The Final Report of the Florida TaxWatch Ad Valorem Tax Task Force

Florida TaxWatch created the Ad Valorem Tax Task Force to examine the myriad laws and regulations governing property taxation in Florida to determine if taxpayer rights and responsibilities are adequate, reasonable and sufficiently explained.

The Task Force was chaired by Dr. Keith Baker, Florida TaxWatch Senior Vice President and Chief Operating Officer and was comprised of knowledgeable representatives from the public and private sectors. Its members consisted of representatives from the Legislature and the Governor's Office, the Florida business community, property appraisers, the Florida Bar and the Florida Department of Revenue. The Task Force held several meetings in late 1999 and early 2000.

The Task Force was staffed by Florida TaxWatch and received considerable assistance from the Florida Department of Revenue. Florida TaxWatch would like to thank the department's staff, particularly John Everton, Jeff Kielbasa and Steve Keller, for their outstanding efforts and contributions.

Early on, a consensus was reached that the Task Force mission would focus on statutory rather than constitutional real and tangible personal property tax issues, with an emphasis on administration and taxpayer rights. The main work of the Task Force would include review and clarification of the pertinent sections of the Florida Statutes and, where necessary, recommending updates to current law. The Task Force concluded that a most worthwhile goal would be to help explain to the public the rights and remedies concerning ad valorem taxation that are available to them. To this end, a consensus prevailed that the Task Force should codify relevant statutes in one statutory location, thereby recommending establishment of an Ad Valorem Taxpayers' Bill of Rights.

The Task Force concluded that the basic system for ad valorem administration is generally a good one and contains many worthwhile taxpayer safeguards. However, the law is unduly complex and does not lend itself to easy understanding by the taxpayers. The establishment of a bill of rights would help remedy this and is the logical first step in ensuring the rights of taxpayers are adequate and protected. The Florida TaxWatch Ad Valorem Task Force recommends that the 2000 Legislature enact, and the Governor sign, the proposed Ad Valorem Taxpayers' Bill of Rights into law. Although there are certainly areas that could be improved, the proposed bill of rights would make no substantive changes to current law, avoiding potential political opposition and fiscal impacts that would make passage more difficult.

The Task Force did identify areas where changes are needed. These issues, which require further study, are summarized later in this report.

The Florida TaxWatch Ad Valorem Task Force further recommends that the Florida Department of Revenue produce a taxpayer information pamphlet to be made available to property appraisers and other outlets, including the Internet, for distribution to the public. The pamphlet should include information such as a summary of rights, important dates, frequently asked questions and who to contact for various property tax-related information. The Department of Revenue (DOR) has been very receptive to this, and Florida TaxWatch will be forming a working group with DOR, property appraisers and tax collectors to develop the content and discuss funding and the production of the document.

Property taxes are the single most important revenue source for local governments in Florida, funding schools and locally provided government services. These taxes account for approximately 38 percent of local government funding in Florida. Property taxes are levied by counties, cities, school boards and a host of special taxing authorities such as water management, fire protection and hospital districts. These governmental units levied a total of $13.8 billion in property taxes during fiscal year 1999. Florida's constitution prohibits the Legislature from levying a state tax on real or tangible personal property.

Florida's property tax laws govern more than 8.2 million parcels of land worth approximately $900 billion. The total value of this property is expected to reach $1 trillion by 2001. The number of parcels is growing at a rate of 5%-10% a year and 34% of parcels are homestead property.

The average total millage (tax) rate in Florida is 21.88 mills--meaning $21.88 per $1000 of a property's taxable value. Cities, counties and schools districts are subject to a constitutional limit of 10 mills for operating purposes. Local voters may authorize millage rates in excess of the 10 mill cap.

There are several exemptions provided in law, the most significant being the $25,000 homestead exemption. Differentials taxation at less than full value are provided for some types of property. The largest example of this is agricultural land.

The Save Our Homes amendment to the Florida Constitution, effective January 1, 1995, limits annual increases in assessed value of homestead property to 3 % or inflation, whichever is lower. This limitation applies only to property value, not property taxes. When a house is sold, the new owner will be assessed at the current fair market value and the property will fall under the limitations the year after the new owner receives their new homestead exemption. If additions or improvements are made to the property, the value of those improvements will be added to the assessment regardless of the cap.

