Assigned to FIN                                                                                                   FOR CAUCUS & FLOOR ACTION

ARIZONA STATE SENATE

Forty-eighth Legislature, First Regular Session

AMENDED

FACT SHEET FOR S.B. 1339

disabled veterans; property tax exemption

Purpose

            Exempts from property tax certain property of armed forces veterans with service connected disabilities upon approval of a ballot measure authorizing a property tax exemption for such persons at the next general election (S.C.R. 1014).

Background

            Currently, the property of widows, widowers and disabled persons is eligible for a tax exemption in the amount of $3,000, if the value of the property does not exceed $200,000 and the person meets certain requirements.  The Arizona Constitution also provided a property tax exemption for veterans with service connected disabilities until it was ruled unconstitutional in the 1989 case Benjamin v. the Arizona Department of Revenue, 163 Ariz. 182, 786 P.2d 1033.  The Court of Appeals affirmed the Superior Court decision, which held that the residency requirements in the exemption violated the 14th Amendment to the U.S. Constitution.  The Court also determined that the unconstitutional residency requirements could not be severed, thus invalidating the tax exemptions.  Subject to the approval of a constitutional exemption, S.B. 1339 creates a new property tax exemption for disabled veterans and the corresponding exemption guidelines. 

            The U.S. Department of Veterans Affairs provides a rating schedule for evaluating disabilities resulting from military service.  The rating schedule determines the average impairment in earnings capacity resulting from the disability.  S.B. 1339 allows the county assessor to refer to the federal rating schedule to determine the amount of the property tax exemption.

            According to the Arizona Department of Veterans’ Services, in 2006 there were 57,893 disabled veterans in Arizona.  Disabilities are rated in increments of 10 percent reflecting the degree of disability as determined by the U.S. Department of Veterans Affairs.  Of the 57,893 disabled veterans in Arizona, 17,481 are in the 10 percent disabled category and 5,442 are in the 100 percent category. 

            According to a Joint Legislative Budget Committee fiscal note requested on a similar bill in 2006, the estimated fiscal impact to the state General Fund ranges from a loss of $5 million to a savings of $1 million.

Provisions

1. Exempts from property tax the primary residence of an Arizona armed forces veteran with a service connected disability subject to the following income limitations:

a) $30,000 if the disabled veteran, spouse and up to two children reside in the home.

b) $36,000 if the disabled veteran, spouse and up to three children reside in the home.

c) $42,000 if the disabled veteran, spouse and up to four children reside in the home.

d) $48,000 if the disabled veteran, spouse and up to five children reside in the home.

2. Allows for a surviving spouse to be eligible for an exemption on the surviving spouse’s primary residence if the veteran dies.

3. Extends the property tax exemption to the primary residence of widows or widowers whose spouses were killed in action while serving in the United States Armed Forces.

4. Limits the amount of the tax exemption to the percentage rating of the veteran’s service connected disability.

5. Allows the county assessor to refer to rating schedules adopted by the U.S. Department of Veterans Affairs.

6. Requires the disabled person or surviving spouse to notify the county assessor in writing of any disqualifying events, which include:

a) the qualifying person’s death.

b) exceeding the income limitations.

c) moving to another residence.

d) selling or transferring the property

e) remarriage of a qualifying spouse.

7. Subjects exempt property to interest penalties and tax delinquency proceedings, whether or not the assessor is notified about a disqualifying event.

8. Allows a qualified person to receive a property tax exemption for a service connected disability or a property tax exemption as a widow, widower or disabled person, but not both.

9. Requires the Department of Revenue to increase income limitations based on any annual percentage increase in the gross domestic product price deflator as defined in the two most recent complete state fiscal years.

10. Defines “household income.”

11. Becomes effective upon voter approval of a ballot measure at the next general election that authorizes a property tax exemption for persons with a service connected disability.

Amendments Adopted by Committee

1. Includes remarriage of a surviving spouse as a disqualifying event.

2. Corrects an internal reference.

Senate Action

FIN     1/31/07     DPA     8-0-0-0

Prepared by Senate Research

January 29, 2007

SL/JW/jas