Proposed tax cut package would change how homeowners get rebates - East Valley Tribune: Arizona

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Proposed tax cut package would change how homeowners get rebates

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Posted: Tuesday, February 15, 2011 2:40 pm

Arizona homeowners who aren't paying attention to the mail could get a shock in the form of higher property taxes.

A little-known provision in the 214-page package of tax cuts for business alters somewhat who gets to claim a special rebate on school property taxes. It will disqualify owners of some second or vacation properties from getting the break which can save up to $600 a year.

Legally speaking, everyone else in his or her own home is entitled to the continued rebate which currently pays 40 percent of what is due in primary taxes for public schools.

But the process of getting the rebate, now automatic, will become more cumbersome.

Right now, there's a presumption that houses, townhomes and condos are occupied by their owners. It is up to the owner to notify county officials that the property is being rented out and is ineligible for the rebate - and up to county assessors to catch cheaters.

The plan turns the system on its head.

All residential property would be presumed to be rented out and, therefore, ineligible for the rebate.

To get the rebate, owners would have to sign and mail back a card, which would come with the notice from the assessor of the property's value, swearing they are living in the home, or that the home is being leased or rented to a relative.

Don't return the affidavit? The tax bill you eventually will get won't reflect the rebate.

House Minority Whip Debbie Lesko, R-Glendale, said that will help weed out fraud.

But Tom Farley, chief executive of the Arizona Association of Realtors, said it may inadvertently catch others.

"We believe that people are going to miss the filing of the affidavit," he said. "Their property taxes on their primary residences will go up."

Rep. Steve Farley, D-Tucson, said he doubts most people even pay attention to that annual valuation card.

"Most of the time, it goes in the recycling bin with the rest of the junk mail," he said.

Lesko said there are procedures for a homeowner who did not mail back the card to appeal.

"There's no intent to penalize people that just forget," she said.

But Rep. Farley said that's not a solution.

"I'm just concerned that, for a lot of people, the appeals process is very intimidating," he said.

The change is a crucial part of the $538 million package of tax cuts for business.

One key provision will reduce the basis on which businesses compute their property taxes, potentially reducing their taxes by 10 percent by the time fully implemented in 2018. Under normal circumstances, that would shift the tax burden for local governments and public schools largely onto homeowners.

Increasing the existing rebate of school taxes now provided to homeowners is designed to compensate for that.

But to keep the cost of that to the state down, the plan seeks to curtail who gets the rebate. Making second or vacation homes no longer eligible is part of that.

The real savings, though, come from disqualifying those who aren't entitled to the rebates.

John Arnold, the governor's budget director, figures enough will be saved in the first two years to allow the higher rebates without affecting the state budget. By 2018, he said the annual cost should be only about $30 million.

The idea of putting another burden on homeowners got the attention of Sen. Gail Griffin, R-Hereford. A real estate broker, Griffin said she does not want to do anything that hurts homeowners.

"People are going to forget, or not know about, the affidavit," she said.

The legislation does not spell out exactly how much the homeowner rebate will increase each year. Arnold said there would be an automatic adjustment every year, with the goal to keep homeowner taxes where they would otherwise be if there had not been a cut in business property taxes.

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