The governing bodies of local taxing authorities set their budgets and the millage rates needed to fund them. County property appraisers determine the value of property and administer exemptions and tax collectors are responsible for collecting the taxes due. The Florida Department of Revenue (DOR) performs an oversight role in the process. The state's fundamental interest in the property tax system is to ensure that all property is assessed at just value with equity and uniformity within and between counties. DOR accomplishes this through promulgation of rules and guidelines governing all aspects of property taxation, reviewing tax rolls submitted to the department by property appraisers each year, ensuring compliance with the TRIM (Truth in Millage) law, conducting procedural audits and providing aid and assistance to local tax collectors and property appraisers.

The ad valorem tax is levied based on the value of real and tangible personal property as of January 1 of each year. Tax bills are mailed in November based on the previous January 1 valuation and taxes are delinquent and accrue interest starting April 1.

The current basic system that is set in Florida law and governs ad valorem taxation is a good one. There are annual assessments and property is assessed at full value fairly uniformly from county to county. Taxing authorities are required to keep taxpayers informed, and avenues for dispute resolution exist.

Property appraisers in Florida are elected and, unlike many states where the tax assessor and taxing authorities work together, Florida's Constitution provides a clear separation between the appraisal of property and the authorities responsible for setting millage rates and raising revenue.

Property appraisers are also improving their performance. Geographic information systems (GIS) technology is also making appraising easier, less costly and more uniform. The Department of Revenue has also made a fundamental change in the way tax rolls are evaluated, moving from staff doing appraisals of selected property to using computer-generated sales ratios where over 100,000 sales can be analyzed. This helps takes subjectivity out of the process and increases tax equity.

In 1998, the statewide average level of assessment was 98.4 (weighted by just value), and the average coefficient of dispersion -- an indicator of tax roll uniformity -- was 11.5. That means that, on average, properties in Florida were assessed at 98.4% of their market value and the average was relatively uniform throughout the state.

Florida law also provides potential remedies for disputed appraisals. If a property owner disagrees with their appraisal or has been denied an exemption, their first recourse is an informal meeting with the property appraiser's office in their county. Many objections are settled during this phase, after the property owner's position is considered and an appraiser gives a complete explanation of how a value was derived. The property appraiser may make adjustments in the assessment.

If a dispute still exists after this initial review, the property owner may then petition the Value Adjustment Board (VAB). The VAB is comprised of three members of the county commission and two members of the school board and has the authority to uphold or overturn a property appraiser's decision.

Many VABs appoint Special Masters who are qualified real estate appraisers or attorneys to conduct hearings on disputed properties. Special Masters are appointed to determine whether the appraised value of a petitioned property exceeds its market value as of January 1 or if the exemption applied for is legitimate. They act independent of the property appraiser's office.

If the property owner is still unsatisfied with the VAB's decision, he or she may pursue the contested assessment in circuit court. Nothing prohibits the owner from by bypassing the other options and going directly to court.

Florida also has the Truth-in-Millage (TRIM) law, which governs the setting of millage rates and ensures that taxpayers are informed and are allowed to have input into the decision-making process. This is a truly exceptional taxpayer safeguard and is one the best of its kind in the country, promoting taxpayer awareness, participation and government accountability (see next section for a description of the TRIM law).

In 1980, the Legislature passed the "Truth-in-Millage" (TRIM) act. This law is designed to inform taxpayers which governmental entity is responsible for the taxes levied and the amount of tax liability owed to each taxing entity. The "Notice of Proposed Property Taxes" is known as the TRIM notice.

TRIM establishes the statutory requirements that all taxing authorities levying a millage must follow, including all notices and budget hearing requirements.

The Notice of Proposed Property Taxes (TRIM notice) enables the taxpayer to compare the prior year assessed value and taxes with the present year assessed value and proposed taxes. It also allows taxpayers to compare the amount of taxes if there is no budget change for the upcoming year. The notice lists the date, time and location of all budget hearings at which the taxing authorities will hear from the public. At these hearings, the taxing authorities establish the millage to be levied against the parcel of land shown on the TRIM notice. The notice also shows the deadline for filing a petition to protest the assessment.

The millage and budget hearing procedures are monitored by the Department of Revenue. This ensures taxpayer notification of the proposed millage changes, the proposed budget changes, and, if any, the percent of change from the rolled-back rate. The rolled-back rate is defined as that millage rate which provides the same ad valorem tax revenue for each taxing authority as was levied during the previous year.

Non-compliance by the taxing authority could result in the loss of revenue-sharing funds and loss of revenues above the rolled-back rate.

