Legislature(2001 - 2002)

02/22/2001 08:04 AM House CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                                                               
REPRESENTATIVE WHITAKER  answered that  the sponsor  statement is                                                               
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                                                               
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.                                                                        

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