Property Tax. All real and personal property in the state is subject to property tax each year based on its value, unless a specific exemption is provided by law. There are numerous exemptions from property tax established either by statute or constitutionally. Exemptions include intangible property, churches, nonprofit hospitals, private schools and colleges, agricultural products, and affordable housing. 

The Multi-Family Property Tax Exemption. The multi-family property tax exemption exempts real property associated with the construction, conversion, or rehabilitation of qualified, multiple-unit residential structures. Property owners must submit an application for the tax exemption to the designated city or county.  The city or county may include additional eligibility requirements for the tax exemptions.  Tax exemptions available under the statute include:

• eight-year exemption;
• 12-year exemption if the applicant commits to renting or selling at least 20 percent of multiple-family housing units as affordable housing to low- and moderate-income households; and
• 20-year exemption if applicant commits to renting at least 20 percent of dwelling units to low-income households for a term of 99 years. 

Retail Sales and Use Tax. Retail sales taxes are imposed on retail sales of most articles of tangible personal property, digital products, and some services. A retail sale is a sale to the final consumer or end user of the property, digital product, or service. If retail sales taxes were not collected when the user acquired the property, digital products, or services, then use tax applies to the value of property, digital product, or service when used in this state. The state, all counties, and cities levy retail sales and use taxes. The state sales and use tax rate is 6.5 percent. 
 
Tax Preference Performance Statement. State law provides a range of tax preferences that confer reduced tax liability upon a designated class of taxpayer. Tax preferences include tax exclusions, deductions, exemptions, preferential tax rates, deferrals, and credits. Legislation that establishes or expands a tax preference must include a tax preference performance statement that identifies the public policy objective of the preference, as well as specific metrics that the Joint Legislative Audit and Review Committee can use to evaluate the effectiveness of the preference. All new tax preferences automatically expire after ten years unless an alternative expiration date is provided or the tax preference is exempted from expiration.

Property Tax Exemption.  A city governing authority may establish a new property tax exemption program for multiunit residential and commercial buildings converted to provide affordable housing units for low-income households.  Unless a different income or rent level is established by the governing authority, rent levels for qualifying affordable units, including any mandatory fees for tenant-paid utilities, may not exceed 30 percent of the income limit for the affordable housing unit. 

For multiunit residential conversions: 

• housing units must be a multiunit residential building, have a certificate of occupancy issued not more than 25 years prior to the effective date of the bill, and be in possession of the owner or, if purchased after the effective date, be acquired by using a loan from a lender overseen by the United States Federal Housing Finance Agency offered for the purposes of generating affordable housing units;  
• the exemption is for 20 years beginning January 1st of the year immediately following the calendar year the exemption is filed with the county assessor and is equal to 100 percent of the value of the residential building for the first ten years and 50 percent for the second ten years; 
• the property must rent or sell 30 percent of residential units as affordable housing units to low-income households for a period of no less than 30 years to be eligible;  
• units must be transitioned to serve low-income households through natural turnover; and  
• any units within the multiunit residential building that are rented to low-income households at the time of the exemption application must remain as affordable housing and are additive to the percentage of units required to be affordable housing.  

For commercial conversions:

•  housing units must be a building whose immediate prior use was predominantly or exclusively for commercial use and have a complete project permit application submitted to the county or city prior to January 1, 2029; 
• the exemption is for 30 years beginning January 1st of the year immediately following the calendar year the exemption is filed with the county assessor; and 
• to be eligible the property must rent or sell 20 percent of residential units as affordable housing units to low-income households for a period of no less than 30 years.  

To be eligible for the property tax exemption, affordable housing units must be distributed throughout the building and be comparable in terms of quality, living conditions, size, and mix of unit types to market rate units in the building for the entire exemption period.

The exemption may not be granted if the owner receives a multi-family property tax exemption.  The exemption excludes the land and any nonhousing related improvements.  

Application.  To receive an exemption an owner of property must apply, on or before December 31, 2029, to the city on forms adopted by the city and verify the information provided in the application by oath or affirmation.  The application must contain:

• information supporting the requested exemption;
• for residential conversions, documentation that indicates the units in the building were rented at over 80 percent area median income prior to conversion to affordable housing as well as the anticipated amount of time needed to transition units to serving low-income households;
• a floor plan of units and other information requested;
• a statement that the applicant is aware of potential tax liability involved when the property ceases to be eligible for the exemption; and
• a certification of family size and annual income requirements.