The law governing ad valorem taxation is long and complex. It covers six different chapters in Florida Statutes (Chapters 193 through 197 and Chapter 200). It is full of cross-referencing and is difficult for the lay person to navigate. Also, as is the case with many statutes, it is becoming longer and more complex with each legislative session. Much of it was written long ago, and parts may be outdated or even unnecessary. These chapters in the statutes are most likely in need of a rewrite.

When taxpayers do not know or understand the rights they have or the processes pertaining to those rights, taxpayer protections can be of little help. This makes communication between government and citizens essential.

In 1995, Florida TaxWatch did a telephone survey of taxing authorities, asking them if they were enacting a property tax increase. According to TRIM, any millage rate in excess of the rolled-back rate is considered to be a tax increase and is to be advertised as such. In general, the rolled-back rate is the millage rate that, when applied to the current year's assessed value, would raise the same amount of revenue as last year. So, even if a taxing authority keeps the same millage rate, if the total assessed value is up, then taxes are increased unless the millage rate is lowered.

Almost two-thirds of taxing authorities gave false, incomplete or misleading answers. Answers such as, "We didn't raise your taxes, the property appraiser did," were common. It's no wonder the taxpayer is confused.

The Task Force concluded that a Taxpayer Bill of Rights specific to ad valorem taxes, similar to one that was enacted in 1992 for other taxes, was needed to codify in one statutory location and in plain, understandable language the rights available to taxpayers. In addition, a uniform, understandable vehicle for taxpayer education needed to be developed.

Toward these ends, first, the Department of Revenue produced a compendium of all rights available to taxpayers under current law. The result was a list of 103 different statutes divided into the three main areas of ad valorem taxation: 1) Tax Levy; 2) Tax Assessment; and 3) Tax Collection.

The Task Force took the list and honed it down to the proposed Ad Valorem Taxpayer Bill of Rights. Similar rights were combined and some that were duplicative or have a very limited application were omitted. The rights were written, to the extent possible, with an eye toward simplicity and taxpayer understanding, while still being comprehensive.

The Bill of Rights was organized into three main sections: 1) Right to know; 2) Right to due process; and 3) Right to redress. There also is a fourth section dealing with confidentiality of taxpayer information.

The preamble was modeled directly after the general Taxpayer Bill of Rights (Section 213.105, F.S.) with modifications to make it applicable to property taxes.

The right for taxpayers to be notified of proposed property taxes and non-ad valorem assessments and notified of public hearings on budgets and millage rates.

The right to advertised notice if the tentatively adopted millage rate exceeds the rolled-back rate and specific disclosure of how the proposed change will affect your taxes.

The right that the adopted millage rate will not exceed the tentatively adopted millage rate. If the tentative rate exceeds the proposed rate, each taxpayer shall be mailed notice comparing his or her taxes under the tentatively adopted millage rate to the taxes under the previously proposed rate, prior to hearing, to finalize the budget and adopt millage.

The right to be informed of non-ad valorem assessment hearings and the right to appear at the hearing and to file written objections with the local governing board.

The right to be informed during the tax collection process, including the opportunity to pay back taxes before property is seized or sold.

The right to informal conference with the property appraiser when the taxpayer objects to the assessment placed on his or her property.

The right to petition the Value Adjustment Board over objections to assessments or denial of exemptions, property classifications or tax deferral.

The right to prior notice of VAB hearing date and the right to the hearing within four hours of scheduled time and the right to be mailed a timely written decision by VAB.

The right to bring action in circuit court to contest a tax assessment or appeal VAB decisions.

The right to discounts for early payment on all taxes and non-ad valorem assessments and the right to pay delinquent personal property taxes under installment payment program.

The right upon filing a challenge in circuit court and payment of taxes admitted in good faith to be owing to have all procedures for the collection of taxes suspended prior to final resolution.

The right to have penalties reduced or waived or interest rates reduced when the taxpayer has acted in good faith.

The right of the taxpayer, as the prevailing party, to recover all costs of the administrative or judicial action, including reasonable attorney's fees.

The proposed Ad Valorem Taxpayers Bill of Rights adopted by the Task Force at its January 2000 meeting is printed in its entirety in Appendix I in this report.

Having a bill of rights in statute is important, but the word must be readily available to the public as well. Toward this end, the Task Force is proposing that the Florida Department of Revenue produce a taxpayer information pamphlet that would be made available to property appraisers, tax collectors and other distribution sites. Efforts should be made to reach new residents and those who are buying property. Distribution points, for example, might include Realtors, closing agents, chambers of commerce and drivers license offices.

