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Special Session D - Property Tax Reform
Constitutional Amendment for Property Tax Reform
The House and Senate both passed legislation (SB 2D) during Special Session D that will be placed on the Jan 29 election ballot. Below are the four (4) components of the constitutional amendment that will be presented before the voters.
1) Double Homestead Exemption
An additional $25,000 homestead exemption is provided for the value of homestead
property above $50,000. This exemption does not apply to school taxes. According
to Senate estimates, this would result in an $892 million statewide tax roll reduction in 2008-09.
Example: If you live in a home that is currently assessed at $250,000 in value, you will be exempt from paying taxes on the 1st $25,000 in value (this is the current Homestead exemption), you will pay full taxes on the 2nd $25,000 in value ($25,000- $50,000 in value), you will be exempt from all taxes except school taxes on the 3rd $25,000 in value ($50,000 - $75,000 in value), and you will pay full taxes on the entire value of your home after $75,000. If you live in a home that is valued at $50,000 or less, this new exemption will not apply to your home.
2) Portability
Homestead property owners will be able to transfer their Save Our Homes benefit (up to $500,000) to a new homestead within two years of giving up their previous homestead. If the just value of the new homestead is more than the previous home's just value, the entire differential can be transferred; if the new homestead has a lower just value, the amount of the accumulated benefit that may be transferred is proportional to the value of the new homestead. (For those who gave up their homestead in 2007 before the amendment was passed, the differential may be transferred if they apply for a new homestead January 1, 2008 or January 1, 2009.) This provision applies to all taxes, including school taxes. Senate staff estimates this would cut taxes, statewide, $302 million in 2008-09.
Example of upsizing your home: If you live in a house that has a market or just value of $250,000 and an assessed value of $150,000 and you move to a home that is valued at $500,000, you will be able to make portable the $100,000 in difference between your existing homes market and assessed values and apply that to your new $500,000 home. Your assessed value on you new $500,000 home will now be $400,000. If you live in a house that is valued at $1,500,000 and is assessed at $500,000 and you move to a home that is valued at $3,000,000, even though the difference between your current homes assessed and market value is $1,000,000, you may only take $500,000 (since the legislation limits the amount you can make portable at $500,000) and apply that to your new home assessment. So your new $3,000,000 home will be assessed at $2,500,000.
Example of downsizing your home: If you live in a home with a market value of $250,000 and it is currently assessed at $150,000, and you downsize and move to a home with a market value of $200,000, the following formula will be used to figure your new assessed value:
(The just value of the new homestead) divided by (the just value of the immediate prior homestead) and multiplied by (the assessed value of the immediate prior homestead) = (the assessed value of your new home)
Please keep in mind that these examples do not take into account your homestead exemption and any other additional exemptions that apply (i.e. exemptions for certain veterans and low income seniors). Those exemptions will still apply to your new homesteaded property.
3) Tangible Personal Property Exemption
A $25,000 exemption is provided for each tangible personal property return. This exemption will allow businesses to receive a break on the taxes they pay on equipment. This provision applies to all taxes. Senate staff estimates this would cut taxes, statewide, $179 million in 2008-09.
Explanation: According to House estimates for the average commercial property, this creates savings of $450 (assuming an aggregate tax rate of 17 mills, which is near the statewide average). Those property owners with less than $25,000 worth of tangible personal property will no longer have to file detailed returns, thereby alleviating an oftencumbersome administrative burden. Approximately 1 million of Florida's 1.3 million businesses will receive a total exemption from the tangible personal property tax. This provision does apply to school tax levies. If this provision exempted schools, businesses would save money but still be required to file annual returns. This would undermine the purpose of completely removing the administrative burden of filing annual returns.
4) Assessment Cap for Non-Homestead Property
Non-homestead property will have a 10% assessment cap (similar to Save Our Homes) but the cap will apply only to non-school levies. The 10% cap will sunset after 10 years, when it will be presented to the voters for re-approval. Most residential property will be reassessed at just value when it is sold; commercial property and residential properties with 10 or more units will be reassessed after a significant improvement or a sale. This provision
will not take effect until the 2009 tax roll, or 2010 if the amendment is approved in November. This provision does not apply to school taxes. Senate staff estimates this would cut taxes, statewide, $51 million in 2009-10.
What Was In the Original Proposal That Did Not Make It in the Final Bill?
The following provisions were included in earlier versions of property tax relief bills pending before the legislature, but were not included in the final proposal.
