DAR File No. 43371

Tax Commission, Property Tax

Section R884-24P-27

Standards for Assessment Level and Uniformity of Performance Pursuant to Utah Code Ann. Sections 59-2-704 and 59-2-704.5

Notice of Proposed Rule

(Amendment)

DAR File No.: 43371
Filed: 11/14/2018 12:27:42 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

These changes are made pursuant to recommendations from a 2018 legislative audit.

Summary of the rule or change:

The permissible measure of central tendency is reduced from within ten percent to within five percent of the legal level of assessment for county-wide residential property in counties of the first through fourth class.

Statutory or constitutional authorization for this rule:

• Section 59-2-704.5
• Section 59-2-704

Anticipated cost or savings to:

the state budget:

These proposed amendments are not expected to have any fiscal impact on state government revenues or expenditures because they do not change the amount of revenue generated statewide.

local governments:

These proposed amendments are not expected to have any fiscal impact on local governments' revenues or expenditures because the property tax rate will adjust to compensate the local governments according to previous year collections plus new growth.

small businesses:

These proposed amendments are expected to have a marginal fiscal impact on small businesses revenues or expenditures. As calculated in the 2018 legislative audit, there will be a $1.4 million shift in individual county contributions to the Uniform School Fund. As a result of these changes in the required level of assessment, small businesses in counties that were under the required level of assessment will experience marginal increases in property tax while small businesses in counties that were at or over the required level of assessment may experience no change or marginal decreases in property tax.

persons other than small businesses, businesses, or local governmental entities:

These proposed amendments are expected to have marginal fiscal impact on the revenues or expenditures of other persons. As calculated in the 2018 legislative audit, there will be a $1.4 million shift in individual county contributions to the Uniform School Fund. As a result of these changes in the required level of assessment, persons in counties that were under the required level of assessment will experience marginal increases in property tax while persons in counties that were at or over the required level of assessment may experience no change or marginal decreases in property tax. Residential values in certain counties that were outside of the required level of assessment of 95% to 105% of fair market value may result in higher or lower individual residential tax assessments.

Compliance costs for affected persons:

These proposed amendments are not expected to impose compliance costs on those impacted because the statistical studies and assessments are already being conducted. This only narrows the variance standard imposed within those assessments.

Comments by the department head on the fiscal impact the rule may have on businesses:

These proposed amendments could impact the revenues or expenditures of businesses owning residential real property in counties of the first through fourth class. Businesses in counties under the required level of assessment may experience marginal increases in property tax while businesses in counties over the required level of assessment may experience no change or marginal decreases in property tax.

Rebecca Rockwell, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Office of Administrative Rules, or at:

Tax Commission
Property Tax
210 N 1950 W
SALT LAKE CITY, UT 84134

Direct questions regarding this rule to:

• Jennifer Franklin at the above address, by phone at 801-297-3901, by FAX at , or by Internet E-mail at [email protected]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

01/02/2019

This rule may become effective on:

01/09/2019

Authorized by:

Rebecca Rockwell, Commissioner

Appendix 1: Regulatory Impact Summary Table*

Fiscal Costs	FY 2019	FY 2020	FY 2021
State Government	$0	$0	$0
Local Government	$0	$0	$0
Small Businesses	$0	$0	$0
Non-Small Businesses	$0	$0	$0
Other Person	$0	$0	$0
Total Fiscal Costs:	$0	$0	$0
Fiscal Benefits
State Government	$0	$0	$0
Local Government	$0	$0	$0
Small Businesses	$0	$0	$0
Non-Small Businesses	$0	$0	$0
Other Persons	$0	$0	$0
Total Fiscal Benefits:	$0	$0	$0
Net Fiscal Benefits:	$0	$0	$0

 

*This table only includes fiscal impacts that could be measured. If there are inestimable fiscal impacts, they will not be included in this table. Inestimable impacts for State Government, Local Government, Small Businesses and Other Persons are described above. Inestimable impacts for Non-Small Businesses are described below.

