Arizona property tax overview

ARIZONA PROPERTY
TAX OVERVIEW
Presented by

Michael G. Galloway
Partner
Frazer Ryan Goldberg & Arnold, LLP
www.arizonatax.com

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Property
Subject to Tax


Generally, All Arizona Property is
Subject to Taxation Unless an
Exemption is Constitutionally
Allowed or Required.


Constitutional Exemptions
Under Art. 9, §2
•
•
•
•
•
•
•
•

Government Property
Public Charities
Public Debts
Household Goods
Business Personal Property
Inventory and Work in Progress
Widows and Veterans
Other Exemptions

“Statutory” Exemptions
• Government Property. A.R.S. §42-11102.
• Government bonded indebtedness. A.R.S.
§42-11103.
• Education and library property. A.R.S. §4211104.
• Health care property. A.R.S. §42-11105.
• Apartments for the elderly or handicapped
residents. A.R.S. §42-11106.
• Institutions for the relief of the indigent or
afflicted. A.R.S. §42-1107.

• Grounds and buildings owned by
agricultural societies. A.R.S. §4211108.
• Religious property. A.R.S. §4211108.
• Cemeteries. A.R.S. §42-11110.
• Observatories. A.R.S. §42-11112.

• Land and buildings owned by societies to
prevent cruelty to animals and for the shelter,
care and control of animals. A.R.S. §4211113
• Property held for conveyance as parkland.
A.R.S. §42-1114
• Property held to preserve or protect scientific
resources. A.R.S. §42-1115
• Property of arts & science organizations.
A.R.S. §42-11116.

• Property of volunteer fire departments. A.R.S.
§42-11117.
• Social welfare and quasi-governmental service
property. A.R.S. §42-11118.
• Property of volunteer roadway cleanup and
beautification organizations. A.R.S. §4211119.
• Property of veteran’s organizations. A.R.S.
§42-11120.

• Community service organizations. A.R.S.
§42-11116.
• Volunteer fire departments. A.R.S. §4211116.
• Social welfare and quasi-governmental
service organizations. A.R.S. §42-11118.
• Volunteer roadway cleanup and beautification
organizations. A.R.S. §42-11119.
• Veteran’s organizations. A.R.S. §42-11120.
• Community service organizations. A.R.S.
§42-11121. Frazer Ryan Goldberg & Arnold, LLP

• Trading commodities. A.R.S. §42-11122.
• Animal and poultry feed. A.R.S. §42-11123.
• Possessory interests for educational or
charitable activities. A.R.S. §42-11124.
• Inventory, materials and products. A.R.S.
§42-11125.


• Production livestock and animals. A.R.S.
§42-11126.
• Commercial and agricultural personal
property up to $50,000 of each
assessment account. A.R.S. §42-11127.
• Personal property in transit. A.R.S. §4211128.
• Property of fraternal societies. A.R.S.
§42-11129.

Qualifying for Exemptions
• Affidavits
• Establish non-profit status


Intangible Property is Not
Taxed


The Arizona Constitution allows property to
be divided into classes for property tax
purposes and each class may be treated
differently. Ariz. Const. Art. IX, §1.


• However, property within a class must be
treated the same. Id.
– Physical characteristics
– legal characteristics
– use
– industry


Class One
– Producing mines and mining claims, related personal
property and improvements, mills and smelters and
standing timber. It also includes real and personal
property of gas and electric utility companies, of airport
fuel and delivery companies, producing oil, gas and
geothermal resource interests, water, sewer and
wastewater utility companies, pipeline companies,
shopping centers, golf courses, manufacturers,
assemblers or fabricators, telephone or
communications transmission companies and any other
commercial or industrial use, other than property that is
specifically included in another class.
– 25%


Class Two
– Real property and improvements and personal
property used for agricultural purposes, real
property and improvements owned and controlled
by a nonprofit that is exempt under 501(c)(3), (4),
(7), (10) or (14) and all other real property, not
included in Classes One, Three, Four, Six, Seven
or Eight.
– Real property - 16%
– Personal property - 16% that exceeds the $50,000
plus exemption amount

Class Three
– Real and personal residential 10%


Class Four
– Real and personal property
used solely for the lease or
rental of residential property
– 10%


Class Five
– Property of railroad companies, private
car companies and flight property
– The assessment ratio is determined
annually by calculating specific ratios
based on value of other property.