New-home buyers would have received a 25 percent break on assessments. The House estimated this would have cut taxes $65 million in 2008-09. Those 65 or older, with household income under $23,604, would have been exempted from all homestead property taxes. The House estimated this would have cut taxes $629 million in 2008-09. Tax breaks for affordable housing would have limited assessments to reflect rents paid. The House estimated it would have cut taxes $45 million in 2008-09. Caps on millage rates local governments could set would have preserved reductions passed by the Legislature and would have given the Legislature the authority to further limit millage rates that local governments could levy. The Miami-Dade property appraiser would have become an elected position. Non-homestead property owners would have had an easier way to challenge their tax assessments, under certain circumstances. House staff estimated taxes would have been cut $100 million in 2008-09.A minimum homestead exemption equal to 40 percent of the median homestead price in each county. Working waterfront property like commercial fishing operations and marinas would have had their assessments limited by allowing for appraisal based on income of the property rather than highest and best use.
SB 4D - Implementing Language and Fiscally Constrained Counties
The statutory changes (SB 4D) implement the provisions of the constitutional amendment. The bill includes language related to all of the above provisions described. One provision in the bill that is not in the constitutional amendment and will have to be dealt with during the regular session is a section related to fiscally constrained counties. The bill requires an annual appropriation to fiscally constrained counties to make up for revenue reductions resulting from the adoption of the constitutional amendment by the voters. There is great concern that fiscally constrained counties will disproportionately loose local revenues to adequately provide for local services. The language in the bill remains vague; therefore, there is concern about how much and from where these funds will be allocated. In addition, language in the original filed bill would have required for FY 2008/09 a unanimous vote of a local government for overrides of the proposed changes to make up for lost revenue. Under the adopted plan a 2/3 majority override for up to 110% is provided.
Fiscal Impacts
The Proposed tax reform package, according to estimates release by the Florida Senate, will have the following five year fiscal impact totals:
Statewide Five-Year Total Fiscal Impact ($millions)
$25K homestead exemption (4,666)
Portability (5,629)
Tangible Personal Property $25K exemption (922)
10% Cap on Non Homestead Assessment (1,163)
Non-School Impacts (9,623)
Total School Impacts (2,757)
Total Impact (12,380)
Special Session D - Property Tax Reform
Constitutional Amendment for Property Tax Reform
The House and Senate both passed legislation (SB 2D) during Special Session D that will be placed on the Jan 29 election ballot. Below are the four (4) components of the constitutional amendment that will be presented before the voters.
1) Double Homestead Exemption
An additional $25,000 homestead exemption is provided for the value of homestead
property above $50,000. This exemption does not apply to school taxes. According to Senate estimates, this would result in an $892 million statewide tax roll reduction in 2008-09.
Example: If you live in a home that is currently assessed at $250,000 in value, you will be exempt from paying taxes on the 1st $25,000 in value (this is the current Homestead exemption), you will pay full taxes on the 2nd $25,000 in value ($25,000-$50,000 in value), you will be exempt from all taxes except school taxes on the 3rd $25,000 in value ($50,000 - $75,000 in value), and you will pay full taxes on the entire value of your home after $75,000. If you live in a home that is valued at $50,000 or less, this new exemption will not apply to your home.
2) Portability
Homestead property owners will be able to transfer their Save Our Homes benefit (up to $500,000) to a new homestead within two years of giving up their previous homestead. If the just value of the new homestead is more than the previous home's just value, the entire differential can be transferred; if the new homestead has a lower just value, the amount of the accumulated benefit that may be transferred is proportional to the value of the new homestead. (For those who gave up their homestead in 2007 before the amendment was passed, the differential may be transferred if they apply for a new homestead January 1, 2008 or January 1, 2009.) This provision applies to all taxes, including
school taxes. Senate staff estimates this would cut taxes, statewide, $302 million in 2008-09.
Example of upsizing your home: If you live in a house that has a market or just value of $250,000 and an assessed value of $150,000 and you move to a home that is valued at $500,000, you will be able to make portable the $100,000 in difference between your existing homes market and assessed values and apply that to your new $500,000 home. Your assessed value on you new $500,000 home will now be $400,000. If you live in a house that is valued at $1,500,000 and is assessed at $500,000 and you move to a home that is valued at $3,000,000, even though the difference between your current homes assessed and market value is $1,000,000, you may only take $500,000 (since the legislation limits the amount you can make portable at $500,000) and apply that to your new home assessment. So your new $3,000,000 home will be assessed at $2,500,000.
