What does amendment mean?

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  • | 12:00 p.m. January 25, 2008
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by Mike Sharkey

Staff Writer

The words above form the first three lines of the property tax amendment, a controversial bill that asks the voters of the state of Florida whether or not to support a reform of current property tax laws.

Gov. Charlie Crist supports the legislation, as do groups such as Realtors. Mayor John Peyton, the local firefighters union and a host of others are opposed.

Regardless who’s in favor of the bill or who opposes, Amendment 1 is being hotly debated, yet its actual wording might be relatively confusing to the average voter.

Within the 519-word, one-page bill, there are seven uses of a specific dollar amount, a date is referred to 13 times, the word “if” is used 10 times, the word “revision” is used eight times, the word “exemption” is used six times and a version of the word “homestead” is used 18 times.

Tuesday, voters will head to the polls to decide the fate of the bill as well as the state’s Republican and Democratic nominees for president. While the race for the White House is shaping up to be arguably one of the most interesting in the country’s 232-year history, the property tax bill seems to have generated as much, if not more, discussion and debate among Florida voters.

In an effort to explain exactly what the bill says and what it means, The Daily Record asked several area experts. In some shape or form, all have a stake in whether the bill passes or not. We did not ask them to offer an opinion that would influence voters, but rather their professional interpretations of the bill.

Ginny Myrick, senior policy advisor, Holland & Knight

Ginny Myrick, senior policy advisor, Holland & Knight

Typical of a lot of amendments, Amendment 1 is very long to read, full of legalese and tends to exhaust the voter about one-third of the way through trying to make sense of it. It is much better for the voters to do their homework before voting. Helpful is to look at who supports the amendment and who opposes it. Amendment 1 offers tax relief to Floridians in five ways:

1. It increases homestead exemption from $25,000 to $50,000 for properties over $75,000 — but doesn’t apply to property taxes paid for schools.

2. It caps growth on non-homestead property at 10 percent — again does not affect the portion of taxes paid for schools. Non-homesteaded property equals rental and commercial property and out-of-state owners of property.

3. It gives a $25,000 tangible property exemption to non-homestead businesses including landlords, again including out-of-state owners — and again, does not affect the taxes paid for schools.

4. It makes the 3 percent tax cap portable to another homestead in Florida. It works this way: it allows homeowners to move up to $500,000 in tax benefits accrued from Save-Our-Homes to another homestead anywhere in Florida — again, this does not affect taxes paid to schools.

Pro and con advocates abound…

1. The state decides how much property tax local school boards have to levy. The Florida League of Cities says the Legislature “pushed” $4.1 billion in education costs onto local homeowners since 2000 — while its own contribution for schools declined. Today, homeowners provide nearly 50 percent of all education funding through local property taxes. Last year the Legislature hiked the property tax for schools by 17 percent. Many school boards oppose the amendment because they don’t trust the Legislature to make up a projected shortfall to schools of $3 billion a year.

2. Since 50 percent of Jacksonville’s budget historically is for police and fire, how will they not be hit with reductions at the worse time in our City’s crime history?

3. How much will individuals save? It’s estimated to be $230 a year in Duval (average $240 per Florida family). The mayor and the business community say it’s not enough to offset the quality of life reductions we would have to withstand.

4. Renters fail to benefit from the plan and, in fact, it could cause Florida rents to rise. Not such a good move in a depressed housing market where renting vs. selling is more attractive.

5. The Florida Tax and Budget Reform Commission (TBRC), a 25-member citizen group which has the power to place tax issues on the November 2008 ballot, is studying the property tax inequity issue right now. Why not wait for them? Some say the TBRC could propose true tax reform where property taxes are based on actual property values and where citizens could be sure that downsizing to a less-expensive house would result in a lower tax bill.

Jerry Holland, supervisor of elections

Jerry Holland, supervisor of elections

From the elections office we refrain from explaining the property tax amendment in fear that we may present our comments in a way that voters may believe we are in support or opposition to the amendment.

We are able to read the amendment back to a voter, but beyond that we send the voter to the property appraiser for a better definition.

Mike Hogan, tax collector

Mike Hogan, tax collector

The proposed amendment, although not a tax reform, does have the potential to reduce taxes. In addition, it has several attractive components that cause me to believe that many will vote for the amendment based solely on its direct benefits to their situation.

Many of the components of the amendment will provide me with some savings. Unfortunately, closer scrutiny reveals the amendment also allows local governments to recoup any lost revenues caused by the amendment, which could negate any savings I might achieve.

One only has to remember what happened after the State Legislature’s “fix” last year to realize cities and counties will find other ways to recapture their lost revenue. Can you say garbage fee, stormwater fee, franchise fee?

