It’s property tax assessment season, and, no, that headline is not a typo. Welcome to the time of year where property owners get to see how last years’ vote is going to affect their pocketbook. The results might trigger a bout of compression (and depression).
You may be asking yourself, wait… what was the vote last November? Two of the measures Multnomah county voters passed last year are now impacting your property tax bill, they are: Measures 26-143 (Library District) and 26-144 (Portland Public Schools). Let us provide a refresher regarding what impact these tax increases were supposed to have on your property tax bill:
Measure 26-143: The Library District measure – created a separate taxing district for the library and replaced the current local option levy. The maximum rate for the library district is $1.24 per $1000 of assessed value (AV). The previous levy was 89 cents per $1000 AV, resulting in a maximum increase of 35 cents per $1000 AV. Per the Library District’s budget for fiscal year (FY) 2014 the assessment will be $1.18 per $1000 AV (an increase of 29 cents per $1000 AV).
Measure 26-144: Portland Public School Bond measure – the $482 million capital bond for rebuilding and upgrading Portland Public Schools resulted in an estimated cost of $1.10 per $1000 AV for the first eight years.
So, are you compressed yet? The term “compression” stems from the limits placed on property tax increases by Measures 5 and 50 passed back in the 1990’s. These placed caps on the maximum dollar amounts that could be assessed and also the growth rate of the assessed value for which tax rates are levied. The important terms to note here are the differences between the Real Market Value (RMV) and the Assessed Value. Measure 5 caps the property tax amounts at $5 per $1000 of RMV for Education and $10 per $1000 RMV for general purposes. Measure 50 caps the annual growth of the assessed value of the property to 3% per year. This distinction is important for 2 reasons:
1) Property taxes are levied on the Assessed Value
2) The real market value and compression limits do not apply to bond levies (such as the PPS bond measure above).
Earlier this year the Oregonian reported an estimated $143 million in savings due to compression in 2012. You’re probably wondering if you were part of that group, and if you weren’t how you can get in on the savings? One quick way to see if you might be close to the compression limits is to divide the Education taxes on your tax bill by .005 or the General taxes by .01 and compare that to the total RMV as shown on the tax bill. That number is the RMV that you would have to be at in order to create compression.
If you aren’t compressed yet, should you be? The following are reasons you may want to consider a property tax appeal, which may result in a reduction of your property taxes:
1) You believe the real market value to be below the current assessed value
2) Improvements made in prior years are over-valued
3) The real market value is reduced to a point where compression limits result in a reduction in taxes to comply with constitutional limits.
If any of the above applies, and you think you have a good case to appeal the real market or assessed values of your property you’ll have to act quickly after receiving the assessment. Property tax appeals must be filed prior to December 31, 2013 with the county clerk in the county in which the property is located. Forms are available at www.oregon.gov/dor/property or feel free to contact one of our property tax-savvy accountants and we can assist you in your appeal.
This blog post is a summary and is not intended as tax or legal advice. You should consult with your tax advisor to obtain specific advice with respect to your fact pattern. Based on the most recent “best practice” standards for tax advisors issued by the Treasury Department, commonly referred to as Circular 230, we wish to advise you that this blog post has not been prepared to be used, and cannot be used, to provide assurance that penalties which may be assessed by the IRS or other taxing authority (including specifically section 6662 understatement penalties) will not be upheld.