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ARIZONA STATE SENATE
Fifty-Fourth Legislature, First Regular Session
AMENDED
property taxes; valuation; property modifications
Purpose
Specifies how the limited property value (LPV) is calculated in situations in which property has been modified by construction, destruction or demolition.
Background
Current statute states that the LPV shall be established at a level or percentage of full cash value (FCV) that is comparable to that of other properties of the same or similar use or classification, including:
1) property that was erroneously totally or partially omitted from the property tax rolls in the preceding tax year;
2) property for which a change in use has occurred since the preceding tax year;
3) property that has been modified by construction, destruction or demolition since the preceding valuation year; and
4) property that has been split, subdivided or consolidated from January 1 through September 30 of the valuation year, except for cases that result from an action initiated by a governmental entity (A.R.S. § 42-13302).
The above statutory provision is known as Rule B. The Arizona Department of Revenue (ADOR) states, "although Rule B must be used when any new construction equals 10 percent or more of the prior valuation year's FCV, an assessor should use discretion in determining whether Rule A or Rule B will be applied in the following situations:
1) the assessor has updated the listing of a property’s characteristics which results in an increase in the FCV;
2) the interior of a property has been completely renovated or modified which changes the property’s effective age;
3) partial omissions, wherein the portion of a property that was omitted from the tax roll is less than 10 percent of the prior valuation year's FCV;
4) changes in classification, including qualified agricultural classification, wherein the increase in FCV is less than 10 percent of the prior valuation year's FCV;
5) new construction, wherein the new construction adds less than 10 percent to the prior valuation year's FCV; and
6) the demolition, destruction or removal of existing improvements, wherein the FCV remaining is equal to, or exceeds, 90 percent of the prior valuation year's FCV, unless the elimination of the improvements also results in a change of legal classification (e.g., if the parcel is changed from improved to vacant land)" (ADOR Updated Assessment Procedures Manual).
Provisions
1. Specifies that, in addition to existing statutory requirements, LPV shall be established at a level or percentage of FCV, known as Rule B, when that property has been modified by construction, destruction or demolition such that the total added value of the modification is equal to or greater than 15 percent of the FCV.
2. Becomes effective on the general effective date.
Amendments Adopted by Committee
1. Reverts to change in use for the imposition of Rule B.
2. Changes Rule B requirements.
3. Removes three-year statute of limitations.
Amendments Adopted by Committee of the Whole
· Reverts the statute to existing language other than the 15 percent change.
Senate Action
FIN 2/20/19 DPA 8-2-0
Prepared by Senate Research
March 1, 2019
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