UNDERSTANDING PROPERTY TAXES

Transcription

1 UNDERSTANDING PROPERTY TAXES This brochure was created by the Los Alamos County Assessor to provide general information on the New Mexico property tax system. For more specific information on any one of these topics, please visit our office at 1000 Central Ave Suite 210, Los Alamos, NM.

2 GENERAL INFORMATION INTRODUCTION The assessment process is the basis for generating property tax revenues that pays for schools, roads, fire protection, police protection and other local services Revenue Distribution 3,500,000 3,000,000 2,500,000 Revenue 2,000,000 1,500,000 1,000, ,000 0 County Operational State Debt School Debt School Operational Municipal Operational Livestock Board L.A. College Debt L.A. Community College HB 33 School Bldg Table below allocates taxable value by residential, non-residential, state assessed and total net taxable. $700,000,000 Net Taxable Value Allocation Total County Res Net Taxable Value $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000,000 $- $308,445,806 $39,475,680 $5,231,190 $353,152,676 $311,398,887 $43,301,562 $5,337,853 $360,038,302 $356,427,728 $45,083,249 $6,054,549 $407,565,526 $366,543,011 $49,769,910 $7,053,830 $423,366,751 $398,931,690 $67,956,971 $7,281,630 $474,170,291 $432,713,570 $71,516,524 $7,124,610 $511,354,704 $472,009,280 $555,054,223 $75,332,823 $7,712,120 $520,368,060 $611,627,530 $83,892,270 $7,367,200 $558,982,350 $654,338,320 $87,996,350 $7,359,620 Total County Nres Total State Assessed Total Net Taxable Value Year Page 1

3 THE COUNTY ASSESSOR The County Assessor is an elected official responsible for valuing property in the county as directed by state laws referred to as the New Mexico Property Tax Code. The Assessor does not set tax rates, the Assessor primary responsibility is to establish market value as set forth by state law. The Assessor does not create value. People create value by their transactions in the market place. The Assessor simply has the legal responsibility to study those transactions, analyze sale prices trends, construction costs and rents to estimate the market value of all properties in the county. In addition to valuing properties, the County Assessor is the custodian of all parcel information for the county. This information is utilized to develop a county geographic information system that taxpayers, county departments; state and federal agencies utilize to further develop their specific needs, such as emergency, police and planning. THE TAXPAYER As the property owner and taxpayer, you have specific rights and responsibilities in the assessment process. You have the right to examine the County Assessors records and all information used in determining how your valuation was determined. You have the right to courteous, prompt and accurate responses to your questions and requests for property valuation assistance. You also have the right to protest your property s value if you disagree with Assessors value. Additionally, you have the responsibility to provide accurate information to the Assessor about property that you own. Also you have the responsibility to be informed about the property tax system process. You should make informed decisions on bond elections and voice your opinion to legislators pertaining to proposed property tax law changes. Most importantly, it is your right and responsibility to participate in the budget hearings held by school boards, cities and other entities receiving property tax revenues. NOTICE OF VALUE The assessor is required by law to send you a Notice of Value on or before April 1 of every tax year. The notice describes the property you own, gives the full and taxable value of the property for the current year. When you receive the Notice of Value study it very carefully! The value shown on the notice affects the taxes you will have to pay next November. The deadlines for protesting valuation are statutory. If you feel that the value place on your property is incorrect, you may want to discuss it with the assessor. Assessed value is simply an assessor s estimate of market value. This term is sometimes referred to as full value. New Mexico law prevents property taxes from being imposed on more than one-third of its market value. Taxable value is therefore one-third of market value. Net taxable value is taxable value less any applicable exemptions. Page 2

