Drafted by Committee on Ways and Means

(dr req 05-1307 – Draft 2.3)Page 1

2/23/2005 - EJB(2.3)

Subject:Education finance; property reappraisals

Statement of purpose: This bill proposes various amendments to education finance law and laws governing property reappraisals.

DRAFT VERSION - NOT FINAL

This draft is available on the Legislative Website at

(click on “Major Issues - Education Finance - Ways and Means Draft Bill”)

AN ACT RELATING TO APPRAISALS AND EDUCATION FINANCE

It is hereby enacted by the General Assembly of the State of Vermont:

* * * Grand List Issues Study * * *

Sec. 1. 32 V.S.A. § 3481(1) is amended to read:

§ 3481. DEFINITIONS

The following definitions shall apply in this Part and chapter 101 of this title, pertaining to the listing of property for taxation:

(1) “Appraisal value” shall mean, with respect to property enrolled in a use value appraisal program, the use value appraisal as defined in section subdivision 3752(12) of this title, multiplied by the common level of appraisal, and with respect to all other property, the estimated fair market value. The estimated fair market value of a property is the price which the property will bring in the market when offered for sale and purchased by another, taking into consideration all the elements of the availability of the property, its use both potential and prospective, any functional deficiencies, and all other elements such as age and condition which combine to give property a market value. Those elements shall include a consideration of a decrease in value due to a housing subsidy covenant as defined in section 610 of Title 27, or the effect of any state or local law or regulation affecting the use of land, including but not limited to chapter 151 of Title 10 or any land capability plan established in furtherance or implementation thereof, rules adopted by the state board of health and any local or regional zoning ordinances or development plans. In determining estimated fair market value, the sale price of the property in question is one element to consider, but is not solely determinative.

Sec. 2. STATEMENT OF INTENT

It is the intent of the general assembly to enhance voluntary lister training provided by the state, in order to support local listers in executing their jobs and to improve the quality and uniformity of appraisal methodology and grand list maintenance. Therefore, the general assembly proposes to amend the law pertaining to lister training and to appropriate additional state funds to support this training as follows in the next two sections of this act.

Sec. 3. 32 V.S.A. § 3436 is added to read:

§ 3436. Assessment Education

(a) The director shall provide an assessment education program for municipal listers and assessors at convenient times and places during the year and is authorized to contract with one or more persons to provide part or all of the assessment instruction. On an annual basis, the director shall provide, to the extent allowed by available resources, instruction in lister duties, property inspection, data collection, valuation methods, mass appraisal techniques, and property tax administration.

(b) The director shall determine the necessary course work or evaluation of equivalent experience required for certification as certified lister/assessor, certified property evaluator, and certified municipal appraiser. Certification for any one level shall be for a period of two years.

(c) Certification obtained under subsection (b) of this section may be renewed for two-year periods upon completion of requirements as determined by the director.

Sec. 4. IMPLEMENTATION AND APPROPRIATION

There is appropriated for fiscal year 2006 from the education fund to the director of property valuation and review the amount of $100,000.00 for purposes of providing assessment education in fiscal year 2006, including obtaining instructors and classroom space and materials and production of videotape and computer courses. In designing the overall program and course offerings to be offered as required under 32 V.S.A. § 3436, the director shall consult with the Vermont Assessors and Listers Association and other persons the director deems appropriate. The director shall report on January 15, 2006 and January 15, 2007 to the house committees on ways and means and appropriations and to the senate committees on finance and appropriations on the current status of the lister education program, including courses offered, level of participation in the program, and level of participants’ satisfaction with the program.

Sec. 5. 32 V.S.A. § 4001(a) is amended to read:

(a) Annually on April 1, at the expense of the state, the director shall furnish to the several town clerks and boards of appraisers for unorganized towns and gores inventory forms sufficient in number to meet the requirements of this chapter. Such forms shall be formulated by the director, and, among other things, shall contain suitable interrogatories requiring each taxpayer to furnish therein a brief statement of all his each taxpayer’s taxable property, real and personal, and such other information, including income and expense information with respect to any income-producing properties, as will enable the listers or appraisers to appraise such part thereof as is required by law to be by them appraised, and to make up the abstract of individual lists and grand list in the manner prescribed by law.

* * * Late-Filed Homestead Declaration * * *

Sec. 6. 32 V.S.A. § 5410(h) and (i) are amended to read:

(h) The filing of a new or corrected declaration or rescission of an erroneous declaration, before December 1 July 15 of the property tax year that is not reflected in the first education fund payment under 16 V.S.A. § 4028 for that fiscal year or in a municipality’s first payment to the education fund under subsection 5402(c) of this title for that fiscal year shall be reflected in the final net payment to or from the education fund for that fiscal year. The municipality may retain one-eighth of one percent of the tax collected. Any reduction in tax paid to a municipality due to a new, revised, or rescinded declaration shall be paid by the municipality to the taxpayer no later than May 15 of the fiscal year. No later than June 1, each municipality shall provide to the state treasurer a list of taxpayers who filed late or corrected declarations or rescinded declarations, the amount of the change in education tax, and the amount of any interest and penalty billed the taxpayer.

