SB 346 awaits governor's signature

The final version of SB 346 (which I’ve described and given updates on here, here, and here) passed the Georgia General Assembly today. The AJC’s Gold Dome Live blog gives this summary:

A long-promised property tax reform bill — promising annual assessments and longer appeal time — received final passage from the General Assembly Thursday.

“With the passage of SB 346, we will protect taxpayers from unfair assessments and guarantee the right to appeal,” Senate Majority Leader Chip Rogers (R-Woodstock said). “While this is a huge victory for Georgia property owners, it’s only part of the solution to providing a system that actually works With the passage of SB 346, we will protect taxpayers from unfair assessments and guarantee the right to appeal.”

The bill, considered the most sweeping overhaul of Georgia’s property tax system, would:

• Requirement that every property owner receive annual Notice of Assessment, which guarantees right to appeal
• Every Notice of Assessment must contain estimated property tax
• Expansion of appeal time-period from 30 to 45 days
• Alternative streamlined appeal option for property valued in excess of $1,000,000
• Automatic taxpayer victory on appeals when government fails to respond within 45 days
• Requirement that all relevant sales, including distress sales, be included when determining Fair Market Value
• Requirement that only “current use of property” be used in determining Fair Market Value
• Taxpayer must be given access to all data used in determining Fair Market Value
• Sales price establishes Fair Market Value for next tax year

Rep. Ed Lindsey (R-Atlanta), who squired the bill through the House, said before the House’s final vote Thursday that the bill should give “greater rights to our property owners when it comes to appeals."

Countrywide investigation “heating up”

From the Wall Street Journal’s law blog on Apr. 18:

With all eyes on Goldman Sachs, it might be easy enough to overlook an investigation that seems to have moved well past where we are in the Goldman matter. The subject of that investigation: Countrywide Financial Corp. (now owned by Bank of America).

Things seem to be heating up in the federal investigation of Countrywide and what brought on the company’s collapse. According to a WSJ story out on Monday by John Emshwiller, federal criminal investigators looking into the collapse of Countrywide have been calling witnesses before a grand jury, say people familiar with the matter. That step suggests, of course, that the investigation of the one-time mortgage giant, which has been continuing for about two years, could be moving closer to a resolution.

According to Emshwiller’s story, the grand jury began hearing witnesses on the Countrywide case late last year, though isn’t known which individuals the Countrywide grand jury here is looking at or what potential crimes are being investigated.

In the Countrywide criminal probe, the calling of witnesses before a grand jury doesn’t mean that charges will be filed. However, it does appear to signify a pick-up in the tempo of a probe that previously hadn’t appeared to be moving very quickly.

In the meantime, the SEC’s suit against former Countrywide executives rolls on. The suit asserts that the three men, including former CEO Angelo Mozilo (pictured), defrauded investors by falsely claiming that Countrywide underwrote low-risk mortgages at a time when the company was getting into increasingly risky parts of the lending business, including so-called “subprime” mortgages made to less creditworthy borrowers.

The SEC additionally accuses Mozilo of insider trading of Countrywide stock. A trial in the case is scheduled for October. All three defendants vehemently deny any wrongdoing and say they plan to fight the SEC charges.

Tax legislation cast in doubt

State Attorney General Thurbert Baker, who is also a candidate for governor, has determined the tax and fee bill that includes a five-year phaseout of the state’s portion of property taxes (HB 1055) may run into legal trouble. The AJC explained it this way on Apr. 21:

Baker questions legality of legislative action on tax break

By Aaron Gould Sheinin

Attorney General Thurbert Baker said Wednesday that Republicans in the House and Senate might have violated state law in approving a controversial $387 million tax break last week, but said it's difficult for him to determine if courts would rule against lawmakers.

Baker said it "appears" Republican leadership "has not strictly adhered to the procedures imposed on itself by statute," according to a letter the attorney general sent to House Minority Leader DuBose Porter (D-Dublin).

Porter said Wednesday that Baker's letter "clearly indicates they did not follow the law." House Speaker David Ralston (R-Blue Ridge) and Lt. Gov. Casey Cagle declined comment on Baker's letter, which does not have the power of law.

But, should the new law be challenged in court and overturned, it would throw the 2011 state budget out of balance, leading to up to an additional $100 million in cuts.

Porter had asked Baker for an official opinion of the General Assembly's action last week in approving a bill, HB 1055, that originally featured nearly $100 million in fee increases. But when the bill hit the House floor last week, Republican leaders amended it to include a tax cut for wealthy retirees and a phaseout of the small property tax bill that goes to the state.

Seniors and property owners wouldn't see any savings before January 2012 and wouldn't get the full benefit of the tax breaks until January 2016, when fully phased in.

