Ohio House Bill 61 proposes to amend several sections of the Ohio Revised Code (specifically sections 319.302, 323.152, 323.156, 4503.065, and 4503.068) to adjust the amounts provided for homestead exemptions and the owner-occupancy property tax credit. The bill seeks to modify the existing calculations and thresholds for these tax relief measures affecting homeowners and manufactured home owners in Ohio.
Main Themes and Important Ideas/Facts:
- Modification of Homestead Exemption (Real Property):
- The bill aims to change the calculation for the homestead exemption for certain eligible individuals (permanently and totally disabled, those 65 years or older, and surviving spouses of such individuals).
- Currently, the reduction is based on the lesser of $25,000 of the true value or 35% of the assessed value, multiplied by the effective tax rate and a factor accounting for other tax reductions.
- Proposed Change: The bill modifies the calculation in Section 323.152 (A)(1)(c) to explicitly state that the reduction amount is the product of the “lesser of the following” components:
- “$25,750 of the true value of the property in money, as adjusted under division (A)(1)(d) of this section.” (This dollar amount is currently $25,000 and is subject to annual adjustment based on the GDP deflator.)
- “The assessment percentage established by the tax commissioner… not to exceed thirty-five per cent.”
- “The effective tax rate used to calculate the taxes charged against the property for the current year…”
- “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.”
- New Inclusion: The bill explicitly adds “The total amount of taxes charged against the property for the current year levied by the board of education of a city, local, exempted village, cooperative education, or joint vocational school district or the taxing authority of a county school financing district or career-technical cooperative education district.” as a factor in the calculation. This suggests a shift in how the exemption interacts with school district levies.
- Modification of Homestead Exemption (Manufactured Homes):
- Similar to real property, the bill proposes changes to the homestead exemption for owners of manufactured or mobile homes taxed under different sections of the Revised Code (4503.06(D)(1) and (D)(2)).
- For homes taxed under 4503.06(D)(2) (based on true value), the reduction calculation mirrors the proposed changes for real property, using the adjusted true value of “$25,750”.
- For homes taxed under 4503.06(D)(1) (based on cost or market value), the reduction involves a “$25,000” base amount (subject to adjustment), depreciation percentages, a 40% assessment rate, and the local tax rate.
- Proposed Change: Section 4503.065 (A)(2)(b) and (d) are modified to reflect the adjusted base amount of “$25,750” for homes under 4503.06(D)(2) and retain “$25,000” for those under 4503.06(D)(1), both subject to the annual GDP deflator adjustment. The inclusion of the school district levy factor, as seen in the real property exemption, is also present here in Section 4503.065 (A)(2)(e).
- Modification of Owner-Occupancy Property Tax Credit:
- The owner-occupancy tax credit, currently a 2.5% reduction on qualifying levies, is proposed to be modified.
- Proposed Change: Section 323.152 (B) will change the credit amount to a fixed dollar amount: “seven hundred fifty dollars, as adjusted under division (A)(1)(d) of this section.” This signifies a move from a percentage-based credit to a fixed-dollar credit, subject to annual inflation adjustments.
- Annual Adjustment based on GDP Deflator:
- The bill reiterates and slightly refines the process for annually adjusting the income thresholds and the base reduction amounts ($25,750 for real property/some manufactured homes and $750 for owner-occupancy credit) based on the percentage increase in the Gross Domestic Product (GDP) deflator.
- Section 323.152 (A)(1)(d) and 4503.065 (A)(2)(c) detail the calculation and rounding methods for these annual adjustments, with the Tax Commissioner responsible for certification to county auditors.
- A safeguard is included stating, “The commissioner shall not make the applicable adjustment in any calendar year in which the amount resulting from the adjustment would be less than the total income threshold or the reduction amount for the current tax year.”
- Fiscal Implications and State Reimbursement:
- The bill maintains the state’s role in reimbursing counties for the revenue lost due to these tax reductions.
- Sections 323.156 and 4503.068 outline the process by which county treasurers certify the amounts of tax reductions to the Tax Commissioner, and how the state will provide payments from the general revenue fund back to the counties (primarily to the county’s undivided income tax fund for distribution to taxing districts).
- A 2% administrative fee for the county auditor and treasurer is also maintained.
- Effective Date and Applicability:
- Section 3 specifies that the amendments will apply to real property tax years ending on or after the effective date of the act and to manufactured home tax years beginning on or after the effective date.
- Harmonization of Previous Amendments:
- Section 4 acknowledges that the introduced bill presents composite versions of sections 323.152 and 4503.065, harmonizing amendments made by H.B. 33 and S.B. 43 of the 135th General Assembly.
Key Quotes:
- Regarding the purpose of the bill: “To amend sections 319.302, 323.152, 323.156, 4503.065, and 4503.068 of the Revised Code to modify the amount of the homestead exemptions and owner-occupancy property tax credit.” (Page 1)
- Proposed change to the owner-occupancy credit: “…the amount of the reduction shall equal two and one-half per cent of the amount of taxes to be levied by qualifying levies on the homestead or the manufactured or mobile home after applying section 319.301 of the Revised Code. For the purposes of this division, ‘qualifying levy’ has the same meaning as in section 319.302 of the Revised Codeseven hundred fifty dollars, as adjusted under division (A)(1)(d) of this section.” (Section 323.152(B), Page 8-9)
- Regarding the annual adjustment: “(i) Determine the percentage increase in the gross domestic product deflator… (ii) Multiply that percentage increase by the total income threshold or reduction amount for the current tax year, as applicable; (iii) Add the resulting product… (iv) Round the resulting sum…” (Section 323.152(A)(1)(d), Page 6)
Potential Impacts:
- Homeowners and Manufactured Home Owners: The shift from a percentage-based owner-occupancy credit to a fixed dollar amount could have varying impacts depending on the property value and tax rates. Lower-valued properties in areas with lower tax rates might see a more significant reduction than under the current 2.5%, while higher-valued properties in high-tax areas might see a smaller relative benefit. The adjustments to the homestead exemption base amount could also affect the level of tax relief for eligible individuals.
- School District Funding: The explicit inclusion of school district levies in the homestead exemption calculation warrants further analysis to understand potential shifts in how these exemptions affect school funding and state reimbursement obligations.
- State Budget: The proposed changes will impact the amount of reimbursements the state makes to counties for the property tax reductions. Careful analysis of these changes is needed to assess the overall fiscal impact on the state’s general revenue fund.
- Administrative Burden: The county auditors and treasurers will continue to administer these exemptions and receive a 2% fee for their costs. The changes to the calculation methods will need to be implemented in their systems.
Further Considerations:
- The bill is currently in its “As Introduced” form and may undergo amendments during the legislative process.
- A detailed fiscal analysis by the Legislative Service Commission would provide a more comprehensive understanding of the financial implications of these proposed changes.
- Stakeholder feedback from homeowners, local governments, and school districts will be crucial in evaluating the potential benefits and drawbacks of this legislation.