 

Appendix 2: Regulatory Impact to Non-Small Businesses

The impacts of these rule changes on non-small businesses are inestimable. In the aggregate, these proposed amendments are expected to have marginal fiscal impact on non-small businesses' revenues or expenditures. As calculated in the 2018 legislative audit, there will be a 1.4 million shift in individual county contributions to the Uniform School Fund. As a result of these changes in the required level of assessment, non-small businesses in counties that were under the required level of assessment will experience marginal increases in property tax while small businesses in counties that were at or over the required level of assessment may experience no change or marginal decreases in property tax.

 

Commissioner of the Utah State Tax Commission, Rebecca L. Rockwell, has reviewed and approved this fiscal analysis.

 

 

R884. Tax Commission, Property Tax.

R884-24P. Property Tax.

R884-24P-27. Standards for Assessment Level and Uniformity of Performance Pursuant to Utah Code Ann. Sections 59-2-704 and 59-2-704.5.

(1) Definitions.

(a) "Coefficient of dispersion (COD)" means the average deviation of a group of assessment ratios taken around the median and expressed as a percent of that measure.

(b) "Coefficient of variation (COV)" means the standard deviation expressed as a percentage of the mean.

(c) "Division" means the Property Tax Division of the commission.

(d) "Nonparametric" means data samples that are not normally distributed.

(e) "Parametric" means data samples that are normally distributed.

(f) "Urban counties" means counties classified as first or second class counties pursuant to Section 17-50-501.

(2) The commission adopts the following standards of assessment performance.

(a) For assessment level in each property class, subclass, and geographical area in each county, the measure of central tendency shall meet one of the following measures[.];

(i) [The]For a county of the first, second, third or fourth class, the measure of central tendency shall be within :

(A) [10]5 percent of the legal level of assessment for county-wide residential property[.]; or

(B) 10 percent of the legal level of assessment for all other classes of property.

(ii) For a county of the fifth or sixth class, the measure of central tendency shall be within 10 percent of the legal level of assessment for all property.

(iii) The 95 percent confidence interval of the measure of central tendency shall contain the legal level of assessment.

(b) For uniformity of the property assessments in each class of property for which a detailed review is conducted during the current year, the measure of dispersion shall be within the following limits.

(i) In urban counties:

(A) a COD of 15 percent or less for primary residential property, and 20 percent or less for commercial property, vacant land, and secondary residential property; and

(B) a COV of 19 percent or less for primary residential property, and 25 percent or less for commercial property, vacant land, and secondary residential property.

(ii) In rural counties:

(A) a COD of 20 percent or less for primary residential property, and 25 percent or less for commercial property, vacant land, and secondary residential property; and

(B) a COV of 25 percent or less for primary residential property, and 31 percent or less for commercial property, vacant land, and secondary residential property.

(iii) For a rural or small jurisdiction with limited development, or for a jurisdiction with a depressed market, the county assessor may petition the division for a five percentage point increase in the COD or COV for one year only. After sufficient examination, the division may determine that a one-year expansion of the COD or COV is appropriate.

(c) Statistical measures.

(i) The measure of central tendency shall be the mean for parametric samples and the median for nonparametric samples.

(ii) The measure of dispersion shall be the COV for parametric samples and the COD for nonparametric samples.

(iii) To achieve statistical accuracy in determining assessment level under Subsection (2)(a) and uniformity under Subsection (2)(b) for any property class, subclass, or geographical area, the minimum sample size shall consist of 10 or more ratios.

(3) Each year the division shall conduct and publish an assessment-to-sale ratio study to determine if each county complies with the standards in Subsection (2).

(a) To meet the minimum sample size, the study period may be extended.

(b) A smaller sample size may be used if:

(i) that sample size is at least 10 percent of the class or subclass population; or

(ii) both the division and the county agree that the sample may produce statistics that imply corrective action appropriate to the class or subclass of property.

(c) If the division, after consultation with the counties, determines that the sample size does not produce reliable statistical data, an alternate performance evaluation may be conducted, which may result in corrective action. The alternate performance evaluation shall include review and analysis of the following:

(i) the county's procedures for collection and use of market data, including sales, income, rental, expense, vacancy rates, and capitalization rates;

(ii) the county-wide land, residential, and commercial valuation guidelines and their associated procedures for maintaining current market values;

(iii) the accuracy and uniformity of the county's individual property data through a field audit of randomly selected properties; and

(iv) the county's level of personnel training, ratio of appraisers to parcels, level of funding, and other workload and resource considerations.

