Chapter 19, unit 9. Taxation

Two valid reasons why it is benificial to tax land and land improvements

- Property tax revenue is predictable. The fair market value of property is generally very stable. -The taxes are hard to avoid. Because the taxes are tied directly to the property, people tend to pay the taxes rather than suffer the potential consequences of non-payment. More than 95 percent of the levied taxes on real property are paid, especially since most lenders require that the property taxes be paid into an escrow account monthly.

Real property tax exemptions are granted on the basis of many different criteria, including the following..

-The use to which the property is put -The owner's ability to pay taxes -The desire of the state and local governments to encourage certain economic or social activities

What are two reasons for making land the base of taxation?

1) The usual stability of land values makes land taxes predictable. 2) The attachment of taxes to land makes enforcement reliable. 3) Land is traditionally related to productivity and wealth; government takes its share

homestead exemption

A law permitting a debtor to retain the family home, either in its entirety or up to a specified dollar amount, free from the claims of unsecured creditors or trustees in bankruptcy.

What is a "homestead exemption?"

A portion of a property's value that is exempted from taxation because the property, or part of it, is owned and occupied as a family residence.

Tax Deed

A tax deed is a legal instrument for conveying title when a property is sold for non-payment of taxes. The application for a tax deed causes the taxing agency to institute a tax sale or tax foreclosure.

Tax Sale

A tax sale is frequently some type of auction usually conducted by the sheriff. If the tax has not already been paid through the tax certificate process, the buyer of the property must pay the taxes due.

What is a taxing district give several examples

A taxing district is a governmentally-established entity, defined by a geographical boundary, that has the authority to collect taxes for specific purposes. Examples are school districts, library districts, and county bridge and highway departments.

Assesment

Assessed value is determined according to state law, usually by a county or township assessor or appraiser. The actual tax, though based on assessed value, may be derived as a legislated percentage of the assessed value. The property's assessment itself may be a percentage of its fair market value, which is the amount the property would sell for in the current market.

County and local government taxes

Counties, cities and municipalities, townships and special tax districts levy taxes on real property to raise funds for providing local services. It is common for the county to collect all real property taxes and distribute it among the other taxing bodies.

The International Association of Assessing Officers (IAAO) guidelines state that assessors should...

Do a physical review of a property every 4-6 years.

Who gets tax exemptions?

Government-owned properties-- real properties owned by federal, state, and local governments are immune from real property taxation (also true in all other states) Properties owned by non-profit organizations-- real properties owned by churches and non-profit organizations are exempt from real property taxation (also true in all other states) Miscellaneous exemptions may be granted to classes of property owner, such as: senior citizens, widows, and disabled individuals. States and municipalities may also offer property tax reductions or exemptions to certain industries to encourage economic growth.

voluntary tax lien

If property owners initiate the assessment by requesting the local government to provide the improvement, the assessment creates a voluntary tax lien.

What are some circumstances that typically trigger a reassessment of a property?

Improvements to the property in general. Specifically, basement finishing, garage additions, swimming pool construction.

In Rem proceeding

In some states, a local official can bring a legal action, called an in rem legal proceeding, to collect the taxes. An in rem proceeding is one that is directed against a thing, rather than against a person. Typically this involves a forced sale of the property.

Is a special assessment a voluntary tax lien or an involuntary tax lien?

It can be either, depending on whether the citizen has asked for the improvement which is to be paid for by a special assessment (voluntary) or whether the taxing entity has initiated the assessment (involuntary).

What protections might your state offer to a homeowner against the inadvertent loss of ownership for failure to pay property tax?

Many states have grace or redemption period, a notification process, and equitable or statutory right of redemption.

Special Assesment Tax

Not permanent. Temporary until project is done/payment completed. (Adding sidewalks, or dredging projects on canal fronts home.

Tax reassessment

Properties are reassessed for tax purposes on a regular schedule that is established by statute. But reassessments also occur under other circumstances. Reassessments can be done "off schedule" when a property owner makes improvements to the property. Assessors are not allowed to do what are called "spot" reassessments on an individual parcel of property unless it is obvious or it has been reported that a material change was made to the property.

Who is wholly exempt from taxes?

Properties owned by governments and religious organizations are wholly exempt. Other exemptions exist for agricultural and forest property. Exemptions may also be granted to not-for-profit educational and charitable groups.

There are ______ federal taxes on?

Real Property

What appraisal methods do tax assessors use to determine the assessed value of a property?

Sales Comparison, Cost, Income—to assess properties, depending on the type of property. Agricultural land valuation is based on land productivity. The assessor uses whatever approach provides the best estimate of market value, which may then be modified according to formulas to arrive at an assessed value

Tax district budgeting.

The derivation of a tax rate begins with the taxing body determining its funding requirements to provide services for the year. This requirement is formalized in the annual budget. Then the county or district looks at its sources of revenue, such as sales taxes, business taxes, income taxes, state and federal grants, fees, and so forth. The part of the budgeted expenditures that cannot be funded from other income sources must come from real property taxes. This budgetary shortfall becomes the ad valorem tax levy. The tax levy is derived every year, since budget requirements and revenue tallies are performed on an annual cycle.

The high school district in your town needs operating funds. How does it regularly obtain them?

The district determines how much of its budget must be paid for from property taxes. Tax officials calculate the tax base and a tax rate for the school district by dividing the tax base into the revenue required. This tax rate is applied to the taxable value of each property and billed to the homeowners at the proper time. The taxing agency (usually the county) collects the revenues and distributes the earmarked portion to the school district.

Example of LOA from assessment

The percentage of full or market value at which properties are assessed is called the level of assessment or LOA. For example, an LOA of 25 percent means that assessments are one-fourth of the market value, so a home with a market value of $100,000 would be assessed at $25,000.

The role of the tax assessor is to?

The role of the assessor in the taxing process is limited to making the valuation and notifying the owner of the assessed value; other tax officials determine the tax rate and the tax levy.

Tax base totalling

The tax base of an area is the total of the appraised or assessed values of all real property within the area's boundaries, excluding partially or totally exempt properties: tax base = assessed values - exemptions

Tax liens take priority over liens true or false?

True.

Taxes are paid on an ________ basis, meaning they are based on the assessed value of a property

ad valorem basis, meaning that they are based on the assessed value of the property.

A special tax district might be created to

create a two-mile extension of county sewer facilities. (Not permanent tax, temporary)

The purpose of taxation is to raise funds to pay for ___________.

municipal services

County and local governments establish __________ to collect funds for providing specific services.

tax districts

Property taxes are based on the?

the assessed value of property

Sale of Tax Certificates

the buyer of a tax certificate agrees to pay the taxes due and after a period of time may apply for a tax deed on the property

Tax districts include:

the city, county, and school district.

Tax Equalization

the jurisdiction may establish equalization factors to level out the unevenness of valuations. For instance, if assessed values of properties in one county are consistently ten percent below the average for other counties, an equalization board may multiply each assessed value in that county by a factor of 110% to raise them to the average level for the state.