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More Property Tax Changes Proposed in Arizona

by Rick Edwards, Phoenix, November 2014


New legislation for tax year 2015 seeks to simplify Arizona's property tax system. Previously, Arizona was the only state that taxed two tiers of valuations, something that confused many property owners.


Now county assessors across the state are pushing for additional reforms that would change the property tax cycle to one year instead of two.


Prop 117


Under Proposition 117, property taxes are based on the Limited Property Value (LPV). Prop 117 limits the annual LPV increase to 5%, with some exceptions.


New construction is not subject to the assessment increase cap. So any permit work or new construction should be reviewed for appeal because those increases can far exceed 5%. In addition, the 5% assessment cap does not apply to parcels that are split or if existing parcels are combined.


Unfortunately, Prop 117 doesn't include any caps on the tax rate. So essentially, taxes can still increase by more than 5%.


Even though tax rates will only be applied to the LPV, the state will continue to track the Full Cash Value (FCV) of all parcels. There are concerns that if Prop 117 is revised in a few years and the system reverts back to two values, the unchecked FCVs will lead to huge increases.


Tax Cycle Could Change


The Arizona Assessors Association has voted to support legislation for an annual property tax cycle. The current two-year cycle was put in place in 1995 to give officials enough time to process a large number of appeals. Assessors believe the passage of Prop 117 allows for the time frame for appeals to be shortened.


If the assessors are successful in changing the law, it would take effect in 2017. They would send out 2017 notices of value in January 2017 and officials would use those values to calculate tax bills on 2017 taxes due in October 2017. The Arizona Legislature convenes in January to consider the change.