This client advisory supplements our August 1, 2007 client advisory ( http://www.eapdlaw.com/newsstand/detail.aspx?news=970).
On October 29, 2007, the Florida Legislature passed a resolution proposing a new amendment to the Florida Constitution regarding property taxes. This amendment replaced and supplemented a portion of the prior property tax amendment that we described in our earlier client advisory and was required because the prior property tax amendment was struck down by a Florida circuit court on September 24, 2007. The circuit court did not strike down the property tax assessment “rollback” provisions enacted into statute (See Section I of our earlier client advisory). The prior amendment invalidated by the circuit court, and replaced and supplemented by the currently proposed amendment (“proposed amendment”), is described in Section II of our August 1, 2007 client advisory.
The proposed amendment will appear on the ballot during Florida’s Presidential primary election on January 29, 2008.
It must be approved by at least 60% of voters casting ballots in order to take effect. If passed, the proposed amendment will become effective on a retroactive basis to January 1, 2008. The remainder of this client advisory will explain the proposed amendment and will endeavor to advise you of its impact, if approved.
Cap on Assessment Increases
Increases in annual assessments on all properties, whether or not they are homesteaded, will be capped at 10% annually. However, this cap would not apply to assessments for property taxes related to schools.
This portion of the proposed amendment only affects owners of Florida residences who have homesteaded their property.
Further, this portion of the proposed amendment would only apply to homesteads sold on or after January 1, 2007.
The proposed amendment limits the assessed value of homestead property based on the formula set forth below. Under the proposed amendment, “assessed value” is the property value recorded by the property appraiser each year. “Assessed value” is the official value upon which properties may be taxed. This value is less than the value actually paid for the property because the Florida Constitution exempts a portion of the home’s value from tax assessments. Each year, the property appraiser multiplies a property’s assessed value by the property tax millage rate to determine each property owner’s tax bill. Another important term under the proposed amendment is “just value,” which means the amount of money someone pays when he or she purchases a homestead property.
The proposed amendment sets forth a new formula for calculating assessed values of homestead properties. Under the proposed amendment, if the owner of a Florida homestead purchases a new homestead for greater value, the assessed value of the new homestead would equal the just value of the new homestead minus the difference between the just value of the new homestead and the assessed value of the previous homestead, or $500,000, whichever is less. Every year thereafter, the assessed value of the new homestead would increase no more than 10%, in accordance with the cap on assessment increases described above. The following examples illustrate this aspect of the proposed amendment.
Homeowner owned a Florida homestead with an assessed value of $150,000. He or she purchases a new homestead with a just value of $200,000. The assessed value of the new homestead would be $150,000 because $200,000 - ($200,000 - $150,000) = $150,000.
Homeowner owned a Florida homestead with an assessed value of $1,000,000. He or she purchases a new homestead with a just valuation of $1,700,000. The assessed value of the new homestead would be $1,200,000 because the difference between the assessed value of the old homestead and the just value of the new homestead would be $1,700,000-$1,000,000 = $700,000, which is greater than $500,000. According to the proposed amendment, the assessed value of the new homestead would be calculated as follows: $1,700,000 - $500,000 = $1,200,000.
Increased Homestead Exemption
This portion of the proposed amendment only affects owners of Florida residences who have homesteaded their property. Florida homestead owners already receive a property tax exemption of $25,000 on the assessed value of their homes. The amendment would create an additional $25,000 exemption on the assessed value of homesteads greater than $50,000 for all property tax levies except school taxes.
Tangible Personal Property Tax Exemption
The amendment will create a new exemption for tangible property. Now, the first $25,000 of tangible personal property will be exempt from taxation.
Florida’s electorate, and all public and quasi-public entities that derive revenue from the ad valorem tax process, have closely watched the Legislature’s actions relating to property tax reform. As the civil suit striking down the first reform proposal demonstrated, the issues continue to be very controversial. As a result, we foresee additional developments and will continue to report regarding those developments going forward.