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ARIZONA STATE SENATE
Fifty-Fifth Legislature, Second Regular Session
property tax; exemption; disability; veterans
Purpose
Subject to voter approval, constitutionally 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 (JLBC) issued a fiscal note on H.B. 2665, which becomes effective on the voter approval of H.C.R. 2027. JLBC 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, the primary residence homestead that is owned by an Arizona resident veteran who receives 100 percent disability compensation from the U.S. VA for a service-connected disability.
2. Exempts a veteran's property tax exemption from the statutory income limits.
3. 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.
4. Specifies that property conveyed to a veteran with a disability to evade taxation is not exempt from property tax.
5. Removes the requirement that a property tax exemption for an honorably discharged member of the U.S. uniformed services with a service-connected disability be available only if the veteran was an Arizona resident prior to September 1, 1945, or had been an Arizona resident for at least four years prior to their original entry into military service.
6. Removes the requirement that a property tax exemption for an honorably discharged member of the U.S. uniformed services with a nonservice-connected disability be available only if the veteran served at least 60 days during time of war after World War I and had been an Arizona resident prior to September 1, 1945.
7. Applies to tax years beginning January 1, 2023.
8. Makes technical and conforming changes.
9. Requires the Secretary of State to submit the proposition to the voters at the next general election.
10. Becomes effective if approved by the voters and on proclamation of the Governor.
House Action
WM 2/14/22 W/D
MAPS 2/14/22 DP 14-0-0-0-1
3rd Read 2/24/22 52-4-1-1
Prepared by Senate Research
March 14, 2022
MG/slp