Tennessee Taxpayers Association

 Does the State Have a Property Tax?

If it looks like a . . . .

Ask most State Officials if the State has a property tax and the answer will be, No!

We feel otherwise and submit that an analysis of the taxes the State levies against taxpayers will show the State does indeed have a property tax.

First, consider that the property tax most taxpayers are familiar with is the tax levied locally against their homes and businesses.  This tax is known as an “ad valorem” (according to value) tax on property and is applied by only the local governments.

Under this system, the local assessor of property uses methods required by law to value the properites on a county by county basis. 

Next, as required by the Tennessee Constitution, these values are multiplied by assessment ratio percentages based upon the type or class of property (commercial = 40%, residential and farms – 25%, and tangible personal property = 30%). 

The result for each property is an “assessment” or a percentage of the appraised market value.   This is also known as a fractional assessment.

This assessment is then multiplied by the various local property tax rates, depending upon the city and/or county location, in order to arrive at the amount of taxes. 

Under the State’s property tax system, the procedure is very similar. 

First  the value of the property is derived by the taxpayer, or sometimes the Commissioner of Revenue, by using the methods provided by law for obtaining the value.

Then, the value is multiplied times a State-wide tax rate (presently $.25 per $100 of value).

Do the procedures appear similar?

They certainly do.  There is no doubt that  both the local property taxes and the State’s property taxes are derived from the values of properties (ad valorem) as determined by law.  

One of the  main differences between the local property tax and the State’s property tax is that the State omits application of the classification percentages to the value to arrive at  fractional assessments. 

This means the State taxes property based upon 100% of its value.

Another difference from the local property tax is that the State applies the tax only against properties owned by corporations, limited partnerships, limited liability companies and business trusts chartered/organized in Tennessee or doing business in Tennessee.  

Oh yes!  There is one more difference between the two taxes.  The State calls its tax not a property tax, but a Franchise tax; the Franchise tax  portion of the Franchise & Excise taxes paid annually by the above named entities.  The Franchise tax is levied as a privilege tax for the right to do business in the State.

Apparently, if a State charges a tax and calls it a privilege tax for the right to do business in the State, the tax may discriminate against the taxpayers by not applying to all taxpayers and further it may (and does) discriminate against taxpayers by charging some taxpayers the same tax twice (double taxation) for the privilege of doing business.   

Our attorneys tell us under the privilege tax sections, the courts have upheld these forms of discrimination.   

It’s unbelievable our Tennessee Constitution permits such discrimination.  Perhaps the taxpayers should demand some fairness clauses inserted.

So, we have a legal State property tax applied against 100% of the value of property which is not uniformly assessed against all taxpayers.  

The obvious conclusion is that whatever else you may choose to call it or how you apply it, a tax on property is still a property tax!

© copyright – Tennessee Taxpayers Association – 10/28,2009

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Candidate Tim Burchett Votes in Senate
Against Taxpayers

Senator Burchett

State Senator Tim Burchett is currently running for Mayor of Knox County.  He is a well liked and personable candidate.

We understand that Knox County residents are mostly conservative Republicans and taxes in Knoxville and Knox County are now reasonable; at least relative to other parts of the State.

These principles have long standing importance to Knox County residents.

However, we are concerned about Senator Burchett’s activities in the Senate with respect to local taxes and how these may carry over into his taxing activities as the Knox County Mayor.

In the Legislature Senator Burchett is a member of two powerful committees; the State & Local Government Committee and the Finance Ways & Means Committee.  All tax legislation must pass through at least one of these committees.

Let’s take a look at his voting record on some tax bills for just 2009.

• He voted “Yes” to pass out of Senate Finance, Ways, & Means Committee the Unemployment Tax Increase bill (SB 2315) which cost the State’s (and Knox County) employers $ millions, at least $160 million.  When the bill hit the Senate Floor, he also voted “Yes” for passage.   Conservative Republicans in the Senate (more in the House) voted against the bill.   See our Post on the Unemployment tax increase.

• Voted “Yes” to pass out of Senate Finance, Ways & Means Committee SB 2318, the Governor’s Technical Corrections bill which contained numerous tax provisions adverse to taxpayers.  Included in this bill was the provision for the Department of Revenue to completely takeover the local gross receipts business tax reporting and collection function.  The bill also provided for fewer deductions for taxpayers (hidden tax increases) and for the State to keep all the local governments’ share of revenue collected from taxpayer audits.  The bill further provided that if a taxpayer is located inside a city limits, the business must pay the State twice for the privilege of operating one business.  When the bill hit the Senate floor, Senator Burchett again voted “Yes” for passage.  For more information, see our Post on the new law.

