Numerous school boards and their property taxpayers could be in for an unwelcome surprise when property tax bills arrive this December. This is due to errors made by the state Department of Revenue coupled with the Legislature’s failure to pass legislation to correct those errors.
This week, the state Department of Revenue (DOR) began notifying local taxing jurisdictions, including school districts, of what is likely to happen without legislative action to fix this problem.
In a blog post back in April, we detailed a letter we sent to legislative leaders urging them to pass Assembly Bill 753, which, as amended, would correct this problem. However, the Senate adjourned without taking up the bill.
Assembly Bill 753, which passed the state Assembly but was not acted on by the state Senate, provides that if the state Department of Administration or state Department of Revenue (DOR) determines by August 15, 2020, that there was an overpayment or underpayment made in the DOR’s certification for the 2019 personal property aid distribution to taxing jurisdictions, the DOR must correct any underpayments by increasing the subsequent year’s distribution. Corrections will be made without interest, but no corrections will be made for overpayments.
What’s at stake with this bill is an unexpected property tax hike in many school districts where an overpayment was made at a time when money is already not only tight but uncertain.
Here’s some background that may be helpful in helping make sense of what’s involved here:
The state annually makes what are known as personal property aid payments to compensate local taxing jurisdictions, including school districts (as well as technical college districts, municipalities and TIF districts), for the revenue they lose due to personal property being exempted from property taxes under state law.
In 2018, however, errors occurred in determining how much exempt personal property existed in each taxing jurisdiction in the state, which resulted in an inaccurate distribution of personal property aid payments by the DOR in 2019. Many jurisdictions, including school districts, received more personal property aid than they should have while other jurisdictions, including school districts, received less than they should have.
Because a court decision requires the DOR to correct any underpayments, without the provisions that were added by the Assembly, the DOR must “claw back” any overpayments it made in order to correct any underpayments that resulted from the miscalculation. Under revenue limits, property taxes would go up in school districts where overpayments were received.
The WASB supports Assembly Bill 753, as passed by the Assembly, because it would allow districts that received overpayments to keep those overpayments, while correcting for underpayments. The WASB supports this solution to the problem because it will minimize the impact on property taxes, not only in school districts but in other local taxing jurisdictions, and TIF districts, as well. We have urged lawmakers to pass the bill but it appears unlikely they will return to take up an business until after the Nov. 3 general election. By that time, it may too late to fix this issue.
To see a copy of a letter the Department of Revenue is sending to all local taxing jurisdictions explaining the situation, click here.
