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Amendment 79 — why you should care about it

By: 7 April 2011 5 Comments

Although they’ve been around for a  few years, Amendment 79 to the Arkansas Constitution and a companion piece of legislation — Act 2284 of 2005 — still leaving some home buyers scratching their heads.

Here’s a word of advice — if you’re going to purchase a home in this state, you need to be aware of Amendment 79 and Act 2284 as those can work to increase how much property taxes you pay after purchasing a house.

In a nutshell, Amend79 states that the taxable assessed value of a property can’t increase more than 5 percent a year on primary residences and 10 percent for other properties. The amendment also freezes the taxable assessed value of primary residences for people over the age of 65 and disabled property owners.

Amendment 79 was modified and clarified by Act 2284, which removes the caps put in place by the amendment after the transfer of a property.

Here’s how that all works. Let’s say Sue is 65-years-old and the value of her home is appraised at $100,000. The taxable value of that home is $20,000 — 20 percent of the actual appraised value. Sue lives in an area where the property tax rate is 68 mills per dollar, so she pays $1,360 in property taxes every year (the $20,000 taxable value times 0.068 cents). As long as Sue’s home is her primary residence, the taxable value will remain $20,000.

Bear in mind that the taxable value will remain constant, but Sue could pay more if the millage rate in her area increases. If the rate goes to, say, 72 mills, then sue is looking at a property tax bill of $1,440 per year — the taxable value hasn’t increased, but the millage rate has.

At any rate, Sue decides to sell her home to Bill. She lists it for $110,000, which is the fair market value of the home. Keep in mind that the value of the home is not necessarily how much someone pays for it — if Bill buys it for $100,000 but the county says the home is worth $110,000 when the next appraisal cycle rolls around, he’ll still look at a taxable value equal to 20 percent of $110,000 ($22,000).

And that’s exactly what happens to Bill. He may pay his property taxes based on the appraised value of $100,000 that Sue enjoyed, but Act 2284 mandates that the caps put in place for the former owner will be removed at the next appraisal.

So, what’s Bill’s tax liability? Assuming the rate is still 68 mills, he’ll pay $1,496 per year — $136 more than Sue paid and, perhaps, what Bill thought his annual property tax bill would be in the absence of a millage increase. That might not seem like a lot, but what if the caps were removed and the value of the home went up to $120,000 or $130,000 in the next appraisal cycle? Bill would be looking at a tax rate that is considerably higher than what he may have expected — every $1,000 increase in taxable value would add another $68 to the annual property tax and that can add up quickly.

There is, of course, some relief for Bill — a $350 homestead exemption which is available to all Arkansas homeowners with it comes to their primary residences. That credit must be claimed at the local county assessor’s office, but they’ve proven adept over the years at publicizing its availability.

Still, never assume the property taxes paid yearly by the current homeowner on that house you’re looking to purchase is what you’ll pay.

About: Ethan C. Nobles:
Benton resident. Rogue journalist. Recovering attorney. Email = Ethan@FirstArkansasNews.net.

5 Comments »

  • bj said:

    how does amendment affect oil and gass in arkansas

  • Barry Bossier said:

    Ethan

    Your information is almost correct. First of all, how old is Bill? If Bill is over 65 and he is going to use this home as his primary place of residence the frozen taxes and homestead cresdit will continue, NO CHANGES. Ark Constitution Amd 79 Sec 1(d)(1)(A) and (B), ACA 26-26-112, AG Opinion No. 2007-244. Bill just needs to fill out the forms, which we send out. Second, my office sends out homestead forms to every new property transfer, asking is this your primary residence, are you over 65, and can you validated the sale price.

    Also, Amd. 2284 is a good equilizer to help keep taxes fair to everyone. Let use your example of Sue and her $100,000 house. If after being in her home for some years she decides to double the size of her house, for whatever reason, she now has a house that might be worth even more than double the initial value. If the taxes stayed frozen at the initial value, well that just is not fair. The value increase was within her control as opposed to inflation. Amd 2284 also says the house will go to full value and then be frozen again at the new value. That is fair.

    Thank You for allowing me to expand on your information which for the most part is accurate. I just though your readers would appreciate the additional senerio.

    Best Regards
    Barry R. Bossier
    Assessor
    Baxter County Arkansas.

  • Jan said:

    what if Sue has a fixed status, moves to another state but does not
    sell her home When the fixed comes off does the value go to the full
    20%?

  • Michael Payne said:

    Fair? The property tax came in very slowly, and it appeared first in New England, coinciding with the spread of Deism and Unitarianism, as well as atheism. Such anti-Christian men saw the state as man’s savior, and as a result they favored placing more and more in the hands of the state. The South was the last area to accept the property tax, and it was largely forced on the South by post-Civil War Reconstruction. Moreover, as far as possible, when the property tax was adopted in the pre-Civil War era, conservative elements limited it to the county and retained the legal requirement that only owners of real property could vote on the county level.

    Today, the property tax is in effect a rent for the use of our own land; the state has the power of confiscation for non-payment, and also the “right” of eminent domain. This is, in terms of the Bible, a mark of tyranny, as both the law, and the story of Naboth’s vineyard, makes clear.

    The tithe is God’s tax for the use of the earth; it is not a gift to God. Only when the giving exceeds ten percent is it called a gift and a “freewill offering” (Deut. 16:10,11; Ex. 36:7, Lev. 22:21, etc.). The tithe is required of all men by God. Failure to pay the tithe brings on God’s curse; yielding God His due results in so great “a blessing, that there shall not be room enough to receive it” (Malachi 3:8-10).

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