Presented by: Tim Wilmath, MAIPresented for: Florida IAAO – Fall Conference

Hilton SanDestin Beach, Florida

• 193.1554  Assessment of nonhomestead residential property.-- (1)  As used in this section, the term "nonhomestead residential property“ means residential real property that contains nine or fewer dwelling units, including vacant property zoned and platted for residential use, and that does not receive the exemption under s. 196.031.

• (2)  For all levies other than school district levies, nonhomestead residential property shall be assessed at just value as of January 1, 2008. Property placed on the tax roll after January 1, 2008, shall be assessed at just value as of January 1 of the year in which the property is placed on the tax roll.

• (3)  Beginning in 2009, or the year following the year the property is placed on the tax roll, whichever is later, the property shall be reassessed annually on January 1. Any change resulting from such reassessment may not exceed 10 percent of the assessed value of the property for the prior year. (4)  If the assessed value of the property as calculated under subsection (3) exceeds the just value, the assessed value of the property shall be lowered to the just value of the property.

• (5)  Except as provided in this subsection, property assessed under this section shall be assessed at just value as of January 1 of the year following a change of ownership or control. Thereafter, the annual changes in the assessed value of the property are subject to the limitations in subsections (3) and (4). For purpose of this section, a change of ownership or control means any sale, foreclosure, transfer of legal title or beneficial title in equity to any person, or the cumulative transfer of control or of more than 50 percent of the ownership of the legal entity that owned the property when it was most recently assessed at just value, except as provided in this subsection. There is no change of ownership if: (a)  The transfer of title is to correct an error; (b)  The transfer is between legal and equitable title; or (c)  The transfer is between husband and wife, including a transfer to a surviving spouse or a transfer due to a dissolution of marriage.

• (6)(a)  Except as provided in paragraph (b), changes, additions, or improvements to nonhomestead residential property shall be assessed at just value as of the first January 1 after the changes, additions, or improvements are substantially completed.

(b)  Changes, additions, or improvements that replace all or a portion of nonhomestead residential property damaged or destroyed by misfortune or calamity shall not increase the property's assessed value when the square footage of the property as changed or improved does not exceed 110 percent of the square footage of the property before the damage or destruction. Additionally, the property's assessed value shall not increase if the total square footage of the property as changed or improved does not exceed 1,500 square feet.

DifferentTreatmen

tFor

certain Propertie

s?

When does the 10% CAPReset?

- Recapture - School

Board- Legislature

Where did it all begin??

With the run-up in property values during 2002-2006, many taxpayers had their assessments increase 20%, 30%, 50%, even 100% or more.

During the height of the market, some property owners received tax bills that exceeded the total income they earn from the property.

Because of taxpayer outcry, the Florida Legislature passed several bills during the 2007 regular session related to property taxes.

The first major property tax reform bill that passed was Senate Join Resolution Bill 4B - which was called the “Super Exemption”. There was no CAP for non-HX in this bill.

The Supreme Court of Florida struck the Super Exemption from the ballot for being too confusing.

So…the Florida Legislature went back to the drawing board. The Senate passed SJR2d and sent it to the House for passage. The House debated the bill on October 29, 2007.

After much debate the house and the senate passedSJR2d – which allowed Amendment 1 to be placed on the Florida Ballot on January 29, 2008.

The original House version called for a 5% CAP on non-homestead, but was revised to 10% by the Senate. Many house members were against passage of the bill because of this change….others saw it differently..

The original House version called for a 5% CAP on non-homestead, but was revised to 10% by the Senate. Many house members were against passage of the bill because of this change….others saw it differently..

On January 29, 2008, Florida voters passed Amendment 1, which brought a CAP to non-homestead properties for the first time.

JAN FEB MAR APR MAY JUN

Although it passed on January 29, 2008, Florida Property Appraisers had 5 months to implement 4 major changes brought about by Amendment 1:

• Portability • 2nd Homestead Exemption• TPP $25,000 Exemption• 10% CAP on Non-Commercial

JAN FEB MAR APR MAY JUN

The 10% CAP on Non-homestead properties was implemented with the creation of two new Florida Statutes.

F.S. 193.1554 Applies to properties with Nine (9) residential units or less and vacant residential land.

F.S. 193.1555 Applies to properties with ten (10) residential units or more, commercial properties, industrial properties and non-residential land.