Example of downsizing your home: If you live in a home with a market value of $250,000 and it is currently assessed at $150,000, and you downsize and move to a home with a market value of $200,000, the following formula will be used to figure your new assessed value:
(The just value of the new homestead) divided by (the just value of the immediate prior homestead) and multiplied by (the assessed value of the immediate prior homestead) = (the assessed value of your new home)
Please keep in mind that these examples do not take into account your homestead exemption and any other additional exemptions that apply (i.e. exemptions for certain veterans and low income seniors). Those exemptions will still apply to your new homesteaded property.
3) Tangible Personal Property Exemption
A $25,000 exemption is provided for each tangible personal property return. This exemption will allow businesses to receive a break on the taxes they pay on equipment. This provision applies to all taxes. Senate staff estimates this would cut taxes, statewide, $179 million in 2008-09.
Explanation: According to House estimates for the average commercial property, this creates savings of $450 (assuming an aggregate tax rate of 17 mills, which is near the statewide average). Those property owners with less than $25,000 worth of tangible personal property will no longer have to file detailed returns, thereby alleviating an oftencumbersome administrative burden. Approximately 1 million of Florida's 1.3 million businesses will receive a total exemption from the tangible personal property tax. This provision does apply to school tax levies. If this provision exempted schools, businesses would save money but still be required to file annual returns. This would undermine the purpose of completely removing the administrative burden of filing annual returns.
4) Assessment Cap for Non-Homestead Property
Non-homestead property will have a 10% assessment cap (similar to Save Our Homes) but the cap will apply only to non-school levies. The 10% cap will sunset after 10 years, when it will be presented to the voters for re-approval. Most residential property will be reassessed at just value when it is sold; commercial property and residential properties with 10 or more units will be reassessed after a significant improvement or a sale. This provision will not take effect until the 2009 tax roll, or 2010 if the amendment is approved in November. This provision does not apply to school taxes. Senate staff estimates this would cut taxes, statewide, $51 million in 2009-10.
What Was In the Original Proposal That Did Not Make It in the Final Bill?
The following provisions were included in earlier versions of property tax relief bills pending before the legislature, but were not included in the final proposal. New-home buyers would have received a 25 percent break on assessments. The House estimated this would have cut taxes $65 million in 2008-09. Those 65 or older, with household income under $23,604, would have been exempted from all homestead property taxes. The House estimated this would have cut taxes $629 million in 2008-09. Tax breaks for affordable housing would have limited assessments to reflect rents paid. The House estimated it would have cut taxes $45 million in 2008-09. Caps on millage rates local governments could set would have preserved reductions passed by the Legislature and would have given the Legislature the authority to further limit millage rates that local governments could levy. The Miami-Dade property appraiser would have become an elected position.
Non-homestead property owners would have had an easier way to challenge their tax assessments, under certain circumstances. House staff estimated taxes would have been cut $100 million in 2008-09.
A minimum homestead exemption equal to 40 percent of the median homestead price in each county. Working waterfront property like commercial fishing operations and marinas would have had their assessments limited by allowing for appraisal based on income of the property rather than highest and best use.
SB 4D - Implementing Language and Fiscally Constrained Counties
The statutory changes (SB 4D) implement the provisions of the constitutional amendment. The bill includes language related to all of the above provisions described. One provision in the bill that is not in the constitutional amendment and will have to be dealt with during the regular session is a section related to fiscally constrained counties. The bill requires an annual appropriation to fiscally constrained counties to make up for revenue reductions resulting from the adoption of the constitutional amendment by the voters. There is great concern that fiscally constrained counties will disproportionately loose local revenues to adequately provide for local services. The language in the bill remains vague; therefore, there is concern about how much and from where these funds will be allocated.
In addition, language in the original filed bill would have required for FY 2008/09 a unanimous vote of a local government for overrides of the proposed changes to make up for lost revenue. Under the adopted plan a 2/3 majority override for up to 110% is provided.
Fiscal Impacts
The Proposed tax reform package, according to estimates release by the Florida Senate, will have the following five year fiscal impact totals:
Statewide Five-Year Total Fiscal Impact ($millions)
Here is a breakdown of the fiscal impact in each of the first five years:
Prepared by: Todd Bonlarron, Palm Beach County