4 LIMITATION OF VALUE ON RESIDENTIAL PROPERTY Except for certain limitations on residential property, the County Assessor shall implement a program of updating property values so that current and correct values of property are maintained and shall have sole responsibility and authority at the county level for property valuation and maintenance, in accordance with the Property Tax Code, and regulations, orders, rulings and instructions of the Property Tax Division of the Taxation and Revenue Department of the State of New Mexico. The limitation mentioned above, refers to residential property that did not have a change of ownership prior to the annual revaluation cycle, these properties shall not increase more than one hundred and three percent from it s value in the prior tax year. This limitation in value does not apply to: A residential property valued for the first time (new construction units); Any physical improvements made to the property in the prior tax year or property omitted in a prior tax year; A change in ownership (sold / transfers) or use or zoning change. Residential property includes single family, manufactured homes and multi family units. All other property, classified as non-residential, which includes commercial, industrial personal property, livestock and all vacant land, which includes vacant residential lots, shall be valued at its market value of the prior tax year. EXEMPTIONS For individual meeting the required criteria under the Property Tax Code, the following are the available exemptions in the State of New Mexico: Head of House Hold (NMSA ), 2,000 off of the net taxable value Veterans (NMSA ), 4,000 off of the net taxable value 100% Disabled Veterans (NMSA ), totally exempted from paying property taxes In addition to the above exemptions there is a limitation or valuation freeze on property owned by over sixty-five (65) years of age and low-income taxpayers. Currently, tax year 2006, any taxpayer whose modified income does not exceed twenty thousand six hundred ($20,600) dollars for the prior year can qualify for this limitation in value increase on their primary single-family residence. This exemption is updated annually by a consumer price index. RATES Rates are number that when multiplied by the net table value, generate the amount of property taxes due. In New Mexico rates are expressed as mills or $ per thousand. There are two types of rates operational rates that finance ongoing operations of local government and schools, and debt rates that are voter approved for financing long-term capital improvements. Page 3

5 Rates shall be set by the Division of Local Government of the Department of Finance department of the State of New Mexico often referred to as DFA, after all the governmental entities in a taxing jurisdiction (school district) budget-making and approval process is completed in accordance with state law. Orders imposing the rates for all of the governmental units shall be made by the board of county commissioners / council. Each year county commissioners / councils, city councils, schools boards, community colleges and special district hold public hearing to determine the dollars needed for operations. The hearing usually begin early in the year and the hearing dates are published in the newspaper. By attending the budget hearings, taxpayers may participate in the budget process and become informed about the quality and cost of services provided in their area. Counties bill and collect taxes for all government entities imposing taxes in the county. Since rate applies to all properties in a particular jurisdiction, rates set by all of these entities are simply added together. Rates are thus cumulative, see example below. The mills set for residential properties in Los Alamos County for example, consist of a series of rates imposed by the various governmental entities totaling mills. Non-residential rates are levied against commercial, industrial, and vacant land, these rates are usually higher than residential rates. Example: Entity Rate State County Municipal School L.A. Community College Total Residential Tax Rate LIMITATIONS ON PROPERTY TAX RATES The maximum operational rates that can be set by the Department of Finance and Administration for use by the authorized governmental entity in a given taxing jurisdiction are: For use by each county, eleven dollars eighty-five cents ($11.85) per each thousand dollars of taxable value allocated to the county; For the use by each school district, fifty cents ($.50) per each thousand dollars of taxable value allocated to the school district; For use by each municipality, seven dollars sixty-five cents ($7.65) per each thousand dollars of taxable value allocated to the municipality; Page 4

6 The imposition of rates authorized under provision of law outside the Property Tax Code that are used to pay off principal and interest on voters approved general obligation debt are limited to the bonding capacity of each governmental entity which varies from year to year. ADDITIONAL LIMITATION ON PROPERTY TAX RATES New Mexico law limits the current yearly operating tax rates, not debt rates, from producing an excess of revenue amount from the prior tax year that is derived by a growth control factor for residential and non-residential rates. The growth control factor is the sum of allowable net new value plus a price deflator index for state and local government not to exceed five percent, referred to as percent change I. Growth Control Factor Percent change I + V=(base value + net new value) Base value What this growth control factor does is to prevent tax dollars from going up in proportion to the assessed value increase for operational rates only. This growth control formula does not affect debt rates. CALCULATION OF MILL LEVY After each taxing entity determines the revenue needed for operational purposes for the coming fiscal year, the assessor report the total assessed values for each of the schools districts by residential and non-residential. EXAMPLE: The assessor has determined that the total assessed value for residential properties in the county is 556,090,257. The County Council has determined the required property revenue for the county s portion to be 2,411,207 and this is within the allowable growth allowed by the growth control factor. The required operational mill levy for county use is therefore calculated as follows: 2,411,207 = or mills per thousand 556,090,257 The Department of Finance and Administration sets the rates required for each of the local governmental entities by residential, non-residential and for operational and debt service rates for each of the governmental entities in a taxing jurisdiction. Page 5

