Legislature(2001 - 2002)
02/22/2001 08:04 AM CRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 118-SR. CIT./VETERAN PROPERTY TAX EXEMPTION CO-CHAIR MORGAN announced that the next order of business would be HOUSE BILL NO. 118, "An Act relating to a mandatory exemption from municipal taxes on certain residences; and providing for an effective date." Number 1370 REPRESENTATIVE JIM WHITAKER, Alaska State Legislature, testified as sponsor of HB 188. He explained that current statute provides a property tax exemption for Alaska's senior citizens, disabled veterans, widows, and widowers who are 60 years of age. He further explained, "A one-time filing is allowed for 'non- senior residential property tax exemption,' that is: disabled veterans, widows, and widowers are allowed to file for an exemption one time whereas senior citizens are required to file yearly." This can be a significant imposition in some cases. For example, an elderly woman in Fairbanks had not filed her property tax exemption for several years. This woman was evicted and her property was taken by the borough. This woman was unable to understand the process. This legislation would simply allow local municipalities to establish their own procedure for senior property tax exemption filing. Number 1501 REPRESENTATIVE MURKOWSKI related her understanding that only senior citizens have to apply on an annual basis. However, the sponsor statement says, "current Alaska Statute requires the recipient of the senior citizen, disabled veteran and widow and widower's exemption to file an application each year in order to qualify." REPRESENTATIVE WHITAKER answered that the sponsor statement is correct. REPRESENTATIVE MURKOWSKI then related her understanding that all of the aforementioned groups have to apply each year. REPRESENTATIVE WHITAKER agreed. REPRESENTATIVE MURKOWSKI asked if the municipalities currently have the option to only require the disabled veterans or senior citizens to apply once. REPRESENTATIVE WHITAKER replied no. Currently, this [annual filing requirement] is mandated by state law and thus is not a local option. REPRESENTATIVE MURKOWSKI surmised then that HB 118 would allow disabled veterans, senior citizens, and widows and widowers to only file once. Number 1650 LORI BACKES, Staff to Representative Whitaker, Alaska State Legislature, explained that HB 118 doesn't change or mandate that municipalities set their application process in any particular timeframe. This legislation provides municipalities with the option to establish the filing requirements for their local area. In response to Representative Murkowski, Ms. Backes agreed that HB 118 applies to the statute that requires this property tax exemption and thus covers all three categories [disabled veterans, senior citizens, and widows and widowers]. REPRESENTATIVE MURKOWSKI inquired as to the municipal assessors offices' opinion of HB 118. MS. BACKES noted that she has spoken with the state assessors as well as [Fairbanks's] local borough assessors, who don't have a problem with this. Originally, there was discussion regarding requiring a one-time filing. In regard to the notion of having the filing requirements be a local option, [the assessors] have not yet responded to that. Number 1805 STEVE VAN SANT, State Assessor, Division of Community and Business Development, Department of Community & Economic Development, testified via teleconference. The original bill included a one-time filing. He noted that Ms. Backes took some of the comments from the assessors and inserted the established procedures and deadlines for the application, which he believes helped the assessors with some of their concerns. Mr. Van Sant informed the committee that the "2000 Alaska Taxable," which includes an overview of the senior citizen, disabled veteran property tax exemption program for the tax year 2000, is available. For tax year 2000, this $28.2 million program had about 16,600 applicants, of which about 15,000 were senior citizens and about 1,700 were disabled veterans. Currently, senior citizens and disabled veterans are required to file annually. He pointed out that the annual filing requirement for disabled veterans will probably remain such, even under HB 118, because the percentage of disability does change. Number 1918 MR. VAN SANT informed the committee that one area of concern for the assessors is the change located on page 2, lines 5-7, which refers to timely filing. The requirement of filing within the assessment year has been removed and it seems that these individuals can file in any year for any prior year. In such a case it would be difficult for assessors to make observations regarding whether the property met the exemption criteria in prior years. Mr. Van Sant informed the committee that the preferred language would be as follows: "If a failure to timely file the initial application, no