Date Requested: January 23, 2015
Time Requested: 03:37 PM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
1953 Introduced HJR3
CBD Subject: Const. Amendments


FUND(S):

General Revenue Fund, local governments

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 $30,000. However, if the homeowner’s federal adjusted gross income is equal to or less than two hundred percent of the federal poverty level the exemption shall be the greater of $30,000 or fifty percent of the average sale price of homes in that county during the five preceding years, provided that the exemption may not be greater than fifty percent of the average sale price of homes in the state during those five preceding years.
    
    The total loss of revenue to the State and local governments cannot be determined. Information tying taxpayer income to local residential property tax liability is generally not available. In isolation and absent any offsetting tax rate increases on the part of local tax jurisdictions, the change to a minimum $30,000 Homestead Exemption would reduce local tax collections by $19.5 million and would increase State General Revenue Fund collections by $150,000.
    
    In most counties, decreased tax revenue due to an increase in the Homestead Exemption would likely be at least partially offset by higher tax rates and tax burdens on other types of property, including both real property taxes and personal property taxes on vehicles, business inventory, machinery and equipment.
    
    There would be a one-time cost of $30,000 to the State Tax Department. Additional administrative costs to the State Tax Department or local governments cannot be determined. Administrative costs for local county assessors will increase as they seek information from taxpayers on their income to determine the level of individual Homestead Exemption.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2015
Increase/Decrease
(use"-")
2016
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 total loss of revenue to the State and local governments cannot be determined. Information tying taxpayer income to local residential property tax liability is generally not available. In isolation, the change to a minimum $30,000 Homestead Exemption would reduce local tax collections by $19.5 million and would increase State General Revenue Fund collections by $150,000.
    
    These estimates are based upon the assumption of no tax rate changes on the part of county commissions, municipalities and voters. In most counties, decreased tax revenue due to an increase in the Homestead Exemption would likely be at least partially offset by higher tax rates and tax burdens on other types of property, including both real property taxes and personal property taxes on vehicles, business inventory, machinery and equipment. Twenty-one county commissions, numerous municipalities (e.g. Charleston), and thirty-three 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.
    
    There would be a one-time cost of $30,000 to the State Tax Department. Additional administrative costs to the State Tax Department or local governments cannot be determined. Administrative costs for local county assessors will increase as they seek information from taxpayers on their income to determine the level of individual Homestead Exemption.
    



Memorandum


    The stated purpose of this resolution is to increase the homestead exemption from $20,000 to $30,000. However, if the homeowner’s federal adjusted gross income is equal to or less than two hundred percent of the federal poverty level the exemption shall be the greater of $30,000 or fifty percent of the average sale price of homes in that county during the five preceding years, provided that the exemption may not be greater than fifty percent of the average sale price of homes in the state during those five preceding years.
    
    The proposed amendment initially increases the amount of the assessed valuation of property subject to the Homestead Exemption from $20,000 to $30,000. 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 200% of the federal poverty level.
    
    Because of the terminology, rather than using the first $30,000 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.
    
    By permitting a county-based consideration of a property’s value, the proposed amendment may violate Article X, Section 1, of the West Virginia Constitution.
    
    



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