There are other problems with the amendment:

1. Those who will receive the most relief (long-term homesteaded property owners) are those who need it the least; and those who have seen sharp increases in their property taxes will get very little to no relief.

2. Portability will increase the inequities caused by Save Our Homes, and the tax burden will shift in ever greater proportion to commercial property owners, non-homesteaded property owners and new homeowners.

3. The 10 percent cap is too high and will probably never provide a benefit to commercial property owners.

4. Many believe “portability” is unconstitutional and will be challenged in the courts.

For the reasons outlined above I have already voted “No” on the Amendment. However, as a Commissioner on the Taxation and Budget Reform Commission, I am currently working on several amendments to our (State) Constitution that I believe will provide citizens with real tax savings and real tax reform.

Jim Overton, property appraiser

Jim Overton, property appraiser

The amendment language may seem complex, but the concepts are not hard to understand. There are basically four parts — two for Florida homeowners and two for businesses.

1. The amendment allows for “portability” of a homesteaded property owner’s capped (“Save Our Homes”) savings to another homestead. In other words, if you have lived in your home for a while and want to move, you can take the difference of your market and assessed values and subtract that amount from the new home’s market value to lower the value on which you will be taxed. There is a limit of $500,000 that can be transferred.

2. The amendment would double the homestead exemption for many. In addition to the existing homestead exemption of $25,000, another $25,000 would come off the assessed value between $50,000 and $75,000. This provision applies to all tax levies except the school district.

3. The amendment would cap annual increases for non-homesteaded property (businesses, rental property and second homes) at 10 percent annually. The assessed value on non-homesteaded property could not go up more than 10 percent in a given year unless the property was changed or there was a change of ownership. This provision also does not apply to school taxes.

4. The amendment would provide a $25,000 exemption on tangible personal property for businesses. Currently, all Florida businesses must report and pay taxes on all assets such as computers, office furniture, etc. The new law would exempt $25,000 of that value, so many small businesses would not pay any tangible taxes — although they would have to file once stating they were below the threshold.

There are significant costs to local government, which voters will have to consider when weighing the benefits of the amendment.

The following is the property tax amendment exactly as it appears on Tuesday’s ballot

Constitutional revision, Article VII, Sections 3, 4 and 6, Article XII, Section 27, Property Tax Exemptions; Limitations On Property Tax Assessments. This revision proposes changes to the State Constitution relating to property taxation. With respect to homestead property, this revision:

(1) increases the homestead exemption except for school district taxes and

(2) allows homestead property owners to transfer up to $500,000 of their Save-Our-Homes benefits to their next homestead. With respect to nonhomestead property, this revision

(3) provides a $25,000 exemption for tangible personal property and

(4) limits assessment increases for specified nonhomestead real property except for school district taxes.

In more detail, this revision:

(1) Increases the homestead exemption by exempting the assessed value between $50,000 and $75,000. This exemption does not apply to school district taxes.

(2) Provides for the transfer of accumulated Save-Our-Homes benefits. Homestead property owners will be able to transfer their Save-Our-Homes benefit to a new homestead within 1 year and not more than 2 years after relinquishing their previous homestead; except, if this revision is approved by the electors in January of 2008 and if the new homestead is established on January 1, 2008, the previous homestead must have been relinquished in 2007. If the new homestead has a higher just value than the previous one, the accumulated benefit can be transferred; if the new homestead has a lower just value, the amount of benefit transferred will be reduced. The transferred benefit may not exceed $500,000. This provision applies to all taxes.

(3) Authorizes an exemption from property taxes of $25,000 of assessed value of tangible personal property. This provision applies to all taxes.

(4) Limits the assessment increases for specified nonhomestead real property to 10 percent each year. Property will be assessed at just value following an improvement, as defined by general law, and may be assessed at just value following a change of ownership or control if provided by general law. This limitation does not apply to school district taxes. This limitation is repealed effective January 1, 2019, unless renewed by a vote of the electors in the general election held in 2018.

Further, this revision:

a. Repeals obsolete language on the homestead exemption when it was less than $25,000 and did not apply uniformly to property taxes levied by all local governments.

b. Provides for homestead exemptions to be repealed if a future constitutional amendment provides for assessment of homesteads “at less than just value” rather than as currently provided “at a specified percentage” of just value.

c. Schedules the changes to take effect upon approval by the electors and operate retroactively to January 1, 2008, if approved in a special election held on January 29, 2008, or to take effect January 1, 2009, if approved in the general election held in November of 2008. The limitation on annual assessment increases for specified real property shall first apply to the 2009 tax roll if this revision is approved in a special election held on January 29, 2008, or shall first apply to the 2010 tax roll if this revision is approved in the general election held in November of 2008.