later than March 31 of the assessment year." Such language would be more beneficial to [the assessors]. MR. VAN SANT also informed the committee of the situation in which applicants to this program move or sell their property or die and the assessors office is not made aware of these changes. Therefore, the property would remain exempt until the assessor is made aware of the aforementioned changes. He expressed the need to include language specifying that when a property becomes ineligible for the exemption, a lien will attach for the taxes of the prior years. Thus, the taxes wouldn't be exempted during the time the property was ineligible for the exemption. REPRESENTATIVE KERTTULA inquired as to what the lien would be for. MR. VAN SANT explained that there are often trusts; however, they often don't let the assessors office know that the individual is no longer eligible for the property tax exemption. There have been cases that have [been in exempt status, although that was not correct due to some change] for three to five years. This would allow the taxes to accrue from the time of ineligibility to the current date and thus the taxes would be due for all the prior years. REPRESENTATIVE KERTTULA asked if that is the current law. MR. VAN SANT replied yes. REPRESENTATIVE KERTTULA asked if Mr. Van Sant is concern that the assessors would not receive the notice and thus need more statutory authority to get a lien. MR. VAN SANT explained, "It's more of a notice to applicants that should the property become ineligible that the prior years' taxes will be owed on the property and will become a lien." In further response to Representative Kerttula, Mr. Van Sant didn't have any suggestions to change HB 118, but he did offer to work with the sponsor in order to develop some language. REPRESENTATIVE KERTTULA asked if this was something that [assessors] could just do without having to change the bill. MR. VAN SANT said he was not sure that it would be necessary to change HB 118 if the record reflects that intent. He remarked, "We could put it in the initial applications." Number 2138 REPRESENTATIVE KERTTULA clarified: I think you already have the power. I mean, certainly, when you're ineligible to receive the exemption you can't get it. If you've died, its going to go to your estate, or trust, or whatever. So, at that point, the only tricky part for you may be that you wouldn't have that filing to trigger your knowledge every year, but I think you certainly have the statutory ability to file a lien if you haven't gotten your proper taxes. REPRESENTATIVE SCALZI referred to the following language: "Each municipality shall, by ordinance, establish procedures and deadlines", which he identified as the local option. Therefore, if the local assessor has problems with filing deadlines, or timelines, or payment problems "they" should be able to [correct] that themselves. He said he didn't see that being of concern for the state. MR. VAN SANT remarked that the assessors sometimes have very little political clout with these exemptions. Although he wanted to agree with Representative Scalzi's assessment, he indicated that political pressure can push [the assessors] "out in the outfield." Number 2242 CO-CHAIR MEYER turned to the intent of the program, which he understood to be to encourage and reward Alaska's elderly to continue to live in Alaska. He expressed concern that if these people were allowed to file [for this property tax exemption] once every five years, what would prevent abuse. Abuse being a situation in which an individual keeps his/her property and rents out that property that has the property tax exemption while he/she actually lives elsewhere. He commented that perhaps this is a concern for the local government. MR. VAN SANT informed the committee that this program began in 1973 with 911 applicants and less than $200,000 was exempted. Originally, the program had a $10,000 annual income requirement for eligibility. In 1985 the language referring to the disabled veterans and the widows and widowers was added to the program. Currently, the assessor's office uses the annual filing as a preliminary indication as to whether individuals are living on a property. Although this doesn't catch everyone, a return address that is outside the state can alert the assessor's office to investigate. Often, a neighbor will call and complain that an individual isn't living on the property continually, which would also prompt investigation. Mr. Van Sant estimated that those abusing the program are small in number, perhaps less than 2-3 percent. He pointed out that there will be no methodology for the assessor to uncover [abuse of the program] unless someone informs the assessor's office. He noted that there could be authority placed with the assessor such that when the assessor believes someone is taking advantage of the program, the assessor