Porter and other Democrats argued that state law says no bill that has a "significant impact on the anticipated revenue or expenditure level of any ... state agency" can be considered by the House or Senate if it is introduced after the 20th day of the legislative session. The law also requires an official estimate, known as a fiscal note, of a bill's impact on state revenues.

The bill was approved in the House and Senate on April 15, the 36th day of the 40-day session. It was introduced well before the 20th day, but no fiscal note was included. The bill passed largely along party lines as Democrats questioned whether the bill was legal as amended. Both Ralston and Cagle overruled Democrats' objections and said the bill was allowable.

"The apparent failure of the General Assembly to adhere to laws generally applicable here raises significant legal questions that could result in challenges to the process engaged by the Legislature," said Baker, a Democrat seeking the party's nomination for governor. Porter is one of his four opponents in the Democratic primary.

But Baker said the "ultimate question ... is whether a court would determine there exists a substantive remedy for the failure to follow the procedural requirements established" in state law.

Baker said he has not been privy to what legal advice Cagle and Ralston received in ruling the bill allowable, so "it is impossible for me to ascertain whether or not their decision making was consistent" with state law.

Baker noted, however, that the state Supreme Court has ruled that the lack of a fiscal note on a bill signed into law does not necessarily mean the bill is unconstitutional.

One final note—although the reduction in your tax bill offered by this legislation would vary based on your property value, I’ve estimated that the typical Decatur homeowner would see their DeKalb County tax bill decrease by about $30 over the next five years.

Readers write: exemptions questions

In response to my “Where is my exemption?” post, reader John Rose asked the following questions:

A few questions for you about exemptions, Russ:

1) Which of the eight exemptions listed on the city website are actually city laws (vs. state laws)?

2) How many people on average take advantage of each of those exemptions?

3) How much of an impact do each of those exemptions have on the city's tax revenues?

Good questions!

First, the Homestead Tax Relief Grant (HTRG), the exemption for residents over 62 with income less than $10,000 (S-1), and the exemption for disabled veterans come from general legislation that is applicable statewide. Currently the HTRG is not being funded by the state, so there are really only seven “active” exemptions.

The Georgia General Assembly passed local legislation which allowed for referendums and approval by a majority of Decatur voters for each of the other five exemptions: the basic homestead exemption (GH-1), the exemption for being age 65 or older (GH2), the exemption for being older than 62 with an income of less than $30,000 (GS-1), the exemption for being over 80 with less than 40,000 in income (S-2), and the exemption for residents over 70 (S-3).

To answer your other questions, this chart shows a very rough estimate of how many property owners benefit from these exemptions and approximately how much each exemption reduces tax bills by over the course of a year:

Of course those numbers fluctuate depending on the digest value, who’s aging and applying for additional exemptions, who’s moving out, and changes in the millage rates. There are also tax exempt properties like churches and homeowners who are on “year support” or deferment. Altogether, taxes are reduced by about $2½ million a year because of these exemptions (which includes the city and the school system taxes). More details on who’s eligible for these exemptions and how they’re calculated is available here.

I hope those answers help, and keep’m coming!

Property assessment bill advances

SB 346 passed the state House yesterday. The Macon Telegraph ran this Associated Press story about the bill:

ATLANTA -- The House has approved a wide-ranging overhaul of property taxes in Georgia.

The bill's supporters say it's designed to create uniformity in the way homes are taxed and to give homeowners access to more information.

It passed the House 137-7 on Wednesday.

The bill requires that homes be assessed every year. It extends the appeals process from 30 to 45 days and requires that all comparable sales, including bank sales and foreclosures, must be applied when officials set an assessed value.

The bill has already passed the state Senate but the House made minor changes so it must return there for another vote.

State Rep. Ed Lindsey, an Atlanta Republican, said the bill would create transparency and fairness.

The Senate passed an earlier version of the bill unanimously in March.  There were a couple of nay votes on the bill in the House.  Among the lawmakers who represent portions of the City of Decatur, Rep. Mary Margaret Oliver voted yes, Rep. Stephanie Stuckey Benfield voted yes, and Rep. Stacey Abrams did not vote.

After the Senate passes this new amended version of the bill, it goes to the governor’s desk.

It should be noted that saying the bill “requires that homes be assessed every year” is misleading. The bill doesn’t require annual appraisals; it requires that notices of assessment be sent annually.

One property, two freezes

The April edition of the Oakhurst Leaflet included a nice, short piece by Greg Wilkinson entitled, “Didn’t House Bill 233 freeze my property value?”

Mr. Wilkinson wrote, “Most homeowners are probably aware of Georgia HB 233, which was supposed to freeze your property value so the tax assessor can’t raise it while we are in this sour market. On the surface this is true, but there are caveats in the bill that allow the tax assessor to raise your property values should it meet certain criteria.”

