Guide to Valuation, Assessment and Equalization

GUIDE TO VALUATION, ASSESSMENT AND EQUALIZATION

PREFACE

The following information was prepared as a reference guide for county elected officials. This reference guide relates to the assessment and equalization processes within the property tax system in Idaho.

This guide includes references to applicable Idaho Code sections and property tax rules. References to Idaho Code sections are section numbers from the Idaho Code, published by Michie. References to the property tax rules are numbers from the Idaho Administrative Procedures Act (IDAPA).

Please submit comments or suggestions for changes to this reference guide.

INTRODUCTION:

The Idaho Constitution requires property taxes to be in proportion to value and uniform in value and rate of tax (Article VII, §§2 and 5). Idaho law requires all taxable property in the county to be valued at market value for property tax purposes (Idaho Code §63-205).

The county assessor completes the assessment of all taxable real and personal property in the county [Idaho Code §63-207(1)]. To do the assessment, the assessor discovers, identifies (describes), classifies and values all taxable real and personal property. Having discovered, identified, classified and valued all taxable real and personal property, the assessor places the values on the appropriate property roll (Idaho Code §63-301). The county assessor delivers the property roll to the clerk of the county commissioners (Idaho Code §§63-310 and 63-311). The clerk presents the property roll to the county commissioners meeting as the county board of equalization (BOE) (Idaho Code §63-501).

Property owners may appeal assessments to the BOE (Idaho Code §63-501A).

The BOE meets to equalize the assessments; equalization includes the review of all values, the hearing of appeals, and approval or disapproval of exemptions (Idaho Code §63-501). The function of the BOE is confined strictly to assuring the assessor has found market value and deciding eligibility for exemptions from property taxes (Idaho Code §63-502). The BOE certifies and delivers the equalized property roll to the clerk for submission to the state tax commission (Idaho Code §§63-509 and 63-510). The state tax commission equalizes assessments of property throughout the state (Idaho Code §§63-108 and 63-109).

Property owners may appeal decisions by the BOE to either the board of tax appeals or the district court (Idaho Code §63-511).

ROLES OF THE COUNTY ASSESSOR

County Assessor’s Duties

The tax administration process in county government starts in the county assessor's office. The assessor assesses all taxable real and personal property in the county [Idaho Code §63-207(1)].

To assess all taxable real and personal property, the assessor performs the following duties:

1. Locates and identifies each property in the county [Idaho Code §§63-207(1), 63-209 and 63-301].

2. Inventories each property, identifying quantity, quality and important characteristics [Idaho Code §§63-207(1), 63-209 and 63-301].

3. Identifies the ownership of each property (Idaho Code §63-307).

4. Develops an opinion of the market value for each property (Idaho Code §§63-205 and 63-301).

5. Prepares and certifies the property rolls (Idaho Code §§63-310, 63-311 and 63-312).

6. Sends a valuation assessment notice to each property owner (Idaho Code §63-308).

7. Appears at valuation appeal hearings and defends the value and the methods used to establish the value (Idaho Code §§63-501and 63-505).

Maps (Idaho Code §63-209)

The county assessor's maps, which identify the location and size of each property subject to taxation, are the foundation of any appraisal program. Idaho Code requires full and accurate plat records and a uniform statewide parcel numbering system (Idaho Code §63-209).

Appraisal (Idaho Code §§63-208 and 63-301)

An appraisal is an “educated opinion” of value. The term “educated opinion” means the county assessor bases the opinion on the application of recognized appraisal methods and techniques (Idaho Code §§63-208 and 63-301). These recognized appraisal methods and techniques include considering the three approaches to value (IDAPA 35.01.03.217). When considering the three approaches, the application of recognized appraisal methods and techniques includes the identification of property characteristics, calculation of indexes and the use of ratio studies and other market analyses based on property type, location, size, age or other characteristics (Idaho Code §63-314 and IDAPA 35.01.03.314). The county assessor must document characteristics for each property, including land size, terrain features and structures’ sizes, ages, amenities and condition.