The pamphlet should include information such as a summary of rights, important dates, frequently asked questions and who to contact for various property tax related information. The Department of Revenue (DOR) has been very receptive to this and, as a result, Florida TaxWatch will be forming a working group with DOR, property appraisers and tax collectors to develop the pamphlet content.

Although the Ad Valorem Taxpayer Bill of Rights proposed by the Task Force would not make changes to current law, the Task Force did consider several recommendations that would make process changes. It was ultimately decided that these changes, although desirable, require more examination and analysis. Thus, whereas the Task Force decided to focus primarily on the drafting of an Ad Valorem Taxpayer Bill of Rights, it also recommends the following issues as areas requiring further review and deliberation.

Non-ad valorem assessments Non-ad valorem assessments are proliferating and becoming a larger and larger part of property owners' tax bills. To the extent possible, the same taxpayer safeguards that apply to property taxes should also apply to these assessments.

Value Adjustment Boards VABs provide a valuable method for taxpayers to appeal assessments. These Boards are comprised of three members of the county commission and two members of the school board and have the authority to uphold or overturn a property appraiser's decision. Many VABs appoint Special Masters who are qualified real estate appraisers or attorneys to conduct hearings on disputed properties.

Sale of property with delinquent taxes Tax collectors sell tax certificates to recoup delinquent taxes. After two years, the certificate holder may apply for a tax deed and the property will be sold at public auction. The seizing and selling of a person's property is, obviously, a very serious situation. If the property is homestead, the minimum bid is 50% of assessed value. There is no such minimum requirement for non-homestead property other than the amount of outstanding taxes, interest and costs.

Interest rate on delinquent tangible personal property taxes Interest of 18% per year is applied to delinquent real and tangible personal property taxes. The 1999 Legislature reduced the interest rate on other delinquent state taxes from 12% to prevailing market rates. Because of the system of selling tax certificates for delinquent real property taxes, the 18% rate may be justified and needed. However, interest on tangible personal property should be brought in line with other taxes.

TRIM notices The Notice of Proposed Property Taxes, is a key taxpayer information tool. It has also become more complex. It should be reviewed for both potential simplification and inclusion of missing essential information.

Special Recommendations Although the Task Force focused on statutory issues, two constitutional issues were raised that dealt with tax administration. They were viewed very favorably by the Task Force and it was decided to include them as special recommendations. One would require a constitutional amendment and the other a change in statutes.

Exempt owners of tangible personal property of less than $5,000 Property appraisers in Orange and Seminole Counties have proposed an amendment to the Florida Constitution that would exempt owners of tangible personal property with a cumulative value of less than $5,000 from filing requirements and taxation on that property. This is a very sound idea that would have minimal impact on revenue, while freeing many small businesses from the burden of filing this tax as well as property appraisers from having to administer it. Orange and Seminole Counties would lose less than 1% of their property tax revenue while reducing returns by more than 50%. In Orange County, 29,100 returns of this size produce only $880,000. Workload savings would offset a portion of the lost revenue.

The simplification of the implementation of the Save Our Seniors amendment A 1998 Constitutional Amendment authorized, and the 1999 Legislature enacted, a law that allows cities or counties to grant an additional homestead exemption of up to $25,000 to persons of at least 65 years of age who meet income limitations. The law requires exemption applicants to provide to the property appraiser a sworn statement of household income on March 1 and financial documentation (tax returns, W-2, etc.) on June 1. The law prohibits the property appraiser from granting the exemption without the documentation. The law creates two administrative problems: the collection and maintenance of income documentation and the dual application deadline. This dual deadline is confusing to taxpayers and can create for them an uncertainty of eligibility when the sworn statement is due (March 1) before the documentation is assembled and submitted (June 1). Changing the law to allow the property appraiser to approve the exemption with the sworn statement only and changing the date of submitting the statement to June 1 would help ease administrative burdens and make it easier and more understandable for the taxpayer. Supporting income documentation could be requested to verify income eligibility.

This report was researched and written by
Kurt Wenner, Senior Research Analyst under the direction of
Keith G. Baker, Ph.D., Senior Vice President and Chief Operating Officer.
T. O'Neal Douglas, Chairman; Dominic M. Calabro, President and Publisher

© Copyright Florida TaxWatch, March 2000

For more information on this or any other TaxWatch report,
please call:
(850) 222-5052
OR
write Florida TaxWatch at:
P.O. Box 10209
Tallahassee, FL 32302
OR
e-mail