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F I S C A L I M P A C T R E P O R T

SPONSOR HTRC

DATE TYPED 3/18/05

HB 743/HTRCS/aSFC

SHORT TITLE Veterans’ Property Tax Exemption & Rebates

SB

ANALYST Wilson

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

See Narrative

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

See Narrative

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Veterans Services (DVS)

Taxation & Revenue Department (TRD)

SUMMARY

Synopsis of SFC Amendment

The Senate Finance Committee amendment removes the HTRC amendments.

The amendment also removes the requirement that a county treasurer shall pay a cash refund to a

taxpayer in an amount equal to the reduction in tax liability resulting from the veteran exemption

for which the taxpayer would have been eligible for the 2004 property tax year if the taxpayer

met certain requirements.

House Bill 743/HTRCS/aSFC -- Page 2

Synopsis of HTRC Amendment

The House Taxation and Revenue amendment to the House Taxation and Revenue Committee

Substitute for House Bill 743 deletes language excepting a person who was dishonorably dis-

charged or discharged for misconduct. This language was unnecessary to implement the intent of

this bill.

Synopsis of Original HTRC Substitute

The House Taxation & Revenue Committee Substitute to House Bill 743 adopts the changes rati-

fied in the constitutional amendment passed on the November 2004 general election ballot. The

voters decided to expand the group of veterans eligible for property tax exemptions. Prior to this

amendment, only honorably discharged veterans who served during periods of armed conflict

were eligible for the exemption. The constitutional amendment approved by the voters allows all

honorably discharged veterans the exemption, irrespective of whether they served during periods

of armed conflict.

FISCAL IMPLICATIONS

The Taxation and Revenue Department (TRD) provides a statewide average residential rate of

approximately 26.5 mills and estimates an additional 60,000 veterans will claim the exemptions.

• In 2004 the exemption on taxable property is $3,000 per newly added veteran. The total

amount of relief granted to newly qualified veterans would have been approximately

$4,800,000. The average benefit to claimants is approximately ($26.50/$1,000) x $3,000

= $79.50, the statewide average property tax rate multiplied by the exemption amount.

• In 2005 the exemption on taxable property will be $3,500 per newly added veteran. The

total amount of relief granted to newly qualified veterans will be approximately

$5,600,000. The average benefit to claimants is approximately ($26.50/$1,000) x $3,500

= $92.75 assuming the rate remains unchanged in 2005.

• In 2006 and all years after, when the exemption on taxable property will be $4,000 per

newly added veteran. The total amount granted to newly qualified veterans will be ap-

proximately $6,400,000. The average benefit to claimants is approximately

($26.50/$1,000) x $4,000 = $106.00 assuming the 2004 rate is the same as in 2004.

These figures should, however, be considered a rough approximation and will depend on the ex-

tent of participation by veterans.

If the 2004 and 2005 veterans were provided through the traditional property tax system mecha-

nism, tax reductions to the newly qualified veterans would total approximately

$10.4 million – the sum of the $4.8 million that they would have received in tax year 2004, and

the $5.6 million they would have received in 2005.

However, TRD has provided information regarding current law which will adjust rates to offset

the exemptions. This bill is, therefore revenue neutral to the counties and the State.

House Bill 743/HTRCS/aSFC -- Page 3

ADMINISTRATIVE IMPLICATIONS

The Department of Veterans’ Services will revise the application now being used to show the

changes in statute. The dates of service requirements will be removed from the application.

The Veterans’ Services Department will process all applications and issue the certificates to eli-

gible veterans and surviving spouses. The SBD currently processes an average of 3,500 certifi-

cates per year. The work load will increase for this division by an estimated 200%. There is cur-

rently one FTE and one Temp that are processing these applications as well as processing appli-

cations for all other state veterans’ benefits.

The administrative cost to the counties is unknown, but there will be a substantial amount of vet-

erans’ certificates to be processed.

DW/lg:yr