1. Date of Assessment (Idaho Code §63-205)

The county assessor assesses all taxable real and personal property within the county as of 12:01 a.m. on January 1 (Idaho Code §63-205). Each year, he/she must decide, as of that date and time, the market value for assessment purposes of each taxable property within the county.

2. Continuing Program of Valuation (Idaho Code §63-314)

The county assessor is to conduct a continuing program of valuation. The objectives of the program are to value all parcels under the county assessor's jurisdiction to reflect current market value each year and to appraise no less than twenty percent (20%) of the properties each year with all properties appraised every five years. The county assessor is to index the values of any property not reappraised “. . . using market value property transactions and results . . .” to keep all properties at market value each year (Idaho Code §63-314).

The valuation program to be carried on by the county assessor ”. . . shall include a plan outlining the continuing valuation program. Said plan shall be submitted to the state tax commission for approval on or before the first Monday in February 1997 . . .” and on a

five-year basis after that (Idaho Code §63-314 and IDAPA 35.01.03.314).

The board of county commissioners must furnish the county assessor with the funds required to carry out the continuing program of valuation [Idaho Code §63-314(3)].

3. Data Bank of Sales

To achieve market value, the county assessor must acquire and maintain information, a data bank of sales, on the prices paid for properties in the county. This data bank contains the prices paid, dates of sale and property characteristics of every property in the county known to have sold within a specified period of time. In Idaho, information on every sold property is not available. Not all parties, to transfers of properties, report the requested information to the county assessor. The county assessor must look to other sources, including realtors, property managers, developers and title companies’ representatives.

4. Units of Comparison

The county assessor analyzes the sales’ prices by property characteristics, computing units of comparison that may be used to estimate the value for every property in the county. Some units of comparison are prices per acre, front foot or lot; prices per square foot of new construction; or prices per square foot of structures by quality of construction in different neighborhoods.

5. Appraisal Models

Using the analyses of the sales’ prices by property characteristics, the county assessor develops appraisal models. These appraisal models provide the basis for valuing all property. One model for property valuation is the cost model. Since the cost model is the model most frequently used in Idaho, an outline of the procedures in the cost model follows.

In the cost model, the county assessor calculates the land value from sales’ prices on comparable land (the market approach). Next, the county assessor computes the replacement cost of all structures based on local construction costs. As long as the county assessor adjusts the unit prices to the current local construction costs, he/she may use any cost manual to compute the replacement cost. He/she must measure the effect of depreciation (appreciation) on the market value. Using the analyses of sales’ prices by property characteristics and condition, he/she computes depreciation (appreciation) schedules that are applied to all applicable structures. For the final step in the cost model, the assessor adds the depreciated (appreciated) replacement cost value of the structures to the land value.

6. Uniformity

Similar properties should have reasonably comparable values. The county assessor should verify that similar properties are treated uniformly. He/she must be able to present information about the sales’ prices and characteristics of properties that are comparable. The inventory of properties’ characteristics must be accurate based on an observation of

the properties within five years (Idaho Code §63-314 and IDAPA 35.01.03.314). The accuracy of these characteristics is critical in the selection of comparable properties.

If the property characteristics, upon which values are based, are correct, resulting in good assessment uniformity, the assessor will be able to develop index factors. By applying the index factors to the values of properties with uniform assessments but without current appraisals, he will be able to achieve market value (Idaho Code §63-314 and IDAPA 35.01.03.314). If characteristics on which the assessments are based are not correct, factoring generally will not result in market value, reappraisals are required.

7. Ratio Studies

The county assessor should use ratio studies as a tool in property valuation. Ratio studies compare property assessments with their respective sales’ prices. The results can help develop index factors and time adjustments and identify assessment biases, such as location, category, construction type and favoritism of high valued or low valued properties.

8. Valuation of Land Actively Devoted to Agriculture (Idaho Code §§63-602K and 63-604)

The speculative portion of the value of land actively devoted to agriculture is exempt from property taxes. The taxable value of land actively devoted to agriculture is calculated by capitalizing the typical net agricultural income. The capitalization rate is the five-year average interest rate from the Spokane office of the farm credit system plus the local tax rate (Idaho Code §63-602K).