(i) An owner filing a new or corrected declaration, or rescinding an erroneous declaration, on December 1 July 15 or after shall not be entitled to a refund resulting from the correct property classification; and any additional property tax and interest which would result from the correct classification shall not be assessed as tax and interest, but shall instead constitute an additional penalty, to be assessed and collected in the same manner as penalties under subsection (g) of this section.

Sec. 7. 32 V.S.A. § 6061(13) is added to read:

(13) “Homestead” means a homestead as defined under subdivision 5401(7) of this title and declared in accordance with section 5410 of this title.

* * * Per Parcel Payments to Towns * * *

Sec. 8. 32 V.S.A. § 4041a(a) is amended to read:

(a) A municipality shall be paid $6.00 $8.50 per grand list parcel per year from the equalization and reappraisal account within the education fund, to be used only for reappraisal and costs related to reappraisal of its grand list properties and for maintenance of the grand list.

* * * Business Portion of the Homestead Parcel * * *

Sec. 9. 32 V.S.A. § 5401(7)(F) is amended to read:

(F) A homestead also includes any other does not include any improvement or structure on the homestead parcel which is not used for business purposes, and does not include that portion of the parcel underlying the business improvement or structure. A homestead does not include that portion of a principal dwelling used for business purposes if the portion used for business purposes includes more than 25 percent of the floor space of the building.

* * * Education Operations Consultant * * *

Sec. 10. 16 V.S.A. § 4028(c) is added to read:

(c) Any district which has adopted a school budget that includes excess spending, as defined in 32 V.S.A. § 5401(12), shall, upon timely notice, be authorized to use a portion of its excess spending penalty in obtaining an education operations consultant, as follows: The district may employ a consultant for recommendations on how to reduce its future education spending, and the department of education shall pay the consulting costs from the property tax revenue to be generated by the excess spending increase to the district’s spending adjustment as estimated by the commissioner, up to a maximum of $5,000.00. “Timely notice” for this purpose means written notice from the district to the commissioner within 60 days after the budget is adopted. The consultant may not be an employee of the district or of the department of education. A copy of the consultant’s final recommendations shall be submitted to the commissioner, and each affected town shall include in its next town report an executive summary of the consultant’s final recommendations and notice of where a complete copy is available. No district is authorized to obtain consulting funds under this section more often than once every five years.

* * * Income Sensitivity Technical Amendments * * *

Sec. 11. 32 V.S.A. § 5932(3) is amended to read:

(3) “Non-debtor Nondebtor spouse” means any individual who is not a debtor, but has filed a joint income tax return, property tax rebate claim or sales tax rebate or claim under chapter 154 of Title 32 with a debtor.

Sec. 12. 32 V.S.A. § 6061(3) is amended to read:

(3) “Household” means, for any individual and for any taxable year, the individual and such other persons as resided with the individual in the homestead principal dwelling at any time during the taxable year. A person who is not related to any member of the household and who is residing in the household under a written homesharing agreement pursuant to a nonprofit homesharing program or a person residing in a household who is hired as a bona fide employee to provide personal care to a member of the household and who is not related to the person for whom the care is provided shall not be considered to be a member of the household.

* * * Legislative Study * * *

Sec. 13. JOINT LEGISLATIVE STUDY OF INCOME-BASED

EDUCATION TAX SYSTEM

(a) There is created a legislative committee, to be known as the Joint Legislative Study Committee on Income-Based Education Property Tax for Vermonters. The committee shall analyze the current prebate and rebate system by which most Vermonters pay education property tax based on income, and propose a more understandable and efficient income-based system, taking into account taxpayer confidentiality. In analyzing and designing its proposals, the committee shall consider:

(1) whether prebates and rebates are the best method to achieve a transparent and Vermonter taxpayer-friendly income-based system;

(2) all administrative and taxpayer burdens and costs of the current methods of prebates and rebates, as contrasted with any proposed new system;

(3) expanding or decreasing the requirements for eligibility for an income-based program, including but not limited to:

(A) definition of “household income”;

(B) housesite value limitation;

(4) concerns with the amount of benefit available in the circumstance of a taxpayer with very high property tax and very low income, and methods to assure that a taxpayer in such circumstance does not receive an inappropriate benefit (as defined by the Study Committee) without creating a hardship for those in true need; ways to limit manipulation of “household income” eligibility, including income averaging; and balancing of the needs of individual taxpayers against the cost to other taxpayers.

(5) which of the following options is the best method to have Vermonters pay for education based on income rather than on property tax:

(A) bill sent by town that identifies the education tax due based on income.

(B) bill sent by State that identifies the education tax due based on income.

(D) eliminate the prebate system and modify the rebate system.

(E) other legislative ideas presented in previous sessions.

(F) other ideas.

(G) keeping in place the current system.

(b) The joint committee members shall be four members of the House, not all from the same political party, appointed by the Speaker, two from the House Committee on Ways and Means, one from the House Committee on Appropriations, and one additional representative; four members of the Senate, not all from the same political party, appointed by the Senate Committee on Committees, two from the Senate Committee on Finance, one from the Senate Committee on Appropriations, and one additional Senator; one representative of the Department of Taxes; one representative of the Vermont League of Cities and Towns; and one representative of the Vermont Municipal Clerks and Treasurers Association.

