Senate Revenue and Tax Committee

February 15, 2023

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• SB 185 Allows governor to appoint members of Tax Appeals Commission
• SB 198 Standardizes property assessment to every 4 years
• SB 184 Defines what a timely receipt of a tax appeal means

Sen Hickey: Okay, members, we’ll call this meeting to order. We welcome everybody to our Revenue and Tax Committee. The first item on our agenda is SB184. We have a small amendment, though, just on a word that we caught sitting here. So there’s an amendment on that one coming over. So we’re going to take up SB185 at this time. Senator Johnson, if you would, please go to the end of the table and introduce yourself and you’re recognized to start when you need to.

 

SB 185 Allows governor to appoint members of Tax Appeals Commission

Sen B Johnson: Thank you, members. Senator Blake Johnson. This is a cleanup from our Tax Appeals Commission. The procedure for appointment, there was Supreme Court and this bill gives the ultimate authority for those appointments with the governor. And this is just a preventive process for the future.

Sen Hickey: Okay, Senator Johnson’s presented his bill. Do any of the members have any questions in regards to it? Is there anyone signed up to speak for or against that bill? Okay, anyone in the audience want to speak for or against this bill? Okay, hearing none, what’s the pleasure of the Committee? We have a motion do pass.

Sen B Johnson: Not yet.

Sen Hickey: That’s the next one. We have a motion do pass by Senator Payton. Is that correct, Senator Payton? Senator Crowell is the second. All in favor say aye. Any opposed? Congratulations, Senator, it’s passed.

Sen B Johnson: The amendment for that other one ought to be over here shortly.

Sen Hickey: Right. Okay, I believe that Senator Dismang’s also on this list. I don’t know if he’s running another bill in a committee or not. We’ve sent him a text to see if he’s coming and we’re just going to sit here for a moment until that amendment comes in on SB184. [Silence] Actually, Senator Dismang, we’re waiting on an amendment on another bill. So you kind of helped us anyway. And members we have a handout on this bill, which is Senate Bill 198. You’re recognized to introduce yourself and begin whenever you want to, Senator.

SB 198 Standardizes property assessment to every 4 years

Sen Dismang: Jonathan Dismang, I am late. Senate Bill 198.

Sen Hickey: You’re recognized.

Sen Dismang: All right, thank you. This is just really just to bring some clarity on reassessment. It’s going to take it to every 4 years. There’s an exception that you can ask for a waiver of that inside the bill. We got some folks can speak on it better than I can but right now it’s just unpredictable. Supported by folks that are in real estate just to kind of bring a little conformity, and then also the assessors and everybody else that’s involved. Again, just to bring a higher level of understanding of when things are going to occur.

Sen Hickey: Whenever you get to the table, if you would introduce yourself and you’ll be recognized.

Hill (Assessor): My name is Russell Hill, and I’m Assessor for Washington County. And then also, too, we have a lot of our other assessors here. And I’m on the board for the Arkansas Assessors Association. This bill, Senate Bill 198, currently counties in Arkansas, we do our reappraisal cycles on a 3 or 5 year basis, thinking that there wouldn’t be much volatility. But with the way that the market’s been going, this last reappraisal, we had 15 of the 17 counties that underwent their reappraisal went to a 3 year cycle.

What it has done is – and as you look at the map you see the yellow, all the counties – it creates a very hard job for us to do this on a statewide basis. 70 of the 75 counties have contractors who do these reappraisals, and it makes it very hard when they have to juggle this thing moving around. You have multiple counties switching and it creates an offset statewide. And it makes it very difficult for the contractors who have the same amount of job to do on a reappraisal but they have 2 less years to do it. So when they switch to a 3 year cycle, they have to hire more people. It takes 2 years to get your certification for them to go out and do some of these things on their own. And so it creates a work issue problem bouncing from county to county. And if you look there, too, we’ve got a large number in 2025, almost half the entire state’s going to be undergoing reappraisal at that time. And then you go into 2027, you only have 2 counties that are going to be undergoing reappraisal at that time.

