Property tax revenue limit. Beginning with the 2025 property tax year, section 2 of the bill establishes a limit on specified property tax revenue for local governments (limit). This limit does not apply to local governments that are home rule local governments, school districts, have not received voter approval to exceed the statutory 5.5% property tax revenue limitation, or have not received voter approval to collect, retain, and spend revenue without regard to the limitations in section 20 of article X of the state constitution. The limit is equal to the local governmental entity's base year qualified property tax revenue increased by 5.5% for each year since the base year including the relevant property tax year. A local government may seek voter approval to waive the limit. A local governmental entity's base year is:
- For a local governmental entity that had qualified property tax revenue for the 2023 property tax year, the local governmental entity's qualified property tax revenue for the 2023 property tax year, plus any money the local governmental entity received from the state to compensate the local governmental entity for reduced property tax revenue in the 2023 property tax year;
- For a local governmental entity that did not have qualified property tax revenue for the 2023 property tax year, the local governmental entity's qualified property tax revenue for the first year that the local governmental entity has property tax revenue; and
- The local governmental entity's qualified property tax revenue for the most recent property tax year for which the local governmental entity's voters approved temporarily waiving the limit.
If a local government property tax revenue would otherwise exceed the limit, a local government shall establish a temporary property tax credit equal to the number of mills necessary to prevent the local government's property tax revenue from exceeding the limit.
Commercial property valuation reductions. Under current law, for commercial property, the valuation for assessment (valuation) is 29% of the actual value of the property. Section 3 reduces the valuation of commercial property as follows:
- For property tax year 2024, the valuation is 27.9% of the amount equal to the actual value of the property minus the lesser of $30,000 or the amount that causes the valuation for assessment of the property to be $1,000 (alternate amount);
- For property tax year 2025, the valuation is 27% of the actual value of the property;
- For property tax year 2026, the valuation is 26% of the actual value of the property; and
- For property tax years commencing on or after January 1, 2027, the valuation is 25% of the actual value of the property.
Residential real property valuation reductions. For the 2024 property tax year, section 4 makes 2 reductions to residential real property valuation by continuing the 2023 property tax year reductions to residential real property valuation:
- For multi-family residential real property, the bill reduces the valuation from 6.8% of the actual value of the property to 6.7% of the amount equal to the actual value of the property minus the lesser of $55,000 or the alternate amount; and
- For all other residential real property, the bill reduces the valuation from an estimated 7.06% of the actual value of the property to 6.7% of the amount equal to the actual value of the property minus the lesser of $55,000 or the alternate amount.
Section 5 makes a conforming amendment to the reduction for all other residential real property for the 2024 property tax year, as described in section 4.
For the 2025 property tax year, section 4 modifies residential real property valuation so that the valuation for all residential real property is:
- For the purpose of a levy imposed by a school district, 7.15% of the actual value of the property; and
- For the purpose of a levy imposed by a local governmental entity that is not a school district, 6.7% of the actual value of the property.
For the 2026 property tax year and all future property tax years, property tax year and all future property tax years, section 4 also reduces the valuation for all residential real property from 7.15% of the actual value of the property. For all residential real property, the valuation is:
- For the purpose of a levy imposed by a school district, the lesser of 7.15% of the actual value of the property or a percentage of the actual value of the property determined by the property tax administrator pursuant to section 6 ; and
- For the purpose of a levy imposed by a local governmental entity that is not a school district, 6.95% of the amount equal to the actual value of the property minus the lesser of 10% of the actual value of the property or $70,000 as adjusted for inflation in the first year of each subsequent reassessment cycle.
Adjustable residential real property valuation. Section 6 requires legislative council staff to notify the property tax administrator of the first year after 2026 in which the local share of total program is equal to or greater than 60% of the total program determined pursuant to the "Public School Finance Act" (act). For every property tax year after that year, the valuation for assessment for all residential real property, for the purpose of a levy imposed by a school district, is equal to the lesser of:
- 7.15% of the actual value of the property; or
- The percentage of the actual value of the property necessary for the local share of total program to equal 60% of the total program determined pursuant to the act, based on the best available information when the property tax administrator determines the percentage of actual value.
Reimbursement of local governments. The state reimbursed local governmental entities for property tax revenue lost as a result of the reductions in valuation enacted in Senate Bill 22-238 and Senate Bill 23B-001. Section 7 establishes a reimbursement mechanism for certain local governmental entities other than school districts to account for property tax revenue lost as a result of the reductions in valuation in the bill for the 2024 property tax year. The reimbursement mechanism requires the state to reimburse local governments in an amount equal to the decrease, if any, in assessed value between the 2022 and 2024 property tax years multiplied by the local governments' mill levy rate from the 2022 property tax year. Section 7 creates a fund out of which the state makes the reimbursements and requires the state treasurer to transfer to the fund an amount equal to one percent of the amount appropriated for expenditure from the general fund for state fiscal year 2024-25. Section 1 makes a corresponding reduction to the amount of the unrestricted general fund year-end balance that must be retained as a reserve for state fiscal year 2024-25. Property tax deferral program. The existing property tax deferral program allows any person to defer the payment of the portion of real property taxes on the person's homestead that exceeds the tax-growth cap, which is an amount equal to the average of the person's real property taxes paid for the preceding 2 property tax years for the same homestead, increased by 4%. Beginning with the 2025 property tax year, section 8 removes the 4% tax-growth cap. Accordingly, beginning with the 2025 property tax year, a person may defer the payment of the portion of real property taxes on the person's homestead that exceeds the average of the person's real property taxes paid for the preceding 2 property tax years for the same homestead.
(Note: This summary applies to this bill as introduced.)
