Property tax assessment notifications due this month
Wednesday, February 1, 2012 at 2:52PM Beginning Monday February 6, 2012, the Maricopa Assessor's office will begin mailing property tax notifications.
In the past, residences were assumed to be owner occupied and receive a lower subsidized property tax rate but that assumption no longer prevails and owners who live in their homes must sign an affidavit affirming as much to retain a state subsidy that cuts their property-tax bill by up to $600 a year.
If they rent out their house or fail to return the affidavit, they will lose the subsidy and face a higher bill.
The idea is that, by weeding out people who wrongly get the subsidy, the savings will be used to offset a property-tax break for businesses.
No one knows how many homeowners this will affect, though legislative analysts estimated that 25 percent of the rental homes in the state are misclassified and 6.5 percent of homes are second homes. Officials involved in Arizona's real-estate community fear the new requirement could trigger undeserved property-tax hikes as they suspect many property owners will ignore or overlook the requirement to sign the affidavit, which will be attached to the notice of valuation mailed to all property owners each year.
The requirement to declare that a property is owner-occupied, as opposed to a rental, is part of the tax-cut and jobs bill Gov. Jan Brewer signed into law in 2011.
One section of the legislation reduces the rate at which business and agricultural properties are assessed for taxation.
Because of the way Arizona's property taxes work, a cut in one category forces an increase in another - in this case, residential properties - so that there is no net loss in tax dollars collected. But lawmakers, not wanting to see residential taxes rise, increased the amount of the state subsidy, which has been 40 percent of the property-tax bill.
To cover the cost of the business-tax breaks and the increased rebate, lawmakers had to find money to fill the gap. The solution: Crack down on property owners who wrongly claim the rebate.
To do that, the legislation puts the burden on owners to attest that they actually live in the house they own. If they don't, the county will reclassify it as a rental, and the homeowner rebate will no longer be used to reduce the property-tax bill.
Currently, property owners indicate if a home is their residence when they buy a home, and they continue to receive the tax break indefinitely. The new legislation will require them to affirm that every other year, beginning in 2012.
Lawmakers figure they can save $39 million a year by withholding the rebate from people who rent out their properties.
Once the program begins, people will have 60 days to return the affidavit or the assessor will classify the property as a rental.
Lawmakers advise there will be a remedy. People have up to three years after getting a tax bill to provide the proper documentation to restore the homeowner rebate.
Many assessors question whether the policy will yield the $39 million that budget analysts predict.
First, some rentals are eligible for the homeowner rebate. If a house is rented to a direct relative of the owner, it qualifies. Second homes, or vacation homes, also qualify as long as they are not used for more than three months.
Second, assessors say they've already weeded out many properties that shouldn't be getting the state subsidy. In Maricopa County, the Assessor's Office last year removed 4,700 rental properties from the rebate list.
Still, no one has a good handle on how many homeowners are wrongfully benefiting from the long-standing state rebate.
That's all the more reason to use the affidavit, said Kevin McCarthy, executive director of the Arizona Tax Research Association, a business-supported advocacy group.
He also said the process, although almost guaranteed to cause unwarranted angst with some taxpayers, should provide a clearer view of how taxes work.
"I think it would be healthy for people to understand this system is in place and their taxes are being subsidized by the state of Arizona," McCarthy said.
