Subject: Analysis of Ohio House Bill No. 40, proposing amendments to increase the enhanced homestead exemption for certain disabled veterans. Source: Excerpts from Ohio House Bill No. 40 (As Introduced, 136th General Assembly)
1. Executive Summary:
Ohio House Bill No. 40 proposes to amend Sections 323.152 and 4503.065 of the Ohio Revised Code to significantly increase the enhanced homestead exemption for qualifying disabled veterans. This bill aims to reduce the real property taxes and manufactured home taxes for these veterans by increasing the true value of their property that is exempt from taxation. The increase is tiered based on the veteran’s total income, with a larger exemption for those with lower incomes. The bill also maintains existing exemptions for other eligible individuals (elderly, permanently and totally disabled, surviving spouses of such individuals and public service officers killed in the line of duty), but the primary focus of these amendments is on enhancing the benefit for disabled veterans.
2. Main Themes and Important Ideas/Facts:
- Increased Homestead Exemption for Disabled Veterans: The central theme of HB 40 is to provide a more substantial property tax reduction for disabled veterans through an enhanced homestead exemption.
- For real property (Section 323.152):
- Income-Based Tiers: The bill introduces two income thresholds for disabled veterans:
- Total income exceeding $125,000 (as adjusted): The reduction will be calculated based on fifty thousand dollars of the true value of the property.
- Total income not exceeding $125,000 (as adjusted): The reduction will be calculated based on one hundred thousand dollars of the true value of the property.
- In Lieu of Other Reductions: This enhanced reduction for disabled veterans is explicitly stated to be “in lieu of any reduction under section 323.158 of the Revised Code or division (A)(1), (2)(b), or (3) of this section.” This means disabled veterans will receive this larger exemption instead of other potential homestead exemptions.
- One Homestead Only: The enhanced reduction applies to “only one homestead owned and occupied by a disabled veteran.”
- For manufactured homes (Section 4503.065):
- Mirrors the real property exemption structure with the same income-based tiers ($125,000 adjusted income threshold) and exemption amounts ($50,000 or $100,000 adjusted true/market value).
- Also explicitly states it is “in lieu of any reduction under section 4503.0610 of the Revised Code or division (A), (B)(2), or (C) of this section” and applies to “only one manufactured or mobile home owned and occupied by a disabled veteran.”
- Existing Homestead Exemptions Maintained (with adjustments): While the focus is on disabled veterans, the bill retains the existing homestead exemptions for other eligible categories:
- Elderly (65+), Permanently and Totally Disabled: These individuals, along with certain surviving spouses, are still eligible for a reduction based on $25,000 of the true value of the property if their total income does not exceed a threshold (currently $30,000, adjusted annually).
- Surviving Spouses: The bill includes specific provisions for surviving spouses of disabled veterans and public service officers killed in the line of duty, outlining their eligibility and the calculation of their exemptions. For surviving spouses of disabled veterans, the reduction is tied to the same amounts authorized for the veteran, based on the surviving spouse’s income.
- Calculation Methodology: The bill details how the tax reduction is calculated, involving several factors:
- The exempt portion of the property’s true value ($25,000, $50,000, or $100,000, as adjusted).
- The assessment percentage (not exceeding 35%).
- The effective tax rate.
- The reduction in taxes received under other sections (e.g., Section 319.302).
- Quote (Sec. 323.152 (A)(1)(c)): “The amount of the reduction under division (A)(1)(c) of this section equals the product of the following: (i) Twenty-five thousand dollars of the true value of the property in money, as adjusted under division (A)(1)(d) of this section; (ii) The assessment percentage established by the tax commissioner under division (B) of section 5715.01 of the Revised Code, not to exceed thirty-five per cent; (iii) The effective tax rate used to calculate the taxes charged against the property for the current year, where ‘effective tax rate’ is defined as in section 323.08 of the Revised Code; (iv) The quantity equal to one minus the sum of the percentage reductions in taxes received by the property for the current tax year under section 319.302 of the Revised Code and division (B) of section 323.152 of the Revised Code.” The calculation for the enhanced disabled veteran exemption follows a similar structure with the different base values ($50,000 or $100,000).