(d) All input to the sample used to measure performance shall be completed by March 31 of each study year.

(e) The division shall conduct a preliminary annual assessment-to-sale ratio study by April 30 of the study year, allowing counties to apply adjustments to their tax roll prior to the May 22 deadline.

(f) The division shall complete the final study immediately following the closing of the tax roll on May 22.

(4) The division shall order corrective action if the results of the final study do not meet the standards set forth in Subsection (2).

(a) Assessment level adjustments, or factor orders, shall be calculated by dividing the legal level of assessment by one of the following:

(i) the measure of central tendency, if the uniformity of the ratios meets the standards outlined in Subsection (2)(b); or

(ii) the 95 percent confidence interval limit nearest the legal level of assessment, if the uniformity of the ratios does not meet the standards outlined in Subsection (2)(b).

(b) Uniformity adjustments or other corrective action shall be ordered if the property fails to meet the standards outlined in [Subsection]Subsections (2)(b)[.] and (c). A corrective action order may contain language requiring a county to create, modify, or follow its five-year plan for a detailed review of property characteristics.

(d) All corrective action orders shall be issued by June 10 of the study year, or within five working days after the completion of the final study, whichever is later.

(5) The commission adopts the following procedures to insure compliance and facilitate implementation of ordered corrective action.

(a) Prior to the filing of an appeal, the division shall retain authority to correct errors and, with agreement of the affected county, issue amended orders or stipulate with the affected county to any appropriate alternative action without commission approval. Any stipulation by the division subsequent to an appeal is subject to commission approval.

(b) A county receiving a corrective action order resulting from this rule may file and appeal with the commission pursuant to rule R861-1A-11.

(c) A corrective action order will become the final commission order if the county does not appeal in a timely manner, or does not prevail in the appeals process.

(d) The division may assist local jurisdictions to ensure implementation of any corrective action orders by the following deadlines.

(i) Factor orders shall be implemented in the current study year prior to the mailing of valuation notices.

(ii) Other corrective action shall be implemented prior to May 22 of the year following the study year.

(e) The division shall complete audits to determine compliance with corrective action orders as soon after the deadlines set forth in Subsection (5)(d) as practical. The division shall review the results of the compliance audit with the county and make any necessary adjustments to the compliance audit within 15 days of initiating the audit. These adjustments shall be limited to the analysis performed during the compliance audit and may not include review of the data used to arrive at the underlying factor order. After any adjustments, the compliance audit will then be given to the commission for any necessary action.

(f) The county shall be informed of any adjustment required as a result of the compliance audit.

 

KEY: taxation, personal property, property tax, appraisals

Date of Enactment or Last Substantive Amendment: November 30, 2017

Notice of Continuation: January 3, 2012

Authorizing, and Implemented or Interpreted Law: Art XIII, Sec 2; 9-2-201; 11-13-302; 41-1a-202; 41-1a-301; 59-1-210; 59-2-102; 59-2-103; 59-2-103.5; 59-2-104; 59-2-201; 59-2-210; 59-2-211; 59-2-301; 59-2-301.3; 59-2-302; 59-2-303; 59-2-303.1; 59-2-305; 59-2-306; 59-2-401; 59-2-402; 59-2-404; 59-2-405; 59-2-405.1; 59-2-406; 59-2-508; 59-2-514; 59-2-515; 59-2-701; 59-2-702; 59-2-703; 59-2-704; 59-2-704.5; 59-2-705; 59-2-801; 59-2-918 through 59-2-924; 59-2-1002; 59-2-1004; 59-2-1005; 59-2-1006; 59-2-1101; 59-2-1102; 59-2-1104; 59-2-1106; 59-2-1107 through 59-2-1109; 59-2-1113; 59-2-1115; 59-2-1202; 59-2-1202(5); 59-2-1302; 59-2-1303; 59-2-1308.5; 59-2-1317; 59-2-1328; 59-2-1330; 59-2-1347; 59-2-1351; 59-2-1365; 59-2-1703