(c) The joint committee shall meet no more than eight times and hold at least one public hearing. It shall report its findings and recommendations, including proposed legislation, by December 15, 2005, to the chairs of the House Committee on Ways and Means and the Senate Committee on Finance.

* * * Simplified Lister Procedure for Late-Filed

Homestead Declarations * * *

Sec. 14. 32 V.S.A. § 4261 is amended to read:

§ 4261. Correcting omission from grand list

When real or personal estate is omitted from the grand list by mistake, or an obvious error is found, the listers, with the approval of the selectmen selectboard, before December 31, may supply such omissions or correct such errors and make a certificate thereon of the fact; provided, however, the listers may make a correction resulting from the filing or rescission, prior to December 1, of a homestead declaration without approval of the selectboard.

* * * Reappraisal-Year CLA * * *

Sec. 15. 32 V.S.A. § 5406(c) shall be amended to read:

(c) If the director of property valuation and review certifies that a municipality has completed a townwide reappraisal, the common level of appraisal for that municipality shall be equal to its new grand list value divided by its most recent equalized grand list value, for purposes of determining education property tax rates, education property tax liabilities, and income sensitivity claims relating to the fiscal year designated by the director but in no case shall the common level of appraisal exceed 110 percent for the first year in which the reappraisal affects the municipality’s grand list.

* * * Income Sensitivity Claim for a Duplex * * *

Sec. 16. 32 V.S.A. § 6062(c)(4) is added to read:

(c) When a homestead is owned by two or more persons as joint tenants, tenants by the entirety, or tenants in common and one or more of these persons are not members of the claimant’s household, the property tax is the same proportion of the property tax levied on that homestead as the proportion of ownership of the homestead by the claimant and members of the claimant’s household; provided, however, that

* * *

(4) if the homestead is a portion of a duplex, and all owners of the duplex occupy some portion of the building as their principal residence, the property tax of the claimant shall be that percentage of the total property tax equal to the ratio of the claimant’s principal residence value to the total duplex building value.

* * * Homestead Property Tax Rate Retained for

Homestead of Decedent * * *

Sec. 17. 32 V.S.A. § 5401(7)(G) is added to read:

(G) For purposes of homestead declaration and application of the homestead property tax rate, “homestead” also means a residence which was the homestead of the decedent at the date of death, and from the date of death through the next April 1 is owned by the estate of the decedent and not rented.

Sec. 18. 32 V.S.A. § 5410 is amended to read:

§ 5410. DECLARATION OF HOMESTEAD

(a) A resident homestead owner shall declare ownership of a homestead for purposes of education property tax.

(b) Annually on or before the due date for filing the Vermont income tax return, without extension, each resident individual homestead owner shall, on a form prescribed by the commissioner, which shall be verified under the pains and penalties of perjury, declare his or her homestead, if any, as of, or expected to be as of, April 1 of the year in which the declaration is made.

* * *

Sec. 19. 32 V.S.A. § 6061(11) is amended to read:

(11) “Housesite” means that portion of a homestead, as defined under subdivision 5401(7) of this title but not under subdivision 5401(7)(G), which includes as much of the land owned by the claimant surrounding the dwelling as is reasonably necessary for use of the dwelling as a home, but in no event more than two acres per dwelling unit; and in the case of multiple dwelling units, no more than two acres per dwelling unit up to a maximum of 10 acres per parcel.

* * * Valuation of ANR Land for PILOT Payments * * *

Sec. 20. 32 V.S.A. § 3708(d) is added to read:

(d) “Fair market value” in this section shall be based upon the value of the land at its highest and best use determined without regard to federal conservation restrictions on the parcel or any conservation restrictions under a state agreement made with respect to the parcel.

(d)(e) The selectboard of a town aggrieved by the appraisal of property by the division of property valuation and review under this section may, within 21 days after the receipt by the town listers of notice of the appraisal of its property by the division of property valuation and review, appeal from that appraisal to the superior court of the district in which the property is situated.

* * *Special Education* * *

Sec. 21. REPEAL

Sec. 10 of No. 117 of the Acts of the 1999 Adj. Sess. (2000) as amended by Sec. 283 of No. 66 of the Acts of 2003, Sec. 42 of No. 68 of the Acts of 2003, and Secs. 272 and 278 of No. 122 of the Acts of the 2003 Adj. Sess. (2004), (special education spending limitation) is repealed.

Sec. 22. APPROPRIATION

There is appropriated from the education fund in fiscal year 2006, in addition to any other appropriation for this purpose, the sum of $4,069,337.00 to the commissioner of education for additional special education expenditures under Sec. 21 of this act.

* * * Appropriation for the $8.50 Per Parcel Payment * * *

Sec. 23. APPROPRIATION

There is appropriated from the education fund in fiscal year 2006, in addition to any other appropriation for this purpose, the sum of $834,000.00 to the director of Property Valuation and Review for the additional $2.50 per-parcel payments to towns under Sec. 8 of this act.

* * *Common Level of Appraisal* * *