By Myrna Trauntvein
Atkinson gave a presentation on how property taxes are collected and calculated and the council voted to adopt the 2020 rate.
The Nephi City certified tax rate for calendar year 2020 had now been prepared by the Juab County Assessor and the Utah State Tax Commission.
The 2020 rate is .000872 down from 2019 rate of .0011.
Nathan Memmott, council member moved to adopt the 2020 certified tax rate of .000872 and Justin Seely, council member, seconded the motion and the motion passed on a unanimous vote.
Most residents have only a vague understanding of how property taxes work.
“We are required to adopt a certified tax rate by the state,” said Atkinson. “The certified tax rate provides a taxing entity with the same amount of property tax revenue it received in the previous tax year plus any revenue generated by additional growth in its taxable value.”
The reason for the decrease, he said, was because the county reassessed property.
Generally, as valuations of existing property increase, property tax rates decrease. This automatic reduction in property tax rates prevents local governments from getting a windfall simply because valuations have increased.
For example, if valuations of existing property increase by 20 percent, the property tax rate decreases by 16.7 percent to maintain revenue neutrality as demonstrated by the following equation: (100 percent + 20 percent) * (100 percent – 16.7 percent) = 100 percent of original tax = no change.
The reduced property tax rate is known as the certified tax rate (CTR). This rate is then applied to all property, including “new growth.” While local governments receive increased revenues due to new growth, Truth-in-Taxation (TNT) includes no automatic adjustment for inflation.
“The total tax collection stays the same year to year, minus new growth,” said Atkinson.
“What happens if you have a more modest home in a more valuable property neighborhood?” asked Glade Nielson, mayor.
Atkinson said that the assessor doesn’t always visit each property but may do an area in bulk. However, any taxpayer who thinks he/she has been overvalued can go to the county assessor and/or the county board of equalization which is held yearly.
“Property tax is based on the assessed value of the property, any exemptions for which the property qualifies and a property tax rate,” said Atkinson.
Factors such as property size, construction type, age and location can affect the valuation. What the property is used for (residential, agricultural, apartment, office, commercial, vacant land, and so on) will also affect what is paid.
Tax authorities can increase or decrease the bill by changing the assessed value of the property and/or the tax rate.
“Generally, when property valuations increase, property tax rates decrease to maintain revenue neutrality (excluding new growth),” he said.
This revenue-neutral rate is called the certified tax rate (CTR). This rate is then applied to all properties, including new residential and commercial developments.
Increased valuations due to new developments do not reduce the property tax rate.
If local governments want to exceed the CTR they must go through TNT notification and a hearing process. TNT is Utah’s most taxpayer-friendly law.
The measure was enacted in 1985 at the request of the Utah Taxpayers Association and Utah Tax Commissioner Gary Cornia.
TNT is a revenue-driven system, not a rate-driven system.
“Five local entities receive funding through property taxes,” said Atkinson.
Since property taxes are based on current real estate values in the area, differences will occur from year to year.
Tax authorities can increase the rate by increasing the assessed value of property and/or by increasing the tax rate. Likewise, they can lower by decreasing the assessed value of property and/or by decreasing the tax rate.
“If you own two homes,” said Kent Jones, council member, “you will be charged at 100 percent on the second home, not the percentage.”
A primary resident or a homeowner who rents property to a primary resident will be taxed at 55 percent of the assessed value of the home.
“If you rent the property,” said Lisa Brough, city recorder/finance director, “the requirements are different.”
“If you own vacant land or an investment or second home, your property will be taxed at 100 percent of the assessed value,” said Jones.
Of course, that was the case if you lived in Utah. Different states had different property tax laws.