So from just a workflow management, it creates a nightmare for our contractors and the people observing that too with the state department managing that. And it just creates an opportunity for mistakes to be made. For property owners, it creates a lot of confusion too. And for title companies, I’m constantly speaking to realtors and title companies, letting them know when a reappraisal is coming up because they don’t know what cycle we’re on. And so when they’re representing the buyer, and whenever that reappraisal happens, if someone buys a house, that property goes to the full value and they get hit with a tax bill they weren’t expecting. So this helps prepare the people who are representing those home buyers. If they know every 4 years, it just creates, okay, we know this is coming up, we can protect our home buyers with that.

Sen Hickey: Senator Dismang, do you have anything else?

Sen Dismang: And so it does bring some certitude to the property owner. Whereas right now it may be 3 or may be 5 or maybe it was 5 but we decided to go to 3, and so I think that’s where the benefit and why I’m involved in the bill.

Sen Hickey: Any of the members, y’all have any questions? Senator Petty?

Sen Petty: Thank you, Mr. Chair. So just a couple of questions. One, currently the law is if you purchase a piece of real estate, the purchase price essentially sets that value in the assessor documents.

Hill (AAA): Well, it’s what the assessor puts on the value of that property. What happens is when we do a reappraisal– for example, Washington County, we did our reappraisal in 2020, so we set those values, and those values will ride for 3 years. We’re on a 3-year cycle right now. And then in 2023 we will adjust the values from 2020 and then we set a new value according to what the market’s doing. So property, if you stay in your home, we have Amendment 79, so whenever we adjust those values it’s only going up 5% on your primary, 10% on all other property. 

So all we’re doing is instead of going to a 3 year or 5 year cycle, we’re kind of splitting the middle at 4 and going, let’s just go on a 4 year, let’s keep it at that. And that just keeps a continuity with our contractors. And the state department that oversees this, it creates a tremendous burden on them, too, I would imagine. I don’t know. I don’t work for the state, but I would think if you’ve got two counties one year, 38 counties the next year, it creates a management problem from just the amount of work because it is a tremendous amount of work when you undergo a reappraisal.

Sen Petty: Okay, so just to follow up. I probably didn’t ask my question very clearly. So I guess maybe I’m one of the unlucky ones that when I buy a piece of property, the value that I then get to pay tax on is usually my purchase price. You’re saying that’s not always the case.

Hill (AAA): Correct. Yeah, it’s not.

Sen Petty: All right, that’s just a clarification there. And then in terms of owners’ rights of appeal, this is not going to change anything? They don’t have to wait every 4 years?

Hill (AAA): They can appeal every year.

Sen Petty: They can appeal every year. Okay. Thank you.

Hill (AAA): Yeah, because I think really property owners out there really don’t know, but it’s the title companies and the realtors. Those are the ones representing a lot of those property owners when you buy and sell a property. They need to know. But even for them when we bounce from a 3 to a 5, and because forever we were on a 5 year cycle, and then the market’s doing what it’s doing, so now we’re on a 3. And yeah, so when you’re bouncing around like that it creates confusion for them because they’re used to doing business every 5 years. And then, for example, we had a family that, this was 2005, we had a value on the house $677,000 on this house, so their property tax bill was $7,000. In 2020, it went to $1.1 million was the new value. And a family bought it in 2019, so they knew the property tax bill was $7,000 the previous year. Well, due to reappraisal, the new tax bill was $13,000. So their property taxes went up $6,000 in one year because of the reappraisal. And they didn’t know what to do, if they’re going to be able to stay in their house or not.

So what we want to do is we want to make sure that people are informed when they go in on the buying process that get ready, make sure you calculate this correctly. And they came in, they go, we’re not arguing the value because that’s about what they paid for it. We’re just going, what happened with our property tax bill almost doubling. And so this could help hopefully prepare these title companies and realtors to help prevent people from walking into something like that.

