On March 14, 2008, the Indiana Senate passed House Bill 1001 by a vote of 41 to 6. The bill was soon thereafter signed by Governor Mitch Daniels. H.B. 1001 has been more commonly referred to as the “property tax reform” bill. Although it promises to bring significant changes to property tax laws in Indiana, the ultimate effects of those changes are uncertain. Among other things, the law accomplishes:
- In 2009, imposing caps on tax bills of 1.5%, 2.5%, and 3% for owner-occupied residential, residential rental, and commercial and industrial properties, respectively
- Beginning in 2010, Imposing caps on tax bills of 1%, 2%, and 3% for owner-occupied residential, residential rental, and commercial and industrial properties, respectively
- Increasing the state’s sales tax percentage from 6% to 7%
- Eliminating most township assessors, and the requirement that others maintain their positions only by a vote in a referendum
- Requiring that major building projects, including certain projects whose costs exceed $12 million, be approved in public referenda
- Shifting certain tax liabilities, such as the remaining portion of school operating costs, from local taxing units to the state
- Increasing the renter’s income tax deduction from $2,500 to $3,000
- Increasing the earned income tax credit from 6% to 9%
- Limiting property tax bills for property owners over age 65 to maximum annual increases of 2% so long as the taxpayer has individual income of $30,000 or less ($40,000 or less for joint taxpayers) and whose home’s assessed value does not exceed $160,000
Most legislators view the new law as a form of significant property tax relief , but one that will come at the cost of decreased funding for local government units, including schools - and increased sales tax. And, not all lawmakers agree on whether the law’s effects will be lasting enough to avoid future legislation on the subject.
Taxpayers in Lake County should be aware that the percentage caps applying to their bills will be subject to an exception pertaining only to Lake and St. Joseph Counties. Existing debt service, or the interest accrued on bonds issued prior to this new legislation, will be generally exempt from the caps on liability. Therefore, the effective caps realized by Lake County taxpayers will likely be higher than those applicable to most other counties. The components of the ultimate tax calculation will surely be more complicated than many taxpayers will expect, and at least some taxpayers may be disappointed to see that the amounts of their tax bills exceed the caps advertised in much of the media coverage. Still, taxpayers in many taxing units, including many of those in Lake County, will enjoy smaller tax bills in the near future.
Even with the new caps, taxpayers should remain aware of the fact that their actual tax liabilities are affected by their properties’ assessed values, just as it has been prior to this new legislation. Therefore, any taxpayer who suspects his or her property’s assessed value might exceed its market value is well advised to consider their rights as they relate to prosecuting a tax appeal. Jon Schmaltz represents the Firm’s clients in property tax appeals.