Indeed, several exceptions to the statewide freeze bear mentioning. 1) First and foremost is the exception for improvements made to the property. The law says, “Additions or improvements to property…shall be added to the owner’s valuation amount…” 2) Counties may also correct errors in the digest during the freeze. 3) There is also an exception for counties which had begun a “comprehensive county-wide revaluation of all properties in the county” prior to the bill’s passage, (which is why Bibb County, for example, has been in the news here and here for a revaluation that may lead to higher property values in Macon even in the midst of a statewide value freeze.)

As noted in the Leaflet, the statewide freeze in HB 233 expires in 2011.

Just to amplify on that aspect of the article, I’d like to note that HB 595, a piece of local legislation passed by the General Assembly in 2006, authorized a ballot question to let DeKalb residents vote to approve a DeKalb-specific freeze. HB 595’s freeze was approved by 80 percent of voters that fall, but that freeze also expires in 2011.

Because HB 595 is expiring, the state House has approved HB 1320 during the current legislative session. HB 1320 would extend DeKalb County’s freeze “indefinitely.” But the scuttlebutt is that the Senate will probably amend HB 1320 to make it simply another 5 year extension, presumably 2012 to 2016.

Unlike the statewide freeze that puts the burden on county assessors to freeze the value, HB 1320 requires property owners to apply for the freeze. More details and restrictions on DeKalb’s freeze are available on their tax commissioner’s website.

Property assessments in a down market

All counties in Georgia are subject to the same state laws regarding property assessments for taxes. Although this story in today’s news from coastal Georgia is about Glynn County, the article does a good job of explaining why county assessments in Georgia may not capture the full decline in a property’s fair market values even when real estate is weak.

“Property tax digest may see little change”

4/19/2010

By NEVIN BATIWALLA The Brunswick News

Some homeowners hoping for property tax relief may be in for a rude awakening next month when Glynn County releases new property valuations.

While a small number of homes will drop in value, resulting in lower tax bills for owners, thousands of parcels won't dip in value at all.

How can that be when it seems almost everyone's house has lost value in an unprecedented nationwide real estate meltdown?

To determine what a house is worth, the county uses a complex mathematical system based heavily on sale prices of other houses in a neighborhood.

In years with a lot of sales, it works well because appraisers have more data from which to calculate a more accurate value for similar houses.

But when houses are not selling, as in today's weak housing market, it becomes more difficult to determine a true value.

"Our system doesn't work as well in low sales," County Chief Appraiser Bobby Gerhardt said.

As a result, homeowners in neighborhoods in which no houses have been sold will likely see no change in their values, he said.

Decatur Tax Blog in the news

Decatur News Online has published an article entitled “City's Tax Blog Seeks To Keep Residents in the Loop” spotlighting this blog (and myself). Take a look! Decatur News Online is also one of the local websites on our blogroll.

Incidentally, DNO publisher Geoff Koski and I were both recent graduates of Decatur 101, which--if you haven’t taken that class--is a terrific way of learning more about City operations and how your tax dollars are spent! If you’re interested in the 2011 class, read more about it here, and sign up early since there’s always a waiting list.

Legislative action on property taxes

Yesterday was a busy day at the state capitol. Amidst a flurry of legislation being considered during the final days of the session, the Georgia General Assembly moved closer toward enacting two property tax related measures.

1. One bill would phase out of state’s share of property tax collections over the next five years. (The Senate had already passed SB 517 which would have ended the state’s portion immediately, but that bill looks moot now.)  According to the Macon Telegraph, the newly proposed five-year phase out was tacked on to a bill about license plate and poultry inspection fees (HB 1055), and was designed in part to make the state budget more palatable to lawmakers. 
2. SB 346, which would reform property valuations and appeals, was approved by the House Ways & Means Committee. The committee made several revisions including 1) improved legal wording of the bill, 2) requiring annual assessment notices but moving the notification date to July, 3) giving the option of sending assessment notices electronically if the jurisdiction is able to and the taxpayer chooses to, and 4) changing the arbitration process. Now the bill moves to the Rules Committee to be scheduled for a floor vote in the House.

My prior posts about the state’s share of property tax revenues is here and details about SB 346 are here.

Tip for homeowners & last-minute filers

With federal income tax returns due tomorrow, I'm sure that most homeowners in Decatur have already completed their returns and claimed the interest paid on their mortgage loan as an itemized deduction. I ran across this article from Bankrate.com by Kay Bell who did a great job of explaining that tax breaks are also available to homeowners even if they only claim the standard deduction:

Homeownership offers many tax benefits. But recently, laws have been modified so that two home-related costs -- private mortgage insurance and property tax payments -- get special treatment at tax-filing time.