- Annual Income Adjustment: The total income thresholds and the base reduction amounts ($25,000, $50,000, $100,000) are subject to annual adjustment by the Tax Commissioner based on the percentage increase in the Gross Domestic Product (GDP) deflator.
- Quote (Sec. 323.152 (A)(1)(d)(iv)): “Round the resulting sum to the nearest multiple of one hundred dollars.” This detail highlights the practical implementation of the annual adjustment.
- Application and Eligibility: Individuals must apply and be approved for the reduction each year. The bill specifies eligibility criteria, including residency, ownership, and in the case of disabled veterans, their disability status and income. There are also provisions regarding ownership transfers and penalties for fraudulent applications.
- Effective Dates: The amendments to Section 323.152 (real property) will apply to tax year 2025 and thereafter. The amendments to Section 4503.065 (manufactured homes) will apply to tax year 2026 and thereafter.
- Harmonization Clause: The bill includes a section noting the General Assembly’s intent to harmonize the amendments with previous legislation (H.B. 33 and S.B. 43 of the 135th General Assembly), indicating that the presented text reflects the combined effect of these prior amendments.
3. Key Quotes:
- Focus on Disabled Veterans (Sec. 1, Title): “To amend sections 323.152 and 4503.065 of the Revised Code to increase the enhanced homestead exemption for certain disabled veterans.” This clearly states the primary purpose of the bill.
- Enhanced Exemption Amount (Lower Income Disabled Veterans – Sec. 323.152 (A)(2)(a)): “For a disabled veteran whose total income does not exceed one hundred twenty-five thousand dollars, as adjusted under division (A)(1)(d) of this section, the reduction shall equal the product obtained by multiplying one hundred thousand dollars of the true value of the property in money, as adjusted under division (A)(1)(d) of this section, by the amounts described in divisions (A)(1)(c)(ii) to (iv) of this section.” This highlights the significant increase in the exempt property value for lower-income disabled veterans.
- Enhanced Exemption Amount (Higher Income Disabled Veterans – Sec. 323.152 (A)(2)(a)): “For a disabled veteran whose total income exceeds one hundred twenty-five thousand dollars, as adjusted under division (A)(1)(d) of this section, the reduction shall equal the product obtained by multiplying fifty thousand dollars of the true value of the property in money, as adjusted under division (A)(1)(d) of this section, by the amounts described in divisions (A)(1)(c)(ii) to (iv) of this section.” This indicates a still substantial, but lower, increase for higher-income disabled veterans.
- In Lieu of Other Exemptions (Disabled Veterans – Sec. 323.152 (A)(2)(a)): “The reduction is in lieu of any reduction under section 323.158 of the Revised Code or division (A)(1), (2)(b), or (3) of this section.” This clarifies that disabled veterans will receive the enhanced exemption instead of other homestead exemptions they might otherwise qualify for.
4. Potential Impacts and Considerations:
- Significant Tax Relief for Disabled Veterans: The proposed increase in the homestead exemption could lead to substantial reductions in property tax bills for eligible disabled veterans, particularly those with lower incomes.
- Fiscal Impact on Local Governments: Increased homestead exemptions will likely result in reduced property tax revenue for local governments and school districts. The bill does not specify how these potential revenue shortfalls will be addressed.
- Administrative Burden: County auditors will need to implement the new income-based tiers and exemption amounts, which may require updates to their systems and procedures.
- Definition of “Disabled Veteran”: The bill refers to “disabled veteran” but relies on existing definitions within the Ohio Revised Code (likely tied to service-connected disabilities as determined by the Department of Veterans Affairs). Understanding the precise definition is crucial for assessing eligibility.
- Public Awareness: Effective outreach will be necessary to ensure eligible disabled veterans are aware of the enhanced exemption and how to apply.
5. Conclusion:
Ohio House Bill No. 40 represents a significant effort to provide greater property tax relief to certain disabled veterans in Ohio. By introducing income-based tiers and substantially increasing the exempt property value, the bill aims to ease the financial burden of homeownership for this population. However, the potential fiscal impact on local governments and the administrative requirements for implementation warrant careful consideration. The bill maintains existing homestead exemptions for other eligible individuals while focusing its enhancements on disabled veterans.