Relating to property taxes by modifying the methodology for determining actual value of residential property, certain levy rates, and assessment limitations of certain classes of property, and including retroactive applicability provisions

Actual value is generally required to be the fair and reasonable market value. “Market value” is defined as the fair and reasonable exchange in the year in which the property is listed and valued between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and each being familiar with all the facts relating to the particular property, but excluding certain abnormal sales. The bill provides that for assessment years beginning on or after January 1, 2026, the actual value of each individual property, including after adjustments to actual values made as the result of equalization, shall not exceed 100 percent of the actual value of the property for the immediately preceding assessment year unless the property was not assessed in the immediately preceding assessment year, the property’s boundaries change, there is a change to the property’s classification, or new construction, additions, or improvements have been made to the property other than normal and necessary maintenance or repairs, not amounting to structural replacements or modification. The bill also makes conforming changes to other provisions of law relating to the valuation of property. DIVISION II —— MODIFICATION OF ASSESSMENT LIMITATIONS.21(4) establishes the calculation for assessment limitations (rollback) for residential property and agricultural property. The bill strikes the calculation of the residential property assessment limitation for assessment years beginning on or after January 1, 2025, and strikes the provision within the agricultural property assessment limitation calculation that limits growth of residential or agricultural property to the growth in the other classification (ag-residential tie). The bill establishes a schedule of assessment limitations for residential property that increases each assessment year from the assessment year beginning January 1, 2025, until the assessment limitation reaches one hundred percent for assessment years beginning on or after January 1, 2034. By operation of the scheduled increases to the residential property assessment limitation, the assessment limitation applicable to that portion of commercial, and industrial property that is equal to or less than $150,000 is also increased. This division of the bill applies retroactively to assessment years beginning on or after January 1, 2025. DIVISION III —— PROPERTY TAX LEVY RATES. The bill establishes a reduction for rate-limited property tax levies that corresponds with the increase of assessment limitations under the bill. The bill defines “rate-limited property tax levy” to be any ad valorem property tax levy limited by law to a specific property tax levy rate per $1,000 of assessed value used to calculate taxes. For each fiscal year beginning on or after July 1, 2026, each rate-limited property tax levy shall, by operation of the bill, be limited to a levy rate that is equal to a percentage of the maximum specified levy rate or the actual maximum levy approved at election, whichever is less and if applicable, as follows: (1) for the property taxes due and payable in the fiscal year beginning July 1, 2026, and each fiscal year thereafter beginning before July 1, 2036, a percentage equal to the quotient, expressed as a percentage, of the base year total taxable value divided by the budget year total taxable value; and (2) for the property taxes due and payable in fiscal years beginning on or after July 1, 2036, a percentage equal to the percentage applicable for the fiscal year beginning July 1, 2035. The bill defines “base year total taxable value” as the statewide total assessed value for all property tax classifications used to calculate taxes for the fiscal year beginning July 1, 2025, and “budget year total taxable value” as the statewide total assessed value for all property classifications used to calculate taxes due and payable in the fiscal year beginning during the calendar year in which a budget is certified, excluding value attributable to new construction.