2003 SESSION

03-1180

10/01

SENATE BILL 208-FN

COMMITTEE: Ways and Means

ANALYSIS

This bill provides for a property tax cap on total property taxes and an abatement program for taxes assessed which exceed the tax cap. The bill repeals the low and moderate income homeowners property tax relief program.

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Explanation: Matter added to current law appears in bold italics.

Matter removed from current law appears [in brackets and struckthrough.]

Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

03-1180

10/01

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Three

Be it Enacted by the Senate and House of Representatives in General Court convened:

1 Findings. The general court finds that the general good, benefit, and welfare of the state is advanced by promoting affordable home ownership and that it is reasonable to implement a program of abating or refunding part or all of an amount equal to state property taxes so that households of modest or limited means are relieved of unreasonable and excessive property tax burdens on their homesteads.

2 Reference Changed; Administrative Services. Amend RSA 21-I:18, I(l) to read as follows:

(l) Purchases of services from private contractors by the department of revenue administration with respect to the administration of [low and moderate income homeowners property tax relief claims] the property tax cap and abatement program under RSA 76-A.

3 New Paragraph; Commissioner of Revenue Administration; Duty Added. Amend RSA 21-J:3 by inserting after paragraph XXVI the following new paragraph:

XXVII. Administer the property tax cap and abatement program and reporting requirements established in RSA 76-A.

4 New Subparagraph; Revenue Administration; Assessing Standards Board. Amend RSA 21-J:14-b, I by inserting after subparagraph (g) the following new subparagraph:

(h) The voluntary inclusion of the calculation of homestead values in the case of multi-unit dwellings or non-residential uses for purposes of the property tax cap and abatement program in RSA 76-A.

5 New Chapter; Property Tax Abatement Program. Amend RSA by inserting after chapter 76 the following new chapter:

CHAPTER 76-A

PROPERTY TAX CAP AND ABATEMENT PROGRAM

76-A:1 Purpose; Property Tax Abatement Program. The purpose of the property tax abatement program is to aid in preserving New Hampshire's tradition of home ownership by abating excessive and unreasonable property tax burdens.

76-A:2 Definitions. In this chapter:

I. "Claimant" means a member of a household with an ownership interest in a homestead who applies for an abatement of property taxes on the basis that their property taxes accrued in a given calendar year attributed to the value of their homestead exceeds the tax cap determined in this chapter.

II. "Commissioner" means the commissioner of the department of revenue administration.

III. "Department" means the department of revenue administration.

IV. "Homestead" means the dwelling owned by a claimant or in the case of a multi-unit dwelling, the portion of the dwelling, which is used as the claimant's principal place of residence and the claimant's domicile for purposes of RSA 654:1. "Homestead" shall include manufactured housing taxed pursuant to RSA 72:7-a when used as a principal place of residence and owned by a claimant. "Homestead" shall not include land and buildings taxed under RSA 79-A, 79-B, or 79-C or land and buildings or the portion of land and buildings rented or used for commercial or industrial purposes. In this paragraph the term "owned by a claimant" includes a vendee in possession under a land contract, one or more joint tenants or tenants in common, and a trustee of a grantor trust pursuant to sections 671-679 of the United States Internal Revenue Code.

V. "Household" includes all persons living with the claimant in the same dwelling unit that has qualified as a homestead. A person not related by blood or marriage to the claimant and who is either a bona fide renter of a room within a dwelling unit/homestead or a bona fide employee providing personal care to a member of the household and who is not related to the person for whom the care is provided shall not be included in the household, provided that if a renter, his or her rent is accounted for in a statement of household income (through a Form 1040 Schedule E or equivalent form approved by commissioner of revenue administration). A household member who files separately from the claimant and who only resides in the claimant's home for part of the year may pro rate his or her annual income based on the number of months (rounded up to a whole number of months) that the member resided in the household.