7 All of these rates are then added together to produce the total tax rate for that particular taxing jurisdiction. This rate is multiplied against the net taxable value of your property to produce the total property tax due. EXAMPLE: The full value of Mr. Jones home is $306,000. The assessment ratio is 1/3 therefore the taxable value of Mr. Jones home is $102,000, further Mr. Jones qualifies for a head of household exemption of 2,000. Mr. Jones net taxable value would then be $100,000. Detailed calculation Full Value $306,000 Assessment Ratio (1/3) $306,000 / 3 equals $102,000 Taxable value Taxable Value $102,000 Less Head of household exemption -2,000 Equals Net Taxable Value $100,000 Net Taxable Value X Total Tax Rate = Taxes $100,000 X = $1, Property taxes are broken down into two installments, the first halve is due November 10th of every tax year and delinquent on December 10th. The second half is due on April 10th and delinquent on May 10th. If payment is late a penalty will be added to the tax amount. APPRAISAL PROCESS The County Assessor revalues property every year in accordance with the Property Tax Code the New Mexico Constitution and state statutes. Once the values are established, the values are analyzed to ensure that they meet the standards set forth by the State of New Mexico. Appraisal, the act of estimating the value of property, has its roots in economic theory. Modern appraisal theory views market value (probable sale price) as that value determined by the interaction of the forces of supply and demand. Prices determined in actual market transactions by sellers and buyers can provide sound evidence of the market value of similar property. An appraisal is an opinion of value. The process though which conclusions of property value or property facts are obtained; also commonly the report setting forth such estimate and conclusion of the value estimate. According to the New Mexico Property Tax Code, the purpose of appraisals for property tax purposes is to estimate market value. Market value as defined by the courts is the highest price estimate in terms of money which a property will bring if exposed for sale in the open market allowing a reasonable time to find a purchaser who buys with knowledge of all uses to which it is adapted and for which it is capable of being used and assumes a willing buyer and seller. Market value is not the same as sales Page 6

8 price but if the market is reasonably competitive, prices can be strong evidence of market value. Market values must be time adjusted to the statutory status date of January 1 of the upcoming tax year. The taxable status of property is determined as of January 1 of each tax year. The first step in the process is to gather information on location, use topography of land, zoning, building measurements, construction type, construction costs, rental income, condition, and property sales. Primary sources are maps, on-site inspections, building permits, local building contractors, real property deeds, and sales affidavits completed by property owners. The information is stored, updated, and maintained for current and future use. THE THREE APPROACHES TO VALUATION The three approaches to estimating market value have been in existence since the early 1900 s, all have been refined though the years and variations developed for specific appraisal problems. The three approaches to estimating value are: sale comparison, cost and income. The sales comparison approach derives a value estimate by comparing the property being appraised, the subject property, to similar properties, comparables, that have recently sold, applying appropriate units of comparison, to the sales prices of the comparables. Because no two real properties are ever exactly alike, systematic methods must be used to adjust the prices of sold properties for dissimilar features by adding or subtracting a dollar amount. The adjustments are market derived and based on contribution value and not cost. Terms and conditions of the sale have to be analysis and if required adjusted to market based equivalence. If the adjusted prices of several comparables turn out to be similar, the appraiser has good evidence as the market value of the subject property. The sale comparison approach is most suitable when there are numerous and frequent sales of similar properties. This approach is widely used in the appraisal of single-family residential properties and vacant land. The reliability of the sales comparison approach rests on the number and quality of available sales. When sufficient valid sales are available, this approach tends to be the preferred valuation method. The cost approach estimates the replacement cost new of the improvements, less the estimated accrued depreciation plus the market value of land. This approach is sometimes referred to as the summation approach. Construction cost and depreciation schedules can be developed internally, based on a systematic study of local construction cost, obtained from firms specializing in such information, or custom generated by a contractor. Cost and depreciation schedules should be verified for accuracy by applying them to recently constructed improvements of known cost. Construction and depreciation schedules should be updated before every revaluation cycle. Page 7