F.S. 193.1554 1

Applies a 10% CAP to all residential property types (9 units or less), including vacant residential land (with the exception of Greenbelt land.)

F.S. 193.1555 2

Identical to 193.1554, except the CAP is also reset on applicable properties when a “substantially complete” improvement increases Just Value more than 25%.

Is different treatment for certain non-HX properties constitutional?

Is different treatment for certain non-HX properties constitutional?

When does

the CAP get

reset on

Non-homestead

properties?

Re-setting the CAP

When does the CAP get reset on

Non-homestead properties?

When does the CAP get reset on

Non-homestead properties?

193.1556, F.S. “Any person who owns property…must notify the property appraiser promptly of any change of ownership or control.”

Or else – pay taxes avoided plus 15% interest per annum and a penalty of 50% of the taxes avoided (10-year go-back).

Re-setting the CAP Change of Ownership or Control

Any sale, foreclosure,

transfer of title, or the

cumulative transfer of

Control of more than 50

percent of the ownership

of the legal entity that owned the property.

What is a change of ownership or control?

Re-setting the CAP Change of Ownership or Control

Why does the statute mention both a change of ownership or control?

Re-setting the CAP Change of Ownership or Control

DR-430…Except when

1. A deed was recorded

2. Correcting a deed

3. Between legal/equitable title

4. Between husband and wife

Besides recording a deed, how does a taxpayer notify the P.A. of a change of ownership or control?

Re-setting the CAP Change of Ownership or Control

193.1554/1555, F.S. (7) “Any increase in the value of property assessed under this section which is attributable to combining or dividing parcels shall be assessed at just value, and the just value shall be apportioned among the parcels created”

Re-setting the CAP - Splits & Joins

Before After

Before:

Just Value - $1,000,000Assessed - $ 800,000Cap Amount = $ 200,000

After:

Just Value $20,000 x 100 lots = $2,000,000Assessed Value$18,000 x 100 lots = $1,800,000 Cap Amount = $ 200,000Or $2,000 per lot CAP after Split

Re-setting the CAP - Splits & Joins

Re-setting the CAP Splits and Joins - Residential

If an owner of an HX home wants to join a non-HX lot , do you reset the CAP on the home? On the lot? On Both?

Re-setting the CAP Splits and Joins - Commercial

How about joining 2 commercial properties – both with a nice CAP?

Re-setting the CAP Splits and Joins - Commercial

How about joining 2 commercial properties – both with a nice CAP?

If your office is like ours - you do cutouts very soon after a plat is recorded.

Re-setting the CAP Splits and Joins – New Subs

For example: a 50 acre property has a plat recorded in March, 2009 creating a 200 lot subdivision.

Re-setting the CAP Splits and Joins – New Subs

Since it was vacant acreage on January 1 it should be valued as such for the 2009 tax roll.

Since the split was done in March-09, then each lot will receive a 2009 TRIM notice based on the pro-rated value of the 50 acre site..right?

Re-setting the CAP Splits and Joins – New Subs

If you TRIM each lot in 2009 at the pro-rated value of the 50 acre site, aren’t you locked in to those values with no more than a 10% increase in 2010???

Re-setting the CAP Splits and Joins – New Subs

When is the value locked in for CAP purposes??

Re-setting the CAP Splits and Joins – New Subs

DOR says: “The fact that the 2009 tax bills represent

only an apportioned share of the large parcel’s value

as of Jan 1st is an administrative function and does

not represent the base value for the lots”

http://dor.myflorida.com/doe/property/faqs10cap.pdf

193.1555, F.S. (4)(a)“A qualifying improvement means any substantially completed improvement that increases the just

value of the property by at least 25%”

Re-setting the CAP –25% Improvement

Re-setting the CAP

Why do some properties get reset upon a 25% increase in Just Value as a result of a physical improvement?

Re-setting the CAP

Why do some properties get reset upon a 25% increase in Just Value as a result of a physical improvement?

Re-setting the CAP

Be assured that members of the Florida House knew exactly what they were voting on.

Re-setting the CAP

Be assured that members of the Florida House knew exactly what they were voting on.

Re-setting the CAP

193.1555 (5)(a) A qualifying improvement means any substantially completed improvement that increases thejust value of the property by at least 25 percent.

What is NOT a qualifyingImprovement?

What is NOT a qualifyingImprovement?

