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Utah Audit Finds $100 Million Tax Error

by Joe Monzon, Denver, August 2014

 

Utah property owners face higher property tax rates in the future after a statewide audit uncovered major miscalculations that caused owners to be under taxed by more than $100 million since 2006.

 

Taxes Kept Artificially Low

 

Under Utah's property tax system, even though property values may rise, local government entities receive the same revenue from existing properties from year-to-year. Additional tax revenue comes from newly developed properties, known as new growth.

 

Calculations for new growth by redevelopment agencies were grossly understated, which improperly lowered tax rates by about 0.01% annually.

 

Corrections have been made, which will likely lead to tax increases going forward. Even though tax jurisdictions were shortchanged, they do not plan to try and recoup lost revenues.

 

Audit Recommendations

 

The audit makes the following suggestions to remedy the situation:

 

  • The Legislature should clarify the method for calculating new growth and its use within the certified tax rate calculation.

  • The Utah State Tax Commission should implement policies and procedures to eliminate the current practice of subtracting the change in the reappraisal value within redevelopment projects twice.

  • The Utah State Tax Commission should collect more detailed information on the tax bases, tax rates, and tax increments from redevelopment projects to avoid confusion in setting certified tax rates.

  • Local governments should properly report all property tax revenue and associated transfers of tax increment to redevelopment agencies.

To read the full report from the Office of the Utah State Auditor, click here.