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Assessed and Taxable Values
Since the beginning of Proposal A in 1994, overall increases in SEV have generally been greater than the increase in taxable value capped at the CPI. The longer a property has been owned and capped, the greater the gap between the SEV and taxable values.
This example illustrates a property purchased in 2013 and uncapped in 2014. We will also assume that there has been no demolition or construction during this time. For further illustration, this property will also sell during 2020.
|Tax Year||IRM||Assessed Value||Capped Value||Taxable Value||Taxable Value Determinded By|
|2014||1.016||66,500||61,792||66,500||2013 transfer of ownership|
|2015||1.016||69,800||67,564||67,564||CV is the lower calculation|
|2016||1.003||73,200||67,766||67,766||CV is the lower calculation|
|2017||1.009||76,100||68,375||68,375||CV is the lower calculation|
|2018||1.021||78,400||69,810||69,810||CV is the lower calculation|
|2019||1.024||83,100||71,485||71,485||CV is the lower calculation|
|2020||1.019||88,100||72,843||72,843||CV is the lower calculation|
|2021||1.014||92,500||73,862||92,500||2020 transfer of ownership|
|2022||1.033||98,100||95,552||95,552||CV is the lower calculation|
|2023||1.05||107,900||100,329||100,329||CV is the lower calculation|
In this example, taxable value will never be higher than the SEV.
Breaking it Down
In May of 2013, this home was sold. At the time of sale, this home had a current SEV of 63,300 which indicated the value of this home was $126,600 on December 31, 2012 (tax day). It also had a taxable value of $47,200. This means that the home was worth $126,600 but it was taxed as if it were worth $94,400 (2x taxable value). This is Proposal A in action. Prior to Proposal A, homeowners were taxed on the SEV.
In 2014, the property "uncapped" and the 2014 taxable value was equal to the SEV.
2015 to 2020
During the years of 2015 to 2020 the market value of this home increased as reflected in the increase in the SEV. The taxable values also increased, but at a lower rate than the market value. Over time you can see a gap between the SEV and TV. This is because the assessed and taxable values increased at different rates.
In 2020, the property transferred ownership, so the taxable value uncapped to become equal to the SEV for 2021.
In 2023, the taxable value increased by the rate of inflation.
The term taxable value was used in the 1994 constitutional amendment known as Proposal A to replace SEV in the property tax equation to calculate property tax bills. the first step in the process of determining taxable value is to calculate the capped value of every parcel of assessable property.
Capped Value Formula
The formula for capped value is: prior taxable value minus taxable value of losses times lesser of 5% or CPI (Consumer’s Price Index) multiplier plus taxable value of additions, which equals the capped value amount.
The legislature has defined taxable value to be the lesser of SEV or capped value. Assessors are required to annually calculate a capped value for each individual parcel of real property. The capped value is then compared to the SEV of that property, and the lower of the two will be its Taxable Value upon which taxes are levied. The year following an eligible transfer of ownership, the SEV of the transferred property set in that year is its taxable Value.
The Equalization Timetable
For 2023, the State Tax Commission is allowing a 24-month appraisal study (differs from sales study) to determine the property assessments for all other classes of property (agricultural, commercial, industrial, etc).
The State Tax Commission has allowed the use of foreclosure sales in the preparation of the assessment rolls. However, these sales must meet a set of standards and requirements established by the STC. The holder of the mortgage, which is usually the seller of the real estate, must provide a real property statement to the local Assessor. These forms are rarely, if ever, submitted and therefore do not appear in the Township sales studies. In addition to the returning of the forms, other conditions must also be met.
One of the most important conditions and, most obvious, is that the home must not show any signs of vandalism or excessive deferred maintenance. It should be in approximately the same condition as the surrounding properties. As a result of the STC requirements, very few foreclosure sales are included in the preparation of the Delhi Charter Township assessment rolls.