The following questions and answers were taken from the Property Appraiser’s Web site. It can be found by logging on to coj.net and going to the Property Appraiser’s Office link.

How does the “double homestead” work?

Currently, the homestead exemption typically reduces the assessed value of a property used as a primary residence by a Florida resident by $25,000. If passed, the new law would provide an additional $25,000 homestead exemption, on the assessed value between $50,000 and $75,000.

For example, if your assessment is $65,000, the first $25,000 and that portion above $50,000 ($15,000) would be exempt, making your taxable value $25,000 (65,000-25,000-15,000). Prior to the proposed change, the taxable value would have been $40,000 (65,000-25,000).

This additional homestead exemption does not reduce the assessed value upon which school taxes are based. Also, it would not reduce or otherwise affect the Save Our Homes deduction or any other exemptions. This new exemption would be effective as of Jan. 1, 2008.

Can I still keep my other exemptions (widow, senior, disabled, veterans, etc.) under the new proposal?

Yes. Other exemptions will not be affected by this law and will be applied to your value after the homestead exemption as they are now. (Remember: some exemptions, like the senior exemption, require annual renewal. The homestead exemption does not unless there is a change to the property that affects ownership or homestead status.) If you move, you must reapply for all exemptions.

What is “portability”?

Portability is a proposal to allow owners of homesteaded property to transfer some of the tax savings they have accrued on their property under the “Save Our Homes” law. Save Our Homes caps annual increases in the assessed value of a home (homesteaded property) at 3 percent or less. If you have lived in your home for a while, your assessed value will be much lower than your market value. The difference between the market value and your assessed value is called the “differential” or “savings”.

The new proposal, if passed, would allow you to apply that savings (up to $500,000) to reduce the assessed value on a new homestead if you sell or transfer the old homestead and establish a new homestead within a two year period. The two year period is based from the date of transfer. Portability is retroactive to Jan. 1, 2007.

What is the “differential” on my property?

The differential (or savings) is calculated by subtracting the Assessed Value from the Market Value. It’s the amount of property value you are not paying taxes on because of the “Save Our Homes” cap on the annual increase in assessed value.

How much savings can I carry to another home?

Under the proposal, when you buy a new home or transfer your homestead to another property, you can transfer up to $500,000 of your differential (savings) if your new home market value is more than your current home.

For example, if you sell a home with a market value of $300,000 with an assessed value of $200,000, your SOH differential (savings) is $100,000. If you then buy a new home with a market value of $350,000, your new assessed value would be $250,000 ($350,000 less the differential).

After your new assessed value is calculated, any further exemptions (homestead, disabled, veterans) are subtracted from the new assessed value to create the taxable value on which you pay taxes, based on the tax rates set by the City Council, School Board and other taxing authorities.

How does portability work if I downsize to a less expensive home?

You can still transfer up to $500,000 of your Save Our Homes differential to a new homestead, however, when downsizing the differential is based on the percentage of market to assessed value on the homestead you’re leaving behind. For example, if you own a home with an assessed value of $150,000 and a market value of $200,000 your differential expressed as a percentage is 25 percent (therefore, you are paying taxes on 75 percent of the market value). You can apply the 25 percent differential rate against the market value of the new homestead, so you will be paying on 75 percent of the market value of the new home.

Can I expect taxes on a new home to increase in the future?

The amendment retains Save Our Homes, so the assessment in future years will not go up more than 3 percent annually on homesteaded property.

Would my differential be “portable” if I move to another county in Florida?

Yes. If the amendment passes, portability would be effective throughout the state.

If I sold (or transferred) my homestead in 2007, can I still get portability?

Yes, the amendment is retroactive to Jan. 1, 2007. Also, you have two years to establish a new homestead.

What does the proposal do for rental or commercial property and for out-of-state visitors with second homes?

Annual increases in value for all non-homesteaded property, such as commercial property, rental property and second homes would be capped at 10 percent annually — meaning the assessed values for these properties could not increase more than 10 percent a year (unless there were changes or improvements made to the property.)

If the proposal is passed, the base year would be 2008 and the cap would be applied to any increase for the 2009 Tax Roll.

If I have a small business with less than $25,000 in business assets (other than real estate), would I need to file a Tangible Personal Property return if the new law is passed?

Yes. All businesses with assets under $25,000 must still file an initial tangible personal property return. You will not be required to file annually after the initial filing, unless or until your business assets surpass the $25,000 threshold.