Class Six
– Noncommercial historic property, property located
within a foreign trade zone
– Property in a military reuse zone
– Real and personal property located in an
enterprise zone
– Property comprising a qualified environmental
technology plant
– Property used to remediate the environment
mandated by governmental authority
– 5%

Class Seven
– Real and personal property that is
commercial historic property
– 25% except for modifications to
restore the property which is
assessed at 1% of value for up to
ten years


Class Eight
– Noncommercial historic property that
is leased or rented as a residence
– The assessment ratio is 10%, except
for modifications made to restore the
property, which are assessed at 1% of
value for up to 10 years


Class Nine
– Possessory interests
– The assessment ratio for Class Nine
property is 1%


Classification Issues
• Current Use
• Intended Use
• Agricultural Land
• Residential Rentals
• Historic Property
• Subclasses

Property Valuation
• Valuation Methods
– “Full cash value” is synonymous with “fair market
value” unless an alternative statutory valuation
method is prescribed. §42-11001.
– “[S]tandard appraisal methods and techniques”
are to be used. §42-11054.

• Cost
• Income
• Market

• Appraisal Techniques
– Cost approach
– Sales Comparison or Market Approach
– Income Approach
– Statutorily Prescribed Valuation Methods
• Electric and Gas Distribution Utilities
• Pipelines
• Shopping Centers

• Current or Intended Use of Property
• Discrimination Prohibited
• The Valuation Role of County Assessors
• The Valuation Role of the Arizona
Department of Revenue
• The Supervisory Role of the Arizona
Department of Revenue

Levy and Calculation of Tax
• Definitions
– Full Cash Value
– Limited Property Value
– Secondary Property Taxes
– Primary Property Taxes
– Current Usage
– Valuation Date
– Valuation Year

• Calculation of the Limited Property Value
– Existing Property, A.R.S. §42-13301
• 10% of that prior year’s value, or
• 25% of the difference between the
current full cash value and the prior
year’s limited value

– New or Omitted Property.
• Rule “B”

• Calculation of Tax


Administrative Appeals of
Locally-Valued Real Property
Valuation and Classification


Parties to an Administrative Appeal
• Owner
• Others With An Interest in the Property
• County Assessor
• Department of Revenue


Administratively Appealable Issues
• Valuation and Classification
• Discrimination


Levels of Administrative Appeals
• Petition to County Assessor

– Multiple Appeals
• same economic unit according to
Department of Revenue guidelines or if
they are owned by the same owner, they
have the same use, are appealed on the
same basis and are located in the same
geographic area

– Petitions Based on Income
Approach to Value
• An Income and Expense Statement form
(DOR 82300) must be filed with the
petition
• Must submit a sworn affidavit, under
penalty of perjury, that the information
submitted is true and correct to the best
of his knowledge

– Exhaustion of Remedies

– Petition Strategies
• Income Approach
• Comparable Assessments
• Isolation of Land and Improvement
Valuation
• Mixed Classification
• Current Usage
• Assessor’s Errors


– Hearing
– Representation
– Assessor’s Power to Increase Value
– Assessor’s Decision


• Appeals to State Board of Equalization
– Description
– Who May Appeal
– Time for Appeal
– Decision
– Further Appeal

Other Administrative Appeals
Procedures
• Errors
• New Construction


Property Tax Appeals to
Court


• During Valuation Year
• New Construction, Changes to
Assessment Parcels and Changes in Use
• Contents of the Appeal
– File a Notice of Appeal
– Contains a statement of the reasons why the
valuation or classification is excessive or
erroneous
– The appeal should identify the property

• Parties to the Appeal. A.R.S. §42-16208
• Service on Defendants
• Timely Payment of Taxes
• Hearing
• Findings and Judgment


Errors
Definition
• An “error” means any mistake in assessing or
collecting property taxes resulting in:
– an imposition of an incorrect, erroneous or illegal tax rate
that resulted in assessing or collecting excessive taxes
– an incorrect designation or description of the use of
property or its classification
– applying the incorrect assessment ratio percentages
– misreporting or failing to report property if a statutory duty
exists to report the property


– A valuation that is based on an error that is
exclusively factual in nature or due to a specific
legal restriction that affects the subject property
and that is objectively verifiable without the
exercise of discretion, opinion or judgment,
demonstrated by clear and convincing evidence,
such:
• a mistake in the description of the size, use or ownership
of land, improvements or personal property
• clerical or typographical errors in reporting or entering
data that was used directly to establish valuation


• A failure to timely capture on the tax roll a change in
value caused by new construction, destruction,
demolition or splitting or consolidating interests in
real property existing on the valuation date
• the existence or non-existence of the property on
the valuation date
• any other objectively verifiable error that does not
require the exercise of discretion, opinion or
judgment


• Notice of Error - Tax Authority detects the
error. A.R.S. §42-16252
• Taxpayer Detected Error
– Error in taxpayer’s favor. A.R.S. §42-16253
– Notice of Claim. A.R.S. §42-16254

• Timing


R e a l P r o p e r ty T a x V a lu a tio n A p p e a ls
N o tic e t o T a x p a y e r
 B e fo r e M a r c h 1 o f p r io r y e a r