9 The cost approach is most reliable in new construction and special purpose properties, where there is little to no sales data, and sometimes in commercial and industrial properties. The income approach is used for income producing properties such as shopping centers, office buildings, and warehouse. The most direct method involves the application of gross income multipliers, which express the ratio of market value to gross income. At a more refined level, net income multipliers or their reciprocals, overall capitalization rates can be developed and applied. These multipliers and rates should always be extracted from actual income and sales price data obtained from properties that have recently been sold. Income multipliers and overall rates provide reliable, consistent, and readily supported valuations when good sales, income and expense data are available. The income approach is the best method to use when dealing with income producing properties. This approach recognizes that potential investors demand property because they anticipate a future income stream. In the following table one (1) illustrated below, the lower number for that type of property represents the most preferred valuation approach. Table 1 Rank of Typical Usefulness of the Three Approaches to Value in the Mass Appraisal of Major Types of Property Cost approach Sales comparison approach Income approach Single-family residential Multifamily residential 3 1,2 1,2 Commercial Industrial 1,2 3 1,2 Non-agricultural land- 1 2 Agricultural* Special-purpose** 1 2,3 2,3 *Includes farm, ranch, and forest properties **Includes institutional, resort, and recreational properties New Mexico law requires assessors to value property at a specific level of assessment. To ensure that assessors are following proper levels and uniformity standards, the Property Tax Division conducts annual ratio studies in each county and evaluates county assessors to ensure compliance with the Property Tax Code. Page 8

10 PROTEST PROCESS Property owners may protest assessed values, classification, allocation of value to a particular governmental unit, denial of exemptions or limitation on increase in value determined by the county assessor. The limitation on increase refers to state law ( ) that limits increase of properties that did not sell in the immediate prior tax year to three per cent per year. Properties that had a change of ownership (sold) in the immediate prior tax year are not subject to this limitation and can be valued at market value. The most common type of protest is over assessed value, exceeds market value. If you think your assessment is higher than it ought to be, the first thing to do is to talk to a representative of the assessor s office and explain why you think you are being over assessed. The best time to do this is within thirty days of receiving your notice of value. After this time it becomes increasing difficult to change your assessment. If you remain convinced that your assessed value is too high, you may protest. You may protest by 1) filing a petition of protest with the county assessor within thirty days of receiving your notice of value, or 2) filing a claim for refund in the district court after paying the first installment of taxes due. You cannot file a petition of protest and claim for refund in the same year. INFORMAL HEARINGS The process a of property valuation protest and a property valuation review have two separate functions. One is to have their protest heard. The other is to provide a procedural method of reviewing assessments whereby any inaccuracies may be corrected, without having to protest. Review allows the reexamination of assessments by the assessor to correct and clarify any discrepancies in the individual assessments within statutory limits, before certifying values. Staff will conduct these informal hearings, and taxpayers still desiring to appeal an appraised value will be given the opportunity to be heard before the Los Alamos Protest valuation Board. A protest petition will be filed and tracked until the dispute is completely resolved. Protest petitions must contain the property owner s name, address and a description of the property. They must also state why the owner believes the value, classification; allocation of value, claim for exemption or the limitation of value determined by the county assessor is incorrect. The owner must also state what he believes the correct value, classification, and allocation of value, claim for exemption or the limitation of value by the county assessor to be. The petition must also state what item (s) are not subject to protest. Petition forms are available at the county assessor s office. After receiving a petition, the assessor will set up an informal hearing with the property owner. The informal hearing is off the record where data is exchanged and verified. During or before this meeting, property owner should review their property data to be sure that the information listed is correct. The assessor will provide the property owner with copies of this information. The assessor will explain the method(s) used in determining assessment. Any pertinent data assembled by the property owner should be presented at this hearing. The goal of a protestant at this informal process should be 1) verify all information on his property, 2) to make sure he understands how his Page 9