Removing Adjustment forLarge VacancyChanging Quality from Average to Excellent

Base Rate increase of 30%In the CAMA systemAny improvement that is Not PHYSICAL

Does Recapture apply to Non-Homestead CAP?

Does Recapture apply to Non-Homestead CAP?

Is it really a 10% CAP?

193.1554/1555 (2)(a) – “For all levies other than school district levies.”...

School Districts represent about40% of the total millage statewide

Source: Florida Department of Revenue

$100,000,000$2,100,000,000$4,100,000,000$6,100,000,000$8,100,000,000

$10,100,000,000$12,100,000,000$14,100,000,000

Schools Counties Municipal IndependentDistricts

Property Taxes Collected by Source

16.8%

34.30%40.40%

8.5%

School Board Example:

2008 Just Value $1,000,0002008 Assessed Value $1,000,0002008 Taxes $20,500

2009 Just Value $1,200,000 (20% increase)2009 Non-school Assessed Value $1,100,000 (10% capped)2009 School Board Assessed Value $1,200,000 (not Capped)

2009 Non-school Taxes (12.7 mills) - $13,9702009 School Board Taxes (7.8 mills) - $ 9,360Total 2009 Taxes $23,330

14% Increase in taxes

10% CAP ChallengesUSE - An owner files for Homestead on one unit of a duplex. He continues to rent the other half out.

Now half the property is capped at 10% and the other half is capped at 3%.

You have 2 different base years on the same property.

How does your CAMA system track multiple assessed values on the same property?

10% CAP ChallengesOwnership - Three separate owners on a house. Two reside with homestead and one does not (66.6% HX). Then one of the owners with HX moves out. How to you reset the assessed value?

Owner 1 retains 33.3% HX, but loses ½ the 3% CAP.

Owner 2 who is moving, starts over with a 10% CAP a new base year.

Owner 3, who never had homestead, retains his 10% CAP, his original base year.

How does your CAMA system track multiple owners with different base years and CAPs?

10% CAP ChallengesValue - What happens when the owner of an existing apartment complex adds a swanky new swimming pool?

You typically value apartment complexes using the income approach.

Since the pool is brand new, it’s considered new construction, and should go on above the CAP.

But since the rents won’t go up for a year or so, there is no justification for increasing the value via income!

The 10% cap on non-homestead properties sunsets in 2018 and will require a vote to extend it.

POP QUIZ!!

Greenbelt barns do not benefit from the 10% CAP.ANSWER: Since the buildings on Ag properties

do not receive any benefit from the low Greebelt rates, they are protected by the 10% CAP.

Pop Quiz!Pop Quiz!

If a taxpayer gets a site rezoned to commercial, the CAP should be removed since the

resulting value increased more than 25%.ANSWER: Since a rezoning is not a “physical” improvement, the CAP would not

be removed.

Pop Quiz!Pop Quiz!

Does a rezoning remove the CAP?

Which state had the highest 2008 combined State & Local taxes paid – as a percentage of income?

E: Massachusetts

D: Texas

A: Florida

B: California

C: New Jersey

Pop Quiz!Pop Quiz!

Which state had the highest 2008 combined State & Local taxes paid – as a percentage of income?

E: Massachusetts

D: Texas

A: Florida

B: California

C: New Jersey

Pop Quiz!Pop Quiz!

Source: www.TaxFoundation.org

With 1 being the highest (N.J.) and Alaska being the lowest, where does Florida rank for state & Local taxes paid as a percentage of income?

E: 30th

D: 26th

A: 11th

B: 19thth

C: 47th

Pop Quiz!Pop Quiz!

With 1 being the highest (N.J.) and Alaska being the lowest, where does Florida rank for state & Local taxes paid as a percentage of income?

E: 30th

D: 26th

A: 11th

B: 19thth

C: 47th

Pop Quiz!Pop Quiz!

Source: www.TaxFoundation.org

Property taxes will continue to be under scrutiny and face further controls by the State.

Amendment 3 appearing on the

November 2010 Ballot

Changes CAP on non-HX from 10% to 5%.

Provides first-time property owners with an additional homestead exemption.

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The Florida House and Senate are currently in session working closely together to improve Property Tax law.

The Florida House and Senate are currently in session working closely together to improve Property Tax law.

Thank You!

Tim Wilmath, MAIWilmatht@hcpafl.org