The new frontier in property tax challenges.

• Author: Bailey, Stephen A.

Tony Beeny embarked upon uncharted territory when he filed a recent petition to challenge his property tax bill. (1) While taxpayers have been challenging tax bills as long as property has been taxed, Beeny's position is unique in that he is alleging what few have until recently: that his tax bill is too low. (2) Beeny, like several others, is attempting to take advantage of the new portability provision of the Save Our Homes Amendment (SOH Amendment) that was authorized by Florida voters in January 2008. That provision would allow homestead property owners to take their SOH savings with them to new homestead property. Beeny sold his home last year to Jason and Christine Pandolfo. (3) As is typical at closing, each party agreed to pay a prorated portion of the tax bill. (4) He received the tax notice on the old home months later. (5) Beeny then realized that he would be receiving little to no portable benefit because the just value of his home was assessed at not much more than what he had paid for it when he purchased the home four years earlier. (6) Beeny then filed a petition to challenge the assessment, claiming it was too low. (7) If successful, Beeny stands to net a savings of about $1,500 a year on his tax bill. (8) The Pandolfos are not at all happy about the request, of course, because the higher assessment could cost them as much as $3,000 a year. (9)

The struggle between Beeny and the Pandolfos illustrates one of the novel set of issues created by the portability provision. As the provision is so new, there is little on point to guide the parties and decisionmakers as they muddle through the quagmire. The key to the mess lies in the answer to the seemingly simpler question of who has the right to challenge a property assessment. On its face, the governing statute states that taxpayers have that right. The issue then becomes who is considered a taxpayer. Unfortunately, the term "taxpayer" is not clearly defined, and the opinions on the matter are few. Considering the courts' previous opinions on the matter, however, obtaining the opportunity to challenge the assessment may be quite a challenge itself for Mr. Beeny.

SOH Portability Under Amendment 1

* What is the SOH Amendment?--Amendment 1 made changes to the SOH Amendment. In November 1992, Florida voters approved the state constitutional provision which limits increases in assessments of homestead property for tax purposes. (10) Each year, property that is entitled to the homestead exemption is assessed at just value as of January 1 of that year. (11) The SOH Amendment limits changes in the assessment to the lower of three percent of the prior year's assessment or the percent change in the Consumer Price Index (CPI) for the preceding year. (12) All persons who are entitled to the homestead exemption are qualified for the SOH assessment limitation. (13) Persons with legal or equitable title to real estate upon which they maintain their permanent residence are eligible for the homestead exemption. (14)

The example in Figure 1 on the following page is given to illustrate the application of the SOH cap.

In the base year, either 1994--the year the SOH program was commenced, or the year the owner first qualified for the homestead exemption, the assessed value will always equal the just value. The increase in assessed value for every subsequent year is calculated using the previous year's assessed value multiplied by the lower of either three percent or the CPI for the previous year. In 2007, for example, the CPI for the previous year, at 2.5 percent, was used because it was the lower of the two multipliers. Also, the assessed value cannot exceed the just value. (17) In the example above, in 2004, the assessed value should have been $208,691.20 according to the SOH calculation. However, because the just value was only $205,000, the assessed value was limited to that figure.

As demonstrated in the example, the SOH cap can result in tremendous savings to a homeowner, especially during years when there are large increases in market value. Those savings are mitigated by the "recapture rule." According to the rule, the property appraiser is required to increase the assessment by either three percent or the previous year's CPI every year that the property's just value exceeds the assessed value, regardless of whether there has been an increase in just value. (18) In the example above, for instance, there was no increase in market value in 2004, but the assessed value still increased. In a declining market, benefits obtained by a homeowner would erode over time until the just value and assessed value are equal.

Even with the recapture rule, however, in the years after the SOH Amendment took effect, many owners found that the longer they stayed in a home to...