Applications should be processed by the governing authority within 30 days.  

Certificate of Tax Exemption.  If the application is approved, a conditional certificate of tax exemption will be issued containing a statement that the applicant complies with the application requirements.  The city and applicant must enter into a contract stipulating a tax exemption will be provided if the applicant complies with the provisions outlined in the conditional certificate of tax exemption.

The applicant must submit information indicating compliance with the terms of the conditional certificate of tax exemption within two years of its issuance.  The applicant can apply for a 12-month extension to receive a final certificate of tax exemption.  Within 30 days of receipt of the statement, the governing authority must determine whether the affordability of units is consistent with the conditional tax exemption and, within ten days, either:

• file a final certificate of tax exemption with the county assessor if the affordability is consistent with the contract issued with the conditional certificate of tax exemption; or
• state in writing the reasons for denial and issue notice to the applicant's last known address by regular or certified mail or by other means reasonably calculated to provide notice.

The applicant may appeal the decision within 30 days after receipt.

Reporting.  The owner receiving a tax exemption must obtain annual certification of family size and annual income from the tenant living in an affordable housing unit and report that information annually to the governing authority along with a statement of occupancy and vacancy and a schedule of rents charged in market rate units.  The governing authority must report annually to the Department of Commerce on the:

• number of tax exemption certificates granted;
• number and type of units in the building and meeting affordable housing requirements;
• total monthly rent amount for each affordable and market rate unit; and
• dollar amount of the tax exemption issued for each conversion and total tax exemptions granted within the city.

 
Cancelation of an Exemption.  If the owner intends to discontinue compliance with the affordable housing requirements or any other conditions to the exemption, they must notify tenants and the jurisdiction 60 days prior to discontinuance.  If the city is notified by the owner or discovers that a portion of the property no longer meets the qualifications, the tax exemption is canceled, and the following must occur:

• additional real property tax must be imposed on the property;
• additional interest is owed upon the amounts of the additional property tax at the same rate charged on delinquent property taxes, calculated from the dates on which the additional tax would have been payable without the tax exemption;
• a penalty is owed in the amount equal to 20 percent of the additional property tax imposed; and 
• the additional tax, interest, and penalty are a lien on the real property and attach at the time property, or portion of the property is removed from exempt status. 

 
Upon determination that a tax exemption is canceled, the governing authority must notify the taxpayer by certified mail, and the county assessor.  The owner may appeal the determination within 30 days by filing a notice of appeal with the clerk of the governing authority. The governing authority may hear the appeal and the decision maker must affirm, modify, or overturn the decision to cancel the tax exemption based on the evidence received.  

The governing authority must notify the county assessor of the final decision.  The county assessor must annually value the exempt and nonexempt portion of the property and improvements as necessary to permit the correction of the tax rolls.  

If the owner intends to convert any affordable housing rental units to market rate units before the 30 year exemption period or after the exemption ends, they must provide tenants with notification of intent to provide the tenant with rental relocation assistance in the amount equal to one month's rent within the final month of the low-income household's lease.  To be eligible for assistance the tenant must occupy an affordable housing unit at the time the exemption expires and must qualify as a low-income household at the time relocation assistance is sought.  

Sales and Use Tax Exemption.  The retail sales and use tax does not apply to tangible personal property incorporated as a component of a conversion of a commercial building into affordable housing and labor and services rendered for the conversion.

A qualifying owner must rent or sell a minimum of 10 percent of residential units in a multiunit residential building to low-income households for at least ten years to claim the exemption.  The exemption is in the form of a remittance for 100 percent of the state sales tax paid on qualifying purchases.  The Department of Revenue (DOR) will determine eligibility. 

If the owner intends to discontinue compliance with affordable housing requirements or any other conditions to the exemption, they must notify DOR 60 days prior to discontinuance.  If DOR discovers eligibility conditions for the exemption are no longer met, they must notify the owner within 60 days.  The owner must pay total remittance granted under this section and an additional 20 percent of the total remittance granted as penalty.  

The exemption expires December 31, 2029.
 
Tax Preference Performance Statement.  A tax preference performance statement specifies that the exemption is intended to incentivize the repurposing of existing buildings for affordable housing.