Assigned to FIN FOR
COMMITTEE
Assigned to FIN FOR
COMMITTEE
ARIZONA STATE SENATE
Fifty-Third Legislature, Second Regular Session
class six property; elderly homeowners
Purpose
Changes, from Class Three to Class Six, the property tax classification of certain homes that qualify for the senior property valuation freeze under the Arizona Constitution.
Background
Current law establishes nine different property classifications for tax purposes with varying assessment ratios. If real and personal property is used as the owner's primary residence, does not qualify for other classifications and is up to 10 acres, then the property is designated as a Class Three property. The assessed valuation of Class Three property is equal to 10 percent of the Full Cash Value (FCV) or limited valuation, as applicable (A.R.S. §§ 42-12003 and 42-15003).
Another property tax classification is Class Six, which has an assessed valuation equal to 5 percent of the FCV or limited valuation, as applicable. Types of property currently included under Class Six are: 1) noncommercial historic property; 2) property located within a foreign trade zone; and 3) property used for renewable energy manufacturing or headquarters (A.R.S. §§ 42‑12006 and 42-15006).
In 2000, Arizona voters approved Proposition 104, which established a property valuation protection option in the Arizona Constitution. This option, also known as the senior property valuation freeze, prevents increases in valuation of the primary residence of owners who meet certain criteria. Specifically, an owner must be age 65 or older, have lived in the residence for at least two years, and have an income of up to 400 percent of the Supplemental Security Income (SSI) benefit rate for an individual owner, or up to 500 percent of the SSI benefit rate for multiple owners (Ariz. Const. art. 9, § 18). According to the Social Security Administration, 400 percent of the 2018 annual SSI benefit rate is $36,000 and 500 percent is $45,000.
There is an anticipated fiscal impact to the state General Fund associated with this legislation. According to the Joint Legislative Budget Committee, the reduction in net assessed value would result in a direct cost increase to the Basic State Aid formula program and decrease the Homeowner Rebate for a net decrease in revenue. Once Truth-in-Taxation provisions are automatically implemented, however, the legislation is expected to result in net savings to the state General Fund.
Provisions
1. Classifies as Class Six property, for taxation purposes, property that:
a) is owned by an Arizona resident who is 65 years of age or older and earns up to 400 percent (for single owners) or up to 500 percent (for multiple owners) of the SSI benefit rate;
b) has been used for residential purposes for at least two years;
c) is the owner's only directly-owned real property; and
d) is under 10 acres on a single parcel, or between 10 and 40 acres on a single parcel if wholly zoned as residential or undividable.
2. Makes technical changes.
3. Becomes effective on the general effective date.
Prepared by Senate Research
January 29, 2018
FB/AF/lb