• Voted “Yes” to pass out of Senate State & Local Committee SB 2110 which would have deleted one of the important appeal rights the property taxpayers now have.  This right is to collaterally attack an illegally made assessment.  The Attorney General had stated that the taxpayer had this right, but the Executive Secretary of the State Board of Equalization wanted to remove it.  The bill passed out of Senator Burchett’s Senate Committee by a five to four vote, (Burchett’s vote being crucial) but the bill finally failed in the House State & Local Committee.  Please see our Post on the bill.

• Voted “Yes” to pass out of Senate State & Local Committee SB 2111.  This bill would have required property taxpayers to go to court from decisions made by the State Board of Equalization on a judicial review basis.  This would have forbidden taxpayers from introducing new evidence in court and would have denied their long standing right to do so.  The bill would also have prejudiced the right of taxpayers to select representatives other than lawyers to represent them in tax appeals.  The bill failed in Burchett’s Committee and his was one of only two votes the bill received from the members of the Committee.  For more information, see our Post on the bill.

• Voted “Yes” to pass out of Senate Finance, Ways, & Means Committee SB 0873 which permits local property taxpayers, who had received forced personal property assessments because they had not even filed schedules of their property with the assessor, two years to have their assessments corrected.  However, the Committee would not even listen to an amendment to give a similar correction period of two years to taxpayers who had actually filed property schedules, but filed the schedules late by just even a day.  These taxpayers only have two months to have their assessments corrected by the county board of equalization.  In addition, the bill penalized taxpayers who filed late, by even just a day, by denying them the right to receive automatic application of appraisal ratio.   Senator Burchett voted “Yes” once again when the bill came to the Senate floor.  Please see our Post on this new law.

• Voted “Yes” to pass out of Senate Finance, Ways & Means Committee SB 1570 which permits the State Division of Property Assessments to intervene as a party in local assessment and property tax appeals in the five largest counties in the State (Shelby, Davidson, Knox, Hamilton, & Rutherford).  Under the bill the Division has the unconditional right to intervene as a party equal to the assessor and may overrule an assessor’s position in the event the assessor wishes to settle an appeal.   The new law also allows the State Division to file appeals if the Division disagrees with a decision by any board of equalization, including the State Board.  The Division does not even make the assessments in these counties and are non-elected State representatives with powers equal to locally elected officials.   Senator Burchett again voted “Yes” on the bill when it came to the Senate floor for approval.  Please see our Post on this new law. 

We read Senator Burchett’s campaign website and about the only thing we could find about taxes was that he was against the State income tax.

While this is a popular stand and it would be hard to be a Republican without taking such a position, his position on other taxes, particularly local taxes,  is not mentioned. 

Mayors deal with all sorts of local taxes and Senator Burchett, as Knox County Mayor, will never have the chance to vote against the State income tax.

He will, however,  have great influence upon local taxes.

Before voting for Senator Burchett for County Mayor, Knox County voters should first consider his liberal voting record on taxes to determine how he may serve as County Mayor with regard to those taxes.

© copyright – Tennessee Taxpayers Association – 10/25/2009

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New State Law Involves State in Property Tax Appeals

While not a total takeover of the total taxing function, it is a further takeover of the taxpayer appeal process in the five (5) largest counties in the State and that just about completes the takeover of the entire State in that regard.  

This new Act (Public Chapter 256) provides that:

 The Tennessee Division of Property Assessments has the unconditional right to intervene in local assessment appeals in the five (5) largest Tennessee counties (Shelby, Davidson, Rutherford, Knox, and Hamilton). 

This means that if the State becomes interested in a local assessment appeal issue in Memphis or Nashville, it has the unconditional right to become a party to the appeal with all the rights and powers of the assessor of property. 

Bobby Lee, staff attorney for the Division of Assessments,  lobbied for the bill’s passage and spoke before the Committees.  He argued unopposed that the State needed the new law in order to maintain uniformity of decisions in tax appeals throughout the State.

 Since the State Board of Equalization makes these decisions, it seems to us that the Division is accusing the State Board of being inconsistent in its decisions.

What’s wrong with this new law? 

Consider:

1. First, the State does not collect or receive any of the property tax. The tax is strictly local.

 

2. Further, the non-elected representative from the State can approve or disapprove any appeal settlement the Assessor, an elected official, wishes to make with the taxpayer.

 

3. Also, if the non-elected State representative does not agree with a decision by any board at any level, the State may independently file an appeal of that decision to have it overturned.

 

4. Still further, the Division of Assessments is a “State” agency opposing a taxpayer in a hearing to be decided by the “State” (State Board of Equalization).  Both agencies are headed by the State Comptroller’s Office.  We feel this close relationship to be inherently biased against the taxpayer. 

 

5. Finally, an intervention by the State in a taxpayer’s appeal will bring the entire power of the State and its powerful resources (combined with those of the Assessor)  to bear against a taxpayer.

  This will not be a fair fight!

The Division of Assessments already makes all the assessments for 90 out of 95 counties in our State.  It is as though there are no assessors in those counties. 

In some counties, the State Division even prints the local property tