Sources of Revenue:

General Fund,Other Fund local property tax

Legislation creates:

Neither Program nor Fund

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

The stated purpose of this resolution is to propose an amendment to the State Constitution that would provide for the limiting of the assessed valuation of, and the tax levy rate upon, real property and personal property in the form of a mobile home, used exclusively for residential purposes and occupied as a residence by a resident owner citizen who is over the age of 65 or who is permanently or totally disabled (property subject to the current homestead exemption)and owned by a person whose income is less than 400% of the federal poverty level, to not exceed the assessed valuation and levy rate upon the property in the year the property became eligible for the homestead exemption, and to establish a 10% maximum tax increase on the aforementioned property per year. The resolution, as written, limits increases in the assessed valuation of Class II real property and mobile homes which are used exclusively as residential property to no more than 10 percent per year unless there is a change of ownership, new construction, or a new addition to the home. In addition, the resolution permanently freezes both the assessed valuation of a Class II residential property and the tax rate on such property to a base year level if the owner is age sixty-five or older or permanently and totally disabled and if the owner’s income is less than 400 percent of the federal poverty level. Due to all of the variable factors, the State Tax Department is unable to quantify the potential revenue loss due to passage of this resolution. However, roughly 90 percent of qualified Homestead Exemption households would likely fall within the 400 percent of the federal poverty level guidelines, an amount equal to $58,000 for a two-person household in 2009. As a result of passage of this bill, programming changes would be needed to track property on a property-by-property basis. The State Tax Department would incur additional costs of $250,000 to make these changes. Other additional administrative costs to the State or local governments would be substantial because property would have to be tracked on a parcel-by-parcel basis.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2009 Increase/Decrease (use"-")	2010 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	250,000	0
Personal Services	0	0	0
Current Expenses	0	0	0
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	0	0	0
2. Estimated Total Revenues	0	0	0

Explanation of above estimates (including long-range effect):

The resolution, as written, limits increases in the assessed valuation of Class II real property and mobile homes which are used exclusively as residential property to no more than 10 percent per year unless there is a change of ownership, new construction, or a new addition to the home. In addition, the resolution permanently freezes both the assessed valuation of a Class II residential property and the tax rate on such property to a base year level if the owner is age sixty-five or older or permanently and totally disabled and if the owner’s income is less than 400 percent of the federal poverty level. Due to all of the variable factors, the State Tax Department is unable to quantify the potential revenue loss due to passage of this resolution. However, roughly 90 percent of qualified Homestead Exemption households would likely fall within the 400 percent of the federal poverty level guidelines, an amount equal to $58,000 for a two-person household in 2009. During a recent five-year period between 2003 and 2008, total Class II property taxes levied increased by $100 million. A substantial portion of future local government revenue increases from Class II property would be eliminated under the provisions of the proposed resolution. On a Statewide basis, the State School Aid Formula would replace roughly 30 percent of any revenue loss. Local school boards, county commissions, and municipalities may have some flexibility to replace a portion of lost funds through higher excess levy tax rates for school boards or higher regular levy tax rates for county commissions and municipalities on business property, automobiles and rental properties. As a result of passage of this bill, programming changes would be needed to track property on a property-by-property basis. The State Tax Department would incur additional costs of $250,000 to make these changes. Other additional administrative costs to the State or local governments would be substantial because property would have to be tracked on a parcel-by-parcel basis.

Memorandum

The stated purpose of this resolution is to propose an amendment to the State Constitution that would provide for the limiting of the assessed valuation of, and the tax levy rate upon, real property and personal property in the form of a mobile home, used exclusively for residential purposes and occupied as a residence by a resident owner citizen who is over the age of 65 or who is permanently or totally disabled (property subject to the current homestead exemption)and owned by a person whose income is less than 400% of the federal poverty level, to not exceed the assessed valuation and levy rate upon the property in the year the property became eligible for the homestead exemption, and to establish a 10% maximum tax increase on the aforementioned property per year. The amendment to Article X, Section 1b, of the West Virginia Constitution is a new subsection which appears to require that for property that is eligible for the Homestead Exemption and is owned a low-income person, the assessed valuation and levy rate on that property may not exceed the assessed valuation and levy rate imposed on the property for the base tax year. The Legislature, by general law, may determine any restrictions, limitations and conditions to be placed on the exemption. Improvements or additions to the property made after the base tax year are exempt from the exemption. The resolution also amends Section 7 by restricting the tax imposed on Class II residential property to increases from one year to the next of no more than 10 percent. This prohibition applies to Class II residences occupied by an owner who is a resident of this State. A primary concern is that this restriction only applies when the owner (and occupier) of the residence is a citizen of this State. As there are a substantial number of residences in the form of cabins and hunting camps that are owned by non-residents but treated as Class II residences, it is possible that this restriction may be determined to violate the United States Constitution by discriminating against interstate commerce. Essentially, nonresidents would be treated differently than residents when both own and occupy a residential structure in West Virginia.

Person submitting Fiscal Note: Mark Muchow
Email Address: kpetry@tax.state.wv.us