The typical net agricultural income is the landlord’s share of the typical five-year average gross income less the landlord’s typical current expenses. The typical five-year average gross income is based on crop rotation and crop share programs typical to the farm neighborhood and the five year average yields and prices paid at time of harvest. (IDAPA 35.01.03.613)

The difference between the taxable value and market value is the speculative portion that is exempt from taxation (Idaho Code §63-602K).

Only land actively devoted to agriculture is eligible for this partial exemption. Land actively devoted to agriculture is defined in Idaho Code §63-604 and IDAPA 35.01.03.645.

Notations

Each year, the property owners must furnish a list of all taxable personal property in the county to the county assessor [Idaho Code §63-302(1)]. The county assessor must note all cases where the person required to list property refused or failed to make the sworn taxpayer's declaration [Idaho Code §63-1401(2)].

Notification of Assessments [Idaho Code §63-308(1)]

Annually, the county assessor must mail an assessment notice to each property owner within the county on or before the first Monday of June. These assessment notices must list the values subject to taxation and must inform the property owner about the procedures to appeal the assessed values. Additionally, these notices must contain announcements of all meetings of the board of county commissioners for equalizing assessments [Idaho Code §63-308(1)].

Notification of Corrected Assessments [Idaho Code §63-308(2)]

After receiving an assessment notice, the property owner may discuss any disagreement over the valuation with the assessor. If the assessor agrees with the taxpayer's value estimate, and if the roll has not been delivered to the clerk of the board of county commissioners, the county assessor may correct the value without taking the matter to the BOE. If a change is made by the assessor, the assessor must deliver a corrected assessment notice to the taxpayer [Idaho Code §63-308 (2)].

Certification (Idaho Code §§63-310 and 63-311)

Each year, the county assessor certifies and delivers the completed property roll to the clerk of the board of county commissioners on or before the fourth Monday of June (Idaho Code §63-310).

The county assessor delivers the subsequent property roll by the fourth Monday of November [Idaho Code §63-311(1)]. The subsequent property roll is for any real property not included on the property roll, transitory personal property, and any other personal property not included on the property roll or coming into the county between the fourth Monday of June and the fourth Monday of November. The county assessor delivers the missed property roll by December 31 [Idaho Code §63-311(2)]. The missed property roll may be necessary if any other real or personal property is discovered and assessed between the fourth Monday of November and December 31.

After the assessment roll is delivered to the county clerk, the county assessor can no longer change values. All disagreements with the county assessor's values must then be taken to the BOE.

TAXPAYER'S RIGHT TO APPEAL

Taxpayers may appeal the assessments by the county assessor to the BOE. The taxpayer must make the appeal in writing on a form provided by the BOE or the county assessor. To file an appeal on the assessment of any property included on the property roll, the taxpayer must file the appeal on or before the end of the county's normal business hours on the fourth Monday of June. To file an appeal on the assessment of any property included on the subsequent property

roll, the taxpayer must file the appeal on or before the end of the county's normal business hours on the fourth Monday of November. To file an appeal on the assessment of any property included on the missed property roll, the taxpayer must file the appeal on or before the BOE adjourns on the day of its January meeting. Only appeals that are filed timely may be considered by the BOE (Idaho Code §63-501A). This means the BOE may only hear appeals postmarked or faxed on or before the stated dates.

If the county assessor agrees with the taxpayer's estimate of value, a simple recommendation to the BOE and subsequent decision of the BOE, concurring with this recommendation, should be enough to resolve the matter.

If an owner of property, against which an occupancy tax is levied, believes that the assessed value is incorrect, he/she must timely file the appeal to be heard at the next regularly scheduled meeting of the BOE [Idaho Code §63-317(4)].

ROLES OF THE COUNTY BOARD OF EQUALIZATION (BOE)

Meetings as BOE [Idaho Code §§63-105A(7) and 63-501]

In each county, the board of county commissioners meets as the BOE at least once a month up to the fourth Monday of June. They meet again, on a daily basis, as the BOE from the fourth Monday in June through the second Monday in July to complete their business on the property roll. They may adjourn as the BOE before the second Monday in July only if they have completed all of their business as the BOE (Idaho Code §63-501).