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 increase the homestead exemption from $20,000 to $35,000. The bill also provides for seniors who earn less than three times the poverty level, that their exemption shall be the greater of the first $35,000 of assessed valuation of any real property or fifty percent of the average home sale price in the county where the residence is located. The bill proposes an amendment to the West Virginia Constitution increasing the Homestead Exemption from $20,000 to $35,000. The increase in the Homestead Exemption from $20,000 to $35,000 would result in a revenue loss of $24.0 million annually for local levying bodies and an increase of $1.0 million in General Revenue Fund collections. The bill also provides that the Homestead Exemption shall be the greater of the first $35,000 of assessed valuation of any real property or fifty percent of the average home sale price in the county where the residence is located for seniors who earn less than three times the poverty level. The impact of this portion of the proposal on State and local property tax revenue cannot be determined. There would be a one-time programming cost of $40,000 to the State Tax Department for computer programming changes on the statewide property tax computer network. Other additional administrative costs to the State Tax Department or local government cannot be determined.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2011 Increase/Decrease (use"-")	2012 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	0	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 increase in the Homestead Exemption would result in a loss of $24.0 million in local property tax revenue. General Revenue Fund collections would increase by $1.0 million as the $100,000 decline in State property tax revenue would be offset by a gain in Personal Income Tax collections. As the level of the Homestead Exemption rises, the number of taxpayers who owe property taxes on their home declines. Therefore, the cost of the refundable property tax credit against Personal Income Tax liability for lower income households would also decline. These estimates are based upon the assumption of no tax rate changes on the part of county commissions, municipalities and voters. Twenty-seven county commissions, numerous municipalities (e.g. Charleston), and 34 school boards (excess levies) currently impose tax rates below their allowed constitutional caps. Some of these authorities may raise tax rates to partially offset any local revenue loss. The bill also provides that the Homestead Exemption shall be the greater of the first $35,000 of assessed valuation of any real property or fifty percent of the average home sale price in the county where the residence is located for seniors who earn less than three times the poverty level. The impact of this portion of the proposal on State and local property tax revenue cannot be determined. There would be a one-time programming cost of $40,000 to the State Tax Department for computer programming changes on the statewide property tax computer network. Other additional administrative costs to the State Tax Department or local government cannot be determined.

Memorandum

The stated purpose of this resolution is to increase the homestead exemption from $20,000 to $35,000. The bill also provides for seniors who earn less than three times the poverty level, that their exemption shall be the greater of the first $35,000 of assessed valuation of any real property or fifty percent of the average home sale price in the county where the residence is located. The proposed amendment initially increases the amount of the assessed valuation of property subject to the Homestead Exemption from $20,000 to $35,000. The amendment then provides under a proviso a higher exemption that is determined solely on a needs basis. It appears that the requirement is fulfilled if only one owner has federal AGI that is equal to or less than 300% of the federal poverty level. Because of the terminology, rather than using the first $35,000 of assessed valuation, the property owner can choose to use as the amount of the exemption 50% of the average home sale price for the five years immediately preceding the assessment in the county where the residence is located. However, the bill does not indicate how the average home sale price is to be determined.

Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov