Pro-Enterprise Property Tax Act Exposed

The Pro-Enterprise Property Tax Act does not include adoption or approval information. ALEC has attempted to distance itself from this piece of legislation after the launch of ALECexposed.org in 2011, but it has done nothing to get it repealed in the states where it previously pushed for it to be made into law.

ALEC Bill Text

Summary

The common one-rate property tax system creates tax disincentives to the construction and maintenance of commercial, industrial, and residential buildings. Changing to a two-rate property tax system places a much lower tax rate on buildings and is more heavily based on the value of the property. This differentiation between land value and improvements on the land has helped revitalize downtown areas, lower annual tax burdens of homeowners, increase the number of construction jobs, and spur the production of housing.

This Act establishes a two-rate property tax system. It enables local governments, or local voters, to adopt a two-rate property tax and to implement such a system on any timetable. Localities choosing this option may then shift as much of the tax burden as desired from buildings and improvements onto land values. This tworate system encourages economic growth and expansion which will have positive, long-term effects for the community and the state.

Model Legislation

{Title, enacting clause, etc.}

Section 1.

This Act may be cited as the Pro-Enterprise Property Tax Act.

Section 2. {Definitions.}

As used in this Act:

(A) “Assessor” means the chief assessment official responsible for determining the value of real property for tax purposes each tax year in the local jurisdiction (city, county, parish, township, etc.)

(B) “Land” means the bare site disregarding any man-made structures as well as site improvements that inosculate with the land after a period of time such as clearing, grading, fertilizing, or draining.

(C) “Improvements” means houses, garages, barns, commercial buildings, factories, orchards, private roads, and other man made features on a site.

(D) “Market-value” means the price at which land and improvements, separately or together, would sell in an arms length sale as determined from actual sales, comparable sales or other prescribed and acceptable appraisal methods used by the assessor.

(E) “Assessed Value” means the commonly used portion of market value that is used for purposes of assigning the annual tax on real property.

(F) “Tax rate” means the charge against the assessed value of the jurisdiction’s taxable property imposed to produce revenues.

(G) “Two-rate tax” refers to the higher tax rates on land values and the lower tax rates on improvements imposed by the differential rate structure of this Act.

Section 3.

The purpose of this Act is to permit local governments to raise revenue in a manner that stimulates the private economy, encourages housing construction and repair, generates job opportunities, and fosters development that reduces the premature invasion of farmland and open space.

<u.Section 4. {Enactment by petition.}

Citizens of a taxing jurisdiction may bring the two-rate taxing option to a vote at the next general election under [cite appropriate state code for petition]. Such petition shall specify the minimum ratio of the differential rate. If approved, the two-rate tax system will become effective in the next tax year.

Section 5. {Enactment by ordinance option.}

The governing body of any city or county by ordinance may, in any given year, levy separate and different tax rates upon land and upon the improvements thereon. Such rates become effective the forthcoming year. This Act is not intended to authorize, where they do not otherwise exist, taxes that impose non-uniform rates on different use classes, such as residential or commercial properties.

Section 6. {Statewide assessment uniformity option.}

Land and the improvements thereon constitute two separate and distinct classes of real estate. The value of all taxable land and improvements shall be assessed uniformly at the identical percentage of full market value. This percentage may be 100 percent, or some uniform fraction thereof, as prescribed by state law or regulation. This section applies to all taxing jurisdictions within the State.

Section 7. {Indivisible application within jurisdiction.}

A jurisdiction shall apply the two-rate tax system to the entire range of property taxes within that jurisdiction’s geographic boundaries: taxes including but not limited to municipal, library district, school district, special assessment districts, state, and county property taxes.

When it is necessary to compare tax rates in two-rate areas with the old property tax system, the following formula shall be used:

1. Land Tax Rate x Assessed Value of All Taxable Lands = Land Revenue (LR)

2. Improvement Tax Rate x Assessed Value of All Taxable Improvements = Improvement Revenue (IR)

3. LR + IR = Total Revenue (TR)

4. TR/Total Assessed Value of Land and Improvements = Comparable Tax Rate (CTR)

Section 8. {Severability clause.}

Section 9. {Repealer clause.}

Section 10. {Effective date.}