Assigned to FIN AS PASSED BY COMMITTEE
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ARIZONA STATE SENATE
Fifty-Fifth Legislature, Second Regular Session
veterans; disability; exemption; property tax
Purpose
Conditional on the voter approval of H.C.R. 2027, statutorily exempts, from property tax, the primary residence homestead of a veteran who receives 100 percent disability compensation from the U.S. Department of Veterans Affairs (U.S. VA) for a service-connected disability.
Background
The property of Arizona residents who are honorably discharged veterans with a service or nonservice-connected disability, is exempt from taxation to the extent allowed by the Arizona Constitution and subject to the conditions and limitations prescribed by statute (Ariz. Const. art. 9 § 2 and A.R.S. § 42-11111).
In Benjamin v. Arizona Department of Revenue, 163 Ariz. 182 (App. 1989), the Arizona Court of Appeals held that the veteran’s property tax exemption was unconstitutional because it imposed an Arizona residency requirement that violated the 14th Amendment to the U.S. Constitution.
The Joint Legislative Budget Committee fiscal note estimates, beginning in FY 2024, a net state General Fund cost of $6.3 million, which could be offset by savings under the automatic school tax rate adjustments provided by under the state’s Truth-in-Taxation provisions resulting in a net state General Fund savings of $3 million beginning in FY 2024 (JLBC fiscal note).
Provisions
1. Exempts, from property tax to the extent allowed by the Arizona Constitution, the primary residence homestead of an Arizona resident veteran who receives 100 percent disability compensation from the U.S. VA for a service-connected disability.
2. Sets the amount of the property tax exemption at the total appraised value of the veteran's primary residential homestead.
3. Requires a veteran to establish initial eligibility for the property tax exemption by filing an affidavit with the county assessor and requires the veteran to notify the county assessor in writing of any event that disqualifies the veteran from continued exemption.
4. Subjects a veterans' property to property tax from the date of disqualification, including interest, penalties and proceedings for tax delinquencies, and specifies that disqualifying events include:
a) the person's death;
b) a change in the percentage of the veteran's disability compensation; and
c) the conveyance of the property title to another owner.
5. Defines veteran as an individual who has served in, and been discharged, separated or released under honorable conditions from, active or inactive service in the uniformed services of the United States, including:
a) all regular, reserve and national guard components of the U.S. Army, Navy, Air Force, Marine Corps, Coast Guard and Space Force;
b) the commissioned corps of the National Oceanic and Atmospheric Administration;
c) the commissioned corps of the U.S. Public Health Service;
d) a nurse in the service of the American Red Cross or in the Army and Navy Nurse Corps; and
e) any other civilian service that is authorized by federal law to be considered active military duty for the purpose of laws administered by the U.S. Secretary of Veterans Affairs.
6. Conditions the enactment of this legislation on the enactment of H.C.R. 2027, Fifty-fifth Legislature, Second Regular Session, by vote of the people at the next general election and applies this legislation, if approved, to tax years beginning January 1, 2023.
7. Makes technical and conforming changes.
8. Becomes effective on the general effective date or later, subject to the provisions of the conditional enactment.
· Inserts H.C.R. 2027 in the blank space provided for that purpose.
WM 2/14/22 W/D FIN 3/16/22 DPA 7-2-1
MAPS 2/14/22 DP 13-0-0-1-1
3rd Read 2/24/22 58-0-1-1
Prepared by Senate Research
March 16, 2022
MG/slp