Real estate taxes have always been part of property ownership, as well as a valuable tax break for owners who itemized. Now some homeowners can add at least a part of their property tax payments into their standard deduction amount.

Another common home cost is private mortgage insurance, or PMI. This PMI is a policy that, as a homebuyer, you pay for, but it protects your lender in case you default. Homebuyers who don't put at least 20 percent down when they purchase a residence usually have to buy PMI. And some of those folks now can deduct that cost.

Property tax additions

Many homeowners itemize because they have substantial enough mortgage interest and property tax amounts to exceed their standard deduction amount. But in some cases, such effort isn't worth it.

Standard deduction amounts have increased over the last few years as part of tax-law changes. Those figures then are bumped up each year to reflect inflation. That means that some homeowners, such as longtime residents who've paid down their loan and don't have much in the way of mortgage interest anymore, don't have enough expenses to itemize.

Because it isn't worthwhile to itemize, these folks then lose the tax break offered by their property taxes. Not anymore.

Now homeowners who claim the standard deduction can add at least some of their property tax payments to their tax return's standard amount.

Single homeowners (which includes those who've never married, a married taxpayer filing separately, as well as heads of households) can add up to $500 of property tax payments to their standard deduction amounts. Married taxpayers who file a joint return can add up to $1,000 to their standard deduction.

To include the property tax amounts in your standard deduction, you'll need to file Schedule L.

Making your PMI claim

For most property owners who pay PMI premiums, the insurance is simply part of the price of owning a home. But some homeowners who purchased their primary residences or second homes in 2009 can claim a tax deduction on PMI premiums.

This tax break was tucked into the Tax Relief and Health Care Act of 2006 and originally applied to policies on home loans taken out in 2007. As the housing market continued to sag, Congress extended this tax break to certain premiums paid through 2010.

The tax deduction can be taken for policies issued by private insurers as well as insurance provided by the Federal Housing Administration, the Department of Veterans Affairs and the Rural Housing Administration.

Claiming the deduction is easy. Most homeowners are already familiar with Schedule A, the form on which itemized expenses are claimed. The second section of that form, titled "Interest You Paid," is where mortgage interest and loan points are claimed, specifically on line 13.

Your lender also helps out when it comes to reporting PMI amounts. In box 4 of your Form 1098 (or the substitute year-end loan information statement your lender uses), you'll find the amount of PMI premiums you paid last year as part of your home payments…

To read about additional restrictions and rules about claiming the PMI deduction, read the rest of the article here.

One final note about your federal income tax. We sometimes get people during tax season coming to our office asking for federal tax forms or trying to turn their income tax payment to us. Sorry, but we can only accept local taxes and fees. But the Decatur post office will be open to take all of our federal tax returns.

State proposal offers slight reduction to total tax

The Georgia General Assembly is back from a two week recess and in the homestretch of their 2010 legislative session. Before their break, the state Senate passed SB 517, which would eliminate the state’s portion of property tax bills in Georgia. If this measure passes the House and is signed by the governor, what this would mean for Decatur residents is a reduction of one-quarter mill from their DeKalb County tax bill.

Let’s say your total value is $275,000 and your DeKalb County 40 percent taxable assessment is $110,000. The state millage rate is 0.25 mills (keeping in mind that a mill means one one-thousandth). To calculate how much your bill would be reduced by, you would multiply your taxable assessment by one one-thousandth by the millage rate.

The $27.50 tax reduction in this example would be more or less depending on the taxable value of your property.

DeKalb County bills and collects the state’s share of your property taxes, not the City of Decatur. Since we do not bill for state taxes, there would be no change in your city taxes if this legislation passes.

Is my value correct? Reading your tax bills

DeKalb County determines the fair market value (also referred to as your “100 percent value, ” “appraised value” or “total value”) of the properties in DeKalb County including properties within the city limits of Decatur.

State law establishes that counties’ property taxes are levied against 40 percent of the total value. This is known as your “assessed value,” “taxable value,” or your 40 percent “assessment.” Municipal governments may apply different assessments depending on the city ordinances.

As authorized by state law and city ordinances, Decatur uses a 50 percent assessment. We start with DeKalb County’s “total value.” For example, if your total value on DeKalb’s website is $250,000, DeKalb will tax you on $100,000 of that as shown on one of their tax bills:

The City of Decatur would also start with $250,000, but would tax you on $125,000:

This is why your taxable value for Decatur won’t match your taxable value for DeKalb. Please also note that the city does not have its own appraiser or assessor and cannot change your assessment. More information about property assessments, appeals, and billing is available on our homepage.