11 assessed value was determined, 3) to be sure that he understands the protest procedure and how the assessors office can help him, if he still wants to protest. If a change of value is warranted then he will be immediately notified. The burden of proof is on the protestant. The assessors values are presumed to be correct and the protestant has the burden of overcoming that presumption. FORMAL HEARINGS If a protestant chooses to continue with his protest, the assessor must schedule a formal hearing before the County Valuation Protest Board. Property owners must be notified by certified mail of the date, time and location of the formal protest hearing. Protest will be denied if the taxpayer or a representative of the taxpayer fails to appear at the hearing without reasonable justification. County Protest Valuation Boards consist of three members and three alternates. The county council appoints two members and two alternates. One member and one alternate are typically laypersons. The other and the corresponding alternate must have real estate appraisal experience. The third member and alternate are employees of the Property Tax Division. The Property Tax Division employee serves as the chairperson of this board. The board must make its decision and notify the property owner in writing within thirty days after the hearing, but the deadline may be extended if the taxpayer and board agree. All protests must be decided within one hundred eighty (180) days of the date on which the protest was filed unless the parties agree otherwise. A copy of the decision must be immediately sent to the property owner by certified mail. A copy of the decision must also be sent to the county assessor, so that valuation records, if required, are changed in accordance with the decision. The property owners or the county assessor can appeal the board s decision in the district court. The appellant will bear all costs associated with this appeal. CLAIM FOR REFUND IN DISTRICT COURT Refund claims are filed in the Santa Fe District Court. Claims must be filed against the county assessor, no later then the sixtieth (60) day after the due date for the first installment of the tax that is subject to a claim of refund. Payment of all taxes due in accordance with the tax bill must be made prior to the delinquency date before filing for a claim for refund. Claims must contain the property owners names and addresses, as well as other persons receiving a tax bill for the property. The action must state the basis for the refund claim, the amount of the refund to which the owners believe they are entitled, and amounts paid. Property owners or the county may appeal final decisions or orders from a district court. Once the courts have determined the amount of refund, if any, the county finance department will make the appropriate change to the tax records. Page 10

12 NEW MEXICO PROPERTY TAX CALENDAR FOR PROPERTY OWNERS January 1: February: April 1: June 15: June 30: September 1: October 1: November 1: November 10: December 10: January 9: April 10: May 10: January 1st determines the taxable status of all property in the state of New Mexico. Properties within the county are valued on the basis of their status and use on this date. Building that are partially completed are valued on the percentage of completion as of this date. By the last day of this month, all new improvements, and decreases in value, mobile homes, livestock, and claims for any applicable property exempt status must be made. On or before April 1, county assessors must mail notices of value to property owners. Claims for Head of Household or Veteran exemptions must be applied for no later than thirty days after mailing of the county assessors notice of value. There are two methods for protesting values. The first method is to file a petition of protest with the county assessor within thirty days of receiving your notice of value (post mark date). The second method is file for a claim of refund in district court after paying your property taxes before the delinquent date. Property owners cannot use both methods on the same property in the same year. County assessors certify total net taxable values in the county to the Property Tax Division. After this date, valuation changes become increasing difficult and will generally require a court order. The Division complies all values certified by all counties and forwards to the Department and Finance for its use in setting tax rates. New Mexico Department of Finance and Administration sets the tax rates. The county council certifies the tax rates. Rates consist of operating rates that finance ongoing operations of government, and debt rates used to finance long-term capital improvements. Governing bodies of imposing entities, for example county council and educational boards, within statutory limits, impose operating rates. Voters approve debt rates. By this date, the county assessor prepares the property tax schedule (tax roll) for the county and delivers it to the finance department. This lists for every property its description, owner, address, value for property tax purposes, classification, exemptions allowed, applicable tax rates and tax amount. The finance department mails the tax bills based on the values set as of January1st. First half of taxes are due. After paying their first installment of taxes due, property owners who feel that their assessments are too high have sixty days from this date to file a claim for refund in district court. Property owners cannot file a petition of protest and a claim for refund in the same year. First half property taxes unpaid at this date are delinquent. On this date penalty and interest began to accrue. This date also controls a property owner s right to file a claim for refund, the second method for protesting assessments. To be eligible to file a claim for refund, the owner must pay the tax billed prior to the delinquency date. Last day to filing a claim for refund on values that were set on January 1 st of the prior tax year. Second half of tax bills are due based on values set January1st of the previous year. Delinquent dates for second half of taxes. Page 11