P e t it io n t o A s s e s s o r
 F ile w it h in 6 0 d a y s o f m a ilin g o f n o t ic e
 D e c is io n b y A u g u s t 1 5
 C o n f e r e n c e r e q u ir e d if r e q u e s t e d b y th e
ta x p a y e r

T a x p a y e r s in S m a ll C o u n t ie s
A p p e a l to C o u n ty B o a rd o f
E q u a liz a t io n
 F ile w it h in 2 5 d a y s o f m a ilin g o f a s s e s s o r
d e c is io n
 D e c is io n b y O c to b e r 1 5

T a x p a y e r s in L a r g e C o u n tie s
E q u a liz a tio n
o r c o u n ty b o a r d d e c is io n
 D e c is io n b y O c t o b e r 1 5 f o r p r o p e r ty
v a lu e d b y t h e C o u n ty ; N o v e m b e r 1 5 f o r
p r o p e r t y v a lu e d b y th e D e p a r tm e n t

A p p e a l to C o u rt
 F r o m a d m in is t r a t iv e d e c is io n w it h in 6 0 d a y s o f m a ilin g
d a t e o f d e c is io n , o r
 B y D e c e m b e r 1 5 w h e r e n o a d m in is tr a t iv e a p p e a l is
f ile d

F u r t h e r A p p e lla t e R e v ie w

Personal Property
• Personal property taxes are liens against
the property.
• The taxpayer has an obligation to report
its property to the assessing authority


• Failure to report
• Construction work in progress
• Clean rooms


P e rs o n a l P ro p e rty T a x
V a lu a tio n A p p e a ls
2000
N O T IC E T O T A X P A Y E R
 B e fo re th e 1 s t M o n d a y o f th e
m o n th

P E T IT IO N T O A S S E S S O R
 W ith in 3 0 d a y s a f t e r n o tic e is
d e liv e r e d

R U L IN G B Y A S S E S S O R

2001
N O T IC E T O T A X P A Y E R
 O n o r b e fo re J u n e 3 0

P E T IT IO N T O A S S E S S O R
 W ith in 2 0 d a y s a f t e r n o tic e is
d e liv e r e d ( lik e ly b y J u ly 2 0 )

R U L IN G B Y A S S E S S O R

 W ith in 3 0 d a y s o f f ilin g

 W ith in 2 0 d a y s o f f ilin g ( lik e ly b y
A ugust 9)

APPEAL TO STATE BO ARD O F
E Q U A L IZ A T IO N

APPEAL TO CO UN TY O R STATE
B O A R D O F E Q U A L IZ A T IO N

 W it h in 3 0 d a y s a f t e r t h e d a t e o f t h e
a s s e s s o r 's n o t ic e o f r e f u s a l

 W it h in 2 0 d a y s o f t h e a s s e s s o r 's
n o t ic e o f r e f u s a l ( lik e ly b y A u g u s t 3 0 )

APPEAL TO CO U RT

APPEAL TO CO UR T

 W ith in 6 0 d a y s o f m a ilin g o f
d e c is io n

 W it h in 6 0 d a y s o f m a ilin g o f
d e c is io n

R e a l P r o p e r ty T a x V a lu a tio n A p p e a ls
N o tic e t o T a x p a y e r
 B e fo r e M a r c h 1 o f p r io r y e a r

P e t it io n t o A s s e s s o r
 F ile w it h in 6 0 d a y s o f m a ilin g o f n o t ic e
 D e c is io n b y A u g u s t 1 5
 C o n f e r e n c e r e q u ir e d if r e q u e s t e d b y th e
ta x p a y e r

T a x p a y e r s in S m a ll C o u n t ie s
E q u a liz a t io n
 F ile w ith in 2 5 d a y s o f m a ilin g o f a s s e s s o r
d e c is io n
 D e c is io n b y O c t o b e r 1 5

T a x p a y e r s in L a r g e C o u n tie s
E q u a liz a tio n
o r c o u n t y b o a r d d e c is io n
 D e c is io n b y O c t o b e r 1 5 f o r p r o p e r t y
v a lu e d b y t h e C o u n ty ; N o v e m b e r 1 5 f o r
p r o p e r t y v a lu e d b y th e D e p a r tm e n t

A p p e a l to C o u rt
 F r o m a d m in is t r a t iv e d e c is io n w it h in 6 0 d a y s o f m a ilin g
d a t e o f d e c is io n , o r
 B y D e c e m b e r 1 5 w h e r e n o a d m in is t r a tiv e a p p e a l is
f ile d

F u r t h e r A p p e lla t e R e v ie w

ARIZONA PROPERTY
TAX OVERVIEW

Michael G. Galloway

Arizona property tax overview

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Arizona property tax overview