Sen Hickey: Okay, Senator Dees, you have a question? You’re recognized.

Sen Dees: Thank you, Mr. Chair. Just to make sure I’m following the uncertainty that you’re trying to prevent, on page 1, line 35 it says it says, “counties can assess at a minimum of one time every year.” That’s the current situation. It says minimum, so are we seeing it happen much more than that? What would you say is the normalcy with houses?

Hill (AAA): Well, we’re on our either our 3 or 5 year cycle.

Sen Dees: But this would move it to a 4 year.

Hill (AAA): Yeah, just a consistent 4 so and we’re not bouncing, we’re not rotating.

Sen Dees: For all counties?

Hill (AAA): And eventually, and I think there’s a contingency or a portion that ACD would have the ability to cycle some of these either at a 3 or a 5 or a 4. What we want to do is we want to create an equal amount of counties each year so we can manage that workflow on an annual basis. And so they would eventually move some counties over to where say you have 25, 25, and 25. They maybe take a year off or something or base it out to 19 counties each over that 4 years.

Sen Hickey: Senator Payton?

Sen Payton: Thank you, Mr. Chair. So as we go from the stagger it’s currently on to the 4 year stagger and try to do 25% of the counties each year, how many counties are going to be driven into a short time frame on the reappraisal process? In other words, where say right now they’re 2 years out and we’re going to make them 4, or are they going to be 3 years out and we’re going to make it 2?

Hill (AAA): Right, I think what the desire to currently do is finish out your current reappraisal cycle. So wherever you are in your cycle, finish that out, and then your next cycle will either be 3, 4, or 5. If you were scheduled to go on a 3, you might do another 3 to balance it out or you might go to a 4 or you could go to a 5.

Sen Payton: So the way you understand the way the bill is written, it should not shorten the cycle of any of them that they’re currently on?

Hill (AAA): No.

Sen Payton: Okay. Thank you.

Sen Hickey: Any other questions? Okay, we don’t have anyone signed up to speak for or against the bill, is there anyone in the audience wants to speak against it? I assume that there’s a lot of you all out there that are for this. If all y’all want to talk, I guess we’ll start. So yeah, Senator Dismang, you’re recognized to close. Okay, members, y’all heard the bill, is there a motion? Had a motion do pass by Senator Payton, I have a second by Senator Petty. All in favor say aye. All opposed? Hearing none, it has passed. Thank you. Senator Johnson, you’re going to be recognized for SB184 and we do have an amendment so I’d ask staff if they would, to pass out the amendment. We’ll look at it first. Senator Johnson, if you would please introduce yourself and then you’ll be recognized to present your Amendment.

 

SB 184 Defines what a timely receipt of a tax appeal means

Sen B Johnson: Senator Blake Johnson. The amendment is on page 2. It deletes line 3 and 4, and puts in “received by the Tax Appeals Commission.” This gives clarity where they receive it and it’s been postmarked.

Sen Hickey: Okay, we have a motion by Senator Payton for adoption. Senator Crowell second. All in favor say aye. Any opposed? Okay, the amendment is adopted. You’re now recognized to present your bill.

Sen B Johnson: Members, this bill is needed because they are receiving these appeals at this time and that’s why it has the emergency clause, and it’s just a matter of postmark so the taxpayer can be covered. And in this amendment, they receive it if it’s postmarked they’re in good shape on it.

Sen Hickey: Okay, any members have any questions in regards to this? Anyone in the audience want to speak against? Anyone want to speak for? Seeing none, you can close, sir.

Sen B Johnson: I’m closed on the motion, as amended.

Sen Hickey: All right and your motion– all right, so we have a motion from Senator Johnson to pass SB184 as amended. We have a second by Senator Payton. All in favor say aye. Any opposed, like sign. Hearing none, it has passed. Congratulations. Is there any other business to come before us? With that, we’re adjourned.