could begin an investigation. CO-CHAIR MEYER inquired as to the requirement for eligibility for this program. MR. VAN SANT explained that the program requires an individual to be 65 years or older, or a disabled veteran with a 50 percent [or greater] disability as of January 1 of the assessment year for which the exemption is sought. Furthermore, the property has to be the primary place of abode. Mr. Van Sant informed the committee that the Alaska Association of Assessing Officers has drafted a voluntary standard that basically mirrors the language for the senior longevity bonus, which requires 180 residency in the house in order to maintain the exemption. He pointed out that if any parts, there being several, of the standard are not met, the assessor would launch an investigation and probably deny the exemption. He expressed the hope that the voluntary standard would be brought into regulation within a few years. Number 2505 REPRESENTATIVE MURKOWSKI surmised that although there is a voluntary standard, HB 118 would make it a local option for the municipalities to establish these [requirements]. Therefore, Fairbanks could say there is no requirement that the individual be in the home for any length of time while Anchorage could require residency in the home for 185 days. She asked if that is correct. MR. VAN SANT agreed with Representative Murkowski's conclusion. He pointed out that if HB 118 passed, the [Assessor's Office] would suggest all municipalities adopt the voluntary standards. REPRESENTATIVE KERTTULA pointed out that HB 118 doesn't touch the primary residence and abode section of the [existing] statute. This legislation just changes the application and the form. She clarified that HB 118 would not allow, by municipal ordinance, an individual to live outside of the state and apply for the property tax exemption. Representative Kerttula asked if she was correct. MR. VAN SANT indicated that Representative Kerttula was correct; this legislation is aimed at the application. REPRESENTATIVE MURKOWSKI turned to the concern raised regarding retroactivity and Mr. Van Sant's suggestion to insert language regarding when an individual files the initial application. She asked if Mr. Van Sant is concerned that an individual could simply say that he/she didn't know about the exemption, although he/she had lived on the property for five years and thus receive a rebate on the taxes for the past five years. MR. VAN SANT said that is the exact concern. Currently, the statute says that an individual, good reason, can make an application within the year, even if it is late, and the governing body can direct the assessor to accept the application as a timely file for that year. The legislation eliminates the language "that year" and thus the concern is borne. He pointed out that there are individuals who, on an annual basis, request an exemption for prior years and under this [legislation] that might be appropriate. REPRESENTATIVE KERTTULA remarked, "I'm not certain I see anything wrong with that. You've got somebody that completely qualifies and for one reason or another -- is too elderly or infirm or just doesn't know about it. It still looks like this is within your statutory authority to not allow it, but at least it gives you the option of being able to take into account those cases of true hardship." She asked if that would be accurate; that [HB 118] would provide the [assessor with the] ability to go back and review it whereas that would not be the case now. MR. VAN SANT replied yes. Number 2768 REPRESENTATIVE WHITAKER pointed out that the committee has to decide whether a state law should preclude a local governing body from making the types of decisions being discussed. REPRESENTATIVE SCALZI announced that he is in favor of HB 118. He echoed earlier comments regarding the difficult situation that the [current statutes] can create when an individual doesn't file in a timely fashion. He emphasized the state's responsibility to protect the mandate for senior citizens and veterans; this [legislation] is an expansion of the program at the local level. Furthermore, the revenues are local and don't impact the state. In conclusion, Representative Scalzi remarked, "If we always keep in mind local options good, mandates are bad -- we can go on that premise there." CO-CHAIR MEYER commented that he and Representative Scalzi would have to realize that they are wearing their "state hat." However, the senior citizen property tax that was an unfunded state mandate was of concern in Anchorage because it amounts to about $50 million per year. Co-Chair Meyer noted his support of HB 118. Number 2953 REPRESENTATIVE MURKOWSKI moved to report HB 118 out of committee with individual recommendations and the accompanying zero fiscal note. There being no objection, HB 118 was reported from the House Community and Regional Affairs Standing Committee.