Property Tax Reform? Committee on Economic and Tax Policy Hears Testimony

The Arkansas Legislature’s Joint Committee on Economic and Tax Policy met on Wednesday, September 20 for an overview of property taxation. Lindsey Bailey, Legal Counsel for the Association of Arkansas Counties (AAC), led the presentation, accompanied by John Nichols, Attorney for the Assessment Coordination Department (ACD); Sandra Collier, Colombia County Assessor; and Chris Villines, Executive Director of the AAC and former Saline County Collector. Although the meeting only lasted for about an hour, there were a number of questions from legislators that highlighted several issues of interest:

The Reappraisal Cycle. Counties are on 3-year or 5-year reappraisal cycles, depending on the rate of growth of the countywide property tax base. All counties are presently on 5-year reappraisal cycle, with the exception of Craighead County (Jonesboro), which will enter a 3-year reappraisal cycle in 2018. As a general rule, real property values are only subject to adjustment during reappraisal years, except in the case of newly discovered property, new construction, reclassifications, and sales. Following reappraisal, increases in assessed value are capped at 5% (residential) or 10% (commercial, industrial, etc.) per year, until the assessed value catches up with the value determined in the reassessment; or are frozen and not subject to adjustment, as in the case of homestead property when the owner is age 65 or older, or is disabled. This led to questions about the distortions that are being created by this system; particularly when the value of property has obviously decreased during the 5-year cycle, but the taxpayer continues to be subject to stepped increases in assessed value as a result of the last 5-year reassessment. Questions explored changing to a 2-year reassessment cycle across the state, and the presenters acknowledged that this could be feasible, although it would require staffing increases by the consultants that typically provide reassessment services, as well as increased costs associated with more frequent county-wide reassessments.

Agriculture & Timber. Some legislators also expressed concern about the favorable valuation principles that apply to agricultural, pasture and timber properties. By law valuation of these properties is based on “productivity of the soil.” This generally limits valuation to an “income approach” that disregards market sales. One of the presenters speculated that productivity valuation reduces the valuation of agricultural, pasture and timber properties by approximately 90% for tax purposes.

Training. A former County Assessor on the Committee explored the training provided to County Equalization Board Members and how well prepared they are to handle valuation issues. Ms. Bailey reminded the Committee that House Revenue and Tax Committee Chairman Joe Jett sponsored an Act passed in the 2017 Session that requires equalization board members to attend training sessions beginning in 2018. One third of EQ Board members will attend each year. This led to a follow-up question whether this would discourage EQ Board members from agreeing to serve in these volunteer positions. Ms. Bailey reported that more EQ Board members had attended the Equalization Board Member Seminar the ACD presented in July, 2017 than ever before. She went on to comment that in her view, EQ Board members are dedicated to the role they play in the ad valorem tax process and welcome the additional education the new law will provide.

This post was authored by DDH member Michael Parker.

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