This Fiscal Note is not an official copy and should not be quoted or cited.
Fiscal Note - SB 0490 - Allows cities and counties to enact homestead exemption for senior citizens under a certain income limit
SB 490 - Fiscal Note

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 2048-01

BILL NO.: SB 490

SUBJECT: Cities, Towns and Villages; Counties; Taxation and Revenue-General-Property

TYPE: Original

DATE: March 23, 1999


FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS

FUND AFFECTED FY 2000 FY 2001 FY 2002
Total Estimated

Net Effect on All

State Funds

$0 $0 $0



ESTIMATED NET EFFECT ON FEDERAL FUNDS

FUND AFFECTED FY 2000 FY 2001 FY 2002
Total Estimated

Net Effect on All

Federal Funds

$0 $0 $0



ESTIMATED NET EFFECT ON LOCAL FUNDS

FUND AFFECTED FY 2000 FY 2001 FY 2002
Local Government $0 $0 to ($9,805,000) $0 to ($9,805,000)

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 4 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials of the Department of Revenue (DOR) state this legislation authorizes the governing authority of any municipality or county to adopt an ordinance to allow a homestead exemption of up to $25,000 for senior citizens whose household income does not exceed $20,000. The taxpayer claiming the exemption is to submit to the assessor each year a statement of household income. DOR staff state this proposal would have little or no impact to their agency.

Officials of the State Tax Commission state this proposal would allow cities or counties to provide homestead exemptions up to $25,000 to those 65 or over with household income under $20,000. Since this is a local option, there would be no impact unless someone adopts it. Should any do so, impact would have to be locally determined. The mix of elderly and those under $20,000 income varies from one jurisdiction to another.

Officials of the Department of Elementary and Secondary Education (DES) state this proposal would allow municipalities or counties to adopt by ordinance an additional homestead exemption for individuals aged 65 or older with household incomes at or below $20,000. The exemption may go up to $25,000.

The fiscal impact is dependent on (1) municipalities and counties adopting an ordinance, and (2) qualified individuals claiming the additional exemption.

If the loss of revenue to the school district resulting from the homestead exemption is made up from state sources -- basically the state school aid formula -- districts "on the formula" would recover the lost local revenues through the state aid formula. Hold harmless districts will experience a decrease in local revenue unless permitted to raise the operating levy enough to compensate for the lost revenue. However, this increases the tax burden for those not qualifying for the tax exemption. The local deductions in the foundation formula would be reduced, thereby increasing the cost to fully fund the formula.

It is not known if this impact on the formula would be significant.

Officials of the Office of Administration (COA) state that assuming all cities and counties enacted a homestead exemption of $25,000 for senior citizens 65 or older with income less than $20,000 would reflect the maximum revenue impact from this proposal. According to the U.S. Census Bureau there are 244,210 households headed by someone 65 or older with income less than $20,000. According to the Census Bureau 73% of the households were owner occupied housing (178,273). Assuming 22%, which is the same as the circuit breaker participation rate, of

ASSUMPTION (continued)

those households participate yields 39,220 households. According to Oversight the average property tax rate is 1%. Assuming a average property tax rate of 1% would yield a maximum local revenue loss of ($9,805,000) annually.

FISCAL IMPACT - State Government FY 2000 FY 2001 FY 2002
(10 Mo.)
0 0 0
FISCAL IMPACT - Local Government FY 2000 FY 2001 FY 2002
(10 Mo.)
Loss to Political Subdivisions
Homestead Exemption for Senior Citizens $0 $0
to to
$0 ($9,805,000) ($9,805,000)
FISCAL IMPACT - Small Business
No direct fiscal impact to small businesses would be expected as a result of this proposal.


DESCRIPTION

This act authorizes the governing authority of any municipality or county to adopt an ordinance to allow a homestead exemption of up to $25,000 for senior citizens whose household income does not exceed $20,000 (adjusted for inflation after January 1, 2001). The taxpayer claiming the exemption is required to submit to the assessor, by March 1 of each year, a statement of household income. The governing authority is required to submit a copy of the ordinance to the local assessor by December 1 of each year. Persons receiving the circuit breaker tax credit are still eligible for the homestead exemption. The act applies to all taxable years beginning after December 31, 1999.

This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.





SOURCES OF INFORMATION

Department of Elementary and Secondary Education

Department of Revenue

State Tax Commission

Office of Administration



Jeanne Jarrett, CPA

Director

March 23, 1999