VI. "Household income" means the sum of the personal incomes of all household members. Personal income is the federal adjusted gross income (as determined by Internal Revenue Code) increased by tax-exempt interest (Form 1040, line 8b), the amount of net capital losses (Form 1040, line 13, Schedule D loss), the amount of other losses (from sales of business property, Form 1040, line 4, Form 4797), the amount of business losses (Form 1040, line 12, Schedule C), the amount of losses from rental real estate, royalties, partnerships, S corporations, estates, trusts, REMICS, etc. (Form 1040, line 17, Schedule E losses), the amount of nontaxable pensions and annuities (Form 1040, line 16a-16b), and the amount of nontaxable social security benefits (Form 1040 lines 20a-20b). Federal Internal Revenue Service form and line numbers are for reference in defining the meaning of terms. If federal form and line numbers change subsequent to the effective date of this paragraph, the commissioner of revenue administration may establish comparable revised defining references by rules, adopted pursuant to RSA 541-A.

76-A:3 Property Tax Cap Established. A cap on the amount of property taxes paid by a claimant on the claimant's homestead shall be calculated as follows:

I. Determine the household size. Persons who qualify as dependents on a claimant's or other household member's federal tax returns can be counted as a household member. Non-dependent members of a household and their dependents shall be pro rated for purposes of their inclusion in the household based on the number of months (rounded up to a whole number of months) that the person resided in the household.

II. Determine the applicable tax cap. For each household size there is a low income threshold and a high income threshold. For a single person household the low income threshold is $20,000 and the high income threshold is $40,000. For a 2 person household, the low income threshold is $30,000 and the high income threshold is $50,000. For each additional household member beyond 2, each threshold would go up by $5,000. The tax cap for household sizes which include other than whole numbers because of partial year residency as provided in paragraph I shall be proportional as determined according to rules adopted by the commissioner under RSA 541-A.

(a) The tax cap for households at or below the low income threshold shall be 6 percent of their household income. The tax cap for households with income greater than the low income threshold and up to the high income threshold would be their income times a percent equal to 6 percent plus their income amount in excess of the low income threshold times .0002.

(b) For household sizes with household income greater than the high income threshold, the tax cap shall be the sum of 10 percent of the applicable high income threshold, plus 25 percent of their income amount in excess of the high income threshold.

76-A:4 Abatement of Taxes on Homestead; Limitation. The amount of a claimant's abatement shall by calculated determining the excess of the property tax liability attributed to the homestead value for the claimant's household based on the household income. To determine the abatement amount:

I. Determine the property value of the homestead. To determine the property value of the homestead which is part of a single tax parcel upon which is located other dwelling units not owned and occupied by the claimant or where there is significant non-residential use of the property:

(a) If the tax parcel includes other dwellings or dwelling units, the value of the claimed homestead relative to the whole parcel shall be determined by the local assessing official, or the department if the local assessing official declines to voluntarily do so, as follows:

(1) Divide the value of the tax parcel by the number of dwelling units; or

(2) If the square footage of each dwelling unit is known, multiply the value of the tax parcel by a fraction consisting of the square footage of the claimed homestead divided by the total square footage of all dwelling units in the parcel;

(b) If the tax parcel includes a significant amount of property used for business or other nonresidential use, meaning a property value in excess of $25,000 of equalized value or with an enclosed floor area of 1,000 square feet or more that is used predominantly for business for other nonresidential use, then the value of the claimed homestead relative to the whole parcel shall be determined by the local assessing official, or the department if the local assessing official declines to voluntarily do so, as follows:

(1) Multiplying the value of the tax parcel by a fraction consisting of the square footage of claimed homestead less the square footage of areas used predominately for business or nonresidential uses, and divided by the total square footage of all buildings on the parcel; or

(2) Another method of valuation that is a generally accepted practice for dividing the value of a single parcel between residential and nonresidential uses; or

(c) In lieu of the methods of determining the amount of homestead value in subparagraph (a) or (b), a claimant may present competent evidence of a greater proportion of homestead value to the department in making their claim application. In such instance the claimant bears the burden of proving the claimed value by the preponderance of the evidence.

(d) The procedure, and exclusion of value resulting from the procedure, in subparagraph (a) shall be waived to the extent it pertains to a single additional dwelling unit on the homestead property that is occupied by a direct lineal ascendant or descendant, sibling, aunt, uncle, niece or nephew, by blood, marriage, or law, of the qualifying claimant who does not pay rent, other than for utilities, as annually certified by the claimant.

(e) For the purposes of this paragraph farm activities owned and operated by the claimant or his or her family members which are not owned by a business entity or held in the name of a non-natural person shall be not be considered a business or nonresidential use and all property used for such farm activities on the same parcel as claimant's dwelling and not assessed under RSA 79-A, 79-B, or 79-C, may be included in claimant's homestead value.

