Senate Bill 40, introduced by Senator Zakas, limits the increase in a homestead’s assessed value to 5% per year for tax purposes unless there is an ownership change or the increase is attributable to a physical improvement of the property.
I understand the motivation behind this bill. Homeowners even more than other types of property owners need some predictability in their property taxes. But I wonder if it passes Constitutional muster.
Article 10, section 1(a) provides that the “General Assembly shall provide, by law, for a uniform and equal rate of property assessment and taxation and shall prescribe regulations to secure a just valuation for taxation of all property, both real and personal.” In the 1998 Supreme Court case of Town of St. John v. Indiana Board of Tax Commissioners, the Supreme Court held that the assessment process then in place – which was jiggered all over the place to benefit residential property owners – was unconstitutional. That is a big chunk of what led to the property tax debacle that has given Indiana such fits over the past several years.
I haven’t read the case closely enough to know whether SB 40 would violate the constitution, but treating assessment of homestead properties differently than assessment for other properties would seem to raise a red flag.
Here we go again. The basic premise for the changes to assessment procedures in Indiana the last few years is that assessments are to be fair and equitable and based on the market valuation of the property being assessed. By limiting the changes to assessments each year, the State Legislature will create problems. First, the assessments within neighborhoods will become inconsistent, since properties sold will have higher assessments than those held for long periods of time. Second, the assessment procedures for annually adjusting sales to follow the market will be compromised, since properties with homesteads will not be adjusted along with the surrounding neighborhood properties. The DLGF requires all assessmnets to meet statistical requirements before they are accepted by the DLGF and taxing rates are determined. Over a period of several years, neighborhoods experiancing high valuation increases will not pass the statistical tests required. Without statistical verification of the values, the DLGF will not certify those values and Counties will not be able to set rates and collect tax revenues.