Idaho property tax law dispute in court | Local
A dispute between Latah County and the Idaho State Tax Commission that could affect millions of dollars in statewide real estate appraisals is about to go to court. law courts.
At issue is the Residential Property Exemption, which is the primary form of property tax relief available to Idaho homeowners.
According to the Tax Commission, Latah County has misadministered the exemption over the past year. It has apportioned the exemption on a pro rata basis in certain circumstances, which means that it only grants a portion of the tax relief available, depending on the date of application.
After a two-hour hearing on May 11, the commission ordered the county to stop prorating and grant the full tax relief. The order also covered Lincoln County, which did something similar.
Latah County officials, however, say the commission’s decision was “arbitrary, capricious…(and) based on an erroneous statutory interpretation of Idaho’s code.”
He filed a motion in the district court on Friday, seeking a stay of the tax board‘s order and seeking judicial review of the case. He wants the court to decide which interpretation of state law is correct.
“We strongly believe that in the plain language of the law, the intent of the legislature was to allow proration ‘from the date of enforcement,'” Latah County Commissioner Tom Lamar said. “To me, it’s crystal clear.”
County officials across Idaho are monitoring the dispute. If Latah County’s interpretation is correct, it would reduce the amount of homestead exemptions counties must provide – allowing tens of millions of dollars of residential property value to be added to property tax rolls across the country. local government.
In its current form, the Homestead Exemption reduces the assessed value of an owner-occupied home by $125,000 or 50%, whichever is lower.
Historically, people had to apply for the exemption by April 15. If they were buying a house that previously qualified for the exemption, the deadline was not an issue; it was already in place, so the assessed value of the house was reduced for the whole year.
However, if someone bought a home after April 15 that previously didn’t qualify — because it was being used as a rental unit or a vacation home, for example — they were out of luck. They had to wait until the following year to benefit from the exemption.
In 2020, the Idaho Legislature approved House Bill 562, which removed the April 15 deadline, allowing people to apply for the exemption at any time of the year.
But the bill also added language stating that the exemption “shall come into force on the date of application.”
Latah County interprets this to mean that the exemption should be pro-rated: someone who applies for it in the middle of the year would only be entitled to half of it. Instead of reducing the home’s assessed value by 50%, the county would only reduce it by 25%. The new owner would pay a little more property tax the first year, before benefiting from the full exemption the following year.
The new law took effect on January 1, 2021. According to the Tax Commission, Latah and Lincoln counties are the only two counties in the state that have elected to prorate the exemption; the other 42 counties follow the commission’s guidelines not to prorate.
Rep. Brandon Mitchell, R-Moscow, was contacted by a voter about the issue after he was elected in 2020. After meeting with several Latah County and state officials to try to understand the dispute, he asked to the attorney general‘s office for a legal opinion. on HB 562.
The office concluded that the Tax Commission was correct in its interpretation and that the homestead exemption should not be pro-rated.
Latah officials, however, point to comments made during House and Senate discussions of the bill that indicate lawmakers themselves believed the exemption would be pro-rated.
At the May 11 Tax Commission hearing, Lincoln County Attorney Richard Roats also noted that there was no reason to add language that “the exemption will take effect on the date of the request”, unless the intention was to calculate on a pro rata basis.
“In order to get to the commission’s position that the exemption should not be pro-rated, you need to remove that wording,” he said.
George Brown, administrator of the Property Tax Division of the Board of Internal Revenue, said that dispute boiled down to whether the homestead exemption was one amount for everyone or a different amount depending on the date of demand.
“That’s the crux of the argument,” he said during the May 11 hearing. “We think you get the full exemption, because that’s what (the law) says. The law doesn’t talk about getting anything less than full exemption. When do you get it? When you apply.
If the commission’s interpretation holds up in court, it’s unclear whether Latah County should reimburse homeowners who were denied the full exemption in 2021.
The Lincoln County Treasurer asked this question at the end of the May 11 hearing. The commissioners said they would provide “guidance” on this later.
The Tax Commission did not respond to a question about this Tuesday.
Latah County Assessor Rod Wakefield estimated that if the exemption was not pro-rated, the county’s various taxing jurisdictions would collectively lose about $100,000 in property tax revenue.
In Nez Perce County, where a number of rental units have been converted to owner-occupied homes, Chief Assistant Appraiser Brad Bovey said nearly $11.9 million in assessed value has been removed. tax rolls last year because homestead exemption claims were not pro-rated. This translated into less revenue for the county, for Lewiston, and for other local tax districts.
“It’s not just an argument over language,” Lamar said. “It’s a dispute over language that impacts the ability of local governments to function.”