II. Determine the property taxes accrued on the homestead.

III. To the extent that the property taxes accrued on the claimant's homestead exceeds the tax cap as determined in RSA 76-A:3 for the claimant for that year, the claimant is eligible for an abatement of all or a portion of the property taxes that exceeds the claimant's tax cap, as limited by the provisions of paragraph IV.

IV. An abatement of property taxes to a claimant granted pursuant to this chapter shall not exceed the claimant's liability for statewide education property taxes as listed on the claimant's tax bill pursuant to RSA 76:11-a.

76-A:5 Applications; Rulemaking.

I. The commissioner of revenue administration shall provide municipalities with notices of the availability of and instructions for claiming property tax abatements under this chapter, to be mailed with property tax bills beginning in November 2003 and with all property tax bills for each billing thereafter.

II. The commissioner of revenue administration shall adopt rules, pursuant to RSA 541-A, relative to the forms for applications for property tax abatements, statements of household income, the determination of household size, and for the administration of the application and abatement process in this chapter.

III. Applications for abatement may be filed any time during a given calendar year based on the prior year's personal income and property taxes, including local, county, and state property taxes, assessed on the homestead. Applications should be filed before July 1 of each year. Those applications filed between July 1 and December 31 will be accepted as late and may be delayed in payment or denied if funds are not available.

IV. An application for property tax abatement and a statement of household income shall be submitted and signed, as true to the best knowledge and belief of the applicants under penalties of perjury, by all adult members of the household who contribute income to the household. Copies of all federal and state personal income tax returns shall be filed with the application. An applicant who is not required to file federal or state personal income tax returns due to low income, shall complete and sign these forms if requested to do so by the commissioner of revenue administration.

V. The department may audit any claim and adjust homestead values and property taxes accrued on a homestead, household incomes, and household sizes.

76-A:6 Payments of Approved Abatements.

I. By December 1 of each year, the commissioner of revenue administration shall pay abatements due on approved applications that were received prior to July 1 of that year. Abatements due on approved applications that were received on or after July 1 may be paid at the convenience of the department of revenue administration as funds are available during the remainder of that fiscal year or rejected if funds are not available.

II. The department of revenue administration shall make abatement payments either jointly to the claimant and the tax assessor of the claimant's homestead municipality, or if so directed on the application, directly to the municipality of the claimant's homestead on the claimant's account, so the abatement may be used as a payment of property taxes due.

III. Abatements not deposited within one year of issuance may be canceled and forfeited back to the education trust fund.

IV. If the department determines that an abatement was overpaid due to subsequent audit, amended return, or error correction, the claimant shall return the overpayment and the amount may be withheld from future abatements or the amount of overpayment due plus interest shall accrue as a lien against the claimant's homestead, to be paid upon sale of the real estate.

V. The funding for abatements under this chapter shall be from the education trust fund, established in RSA 198:39. The governor is authorized to draw a warrant for said sums in the education trust fund for the payment of abatements.

76-A:7 Reporting on Funding. The commissioner shall by October 1 of each year estimate the cost of the abatement program under this chapter and make a report to the governor, the state treasurer, and the joint legislative fiscal committee. The commissioner's report shall also include:

I. A calculation of the proportion of the statewide education property tax rate under RSA 76:3 required to substantially fund the cost of abatements from statewide education property tax revenues without including any other general fund or education trust fund sources.

II. The total amount of property taxes paid by all taxpayers in excess of tax caps provided in this chapter, and the total amounts of abatements granted.

6 Education Trust Fund; Property Tax Abatements. Amend the introductory paragraph of RSA 198:39, I to read as follows:

I. The state treasurer shall establish an education trust fund in the treasury. Moneys in such fund shall not be used for any purpose other than to distribute adequate education grants to municipalities' school districts pursuant to RSA 198:42, and to provide [education property tax hardship relief under RSA 198:55] property tax abatements under RSA 76-A:6. The state treasurer shall deposit into this fund immediately upon receipt:

7 Repeal. RSA 198:56 - 61, relative to low and moderate income homeowners property tax relief, are repealed.

8 Effective Date. This act shall take effect July 1, 2003.

LBAO

03-1180

Revised 3/19/03

SB 208 FISCAL NOTE

FISCAL IMPACT:

METHODOLOGY: