the Efficiency and Accountability Commission study by the Department of Revenue reviewed these problems and recommended a statutory solution.

Property of veterans' organizations recognized by the United States Department of Defense is exempt from property tax.  The property must be used for the purposes and objects of the organization.  Property that is loaned or rented to another organization is tax exempt only if the other organization is exempt.

The real and personal property of a nonprofit organization used in providing nonpermanent shelter to indigent homeless persons is exempt from property tax.  The exemption applies if the charge for shelter does not exceed the actual costs of operating and maintaining the shelter facility.

Library, fire, hospital, and metropolitan park districts may seek voter approval to increase property tax levy rates for protection of the district's levy.  A levy rate of up to $.35 per $1,000 of assessed value may be imposed to protect the levy from being prorationed over a five-year period.

SUMMARY:

When conducting ratio studies for equalization of the state levy for personal property, the Department of Revenue shall use data from the preceding assessment year.

Property of veterans' organizations that is loaned or rented is exempt from property taxes except in instances where the rented or loaned property is used for pecuniary gain or to promote business activities.  Fund raising activities conducted in the loaned or rented property does not disqualify the organization from receiving the tax exemption.

Leased or rented property of nonprofit organizations operating nonpermanent shelters for indigent homeless persons or victims of domestic violence who are homeless for personal safety reasons is exempt from property taxes.  The leased or rented property exemption benefit must inure to the nonprofit organization.  The exemption is provided for taxes due through the year 1999.

Hospital and metropolitan park districts that have received voter approval for additional levies for prorationing protection may continue the rate in full force during the time so authorized. The levy rate for prorationing protection may not reduce the levy of another taxing district including the levy of a fire, library, or emergency medical services district, or a conservation futures levy imposed by a county.

VOTES ON FINAL PASSAGE:

      House 92   0

      Senate    45     1 (Senate amended)

      House             (House refused to concur)

Free Conference Committee

      Senate    45     0

      House 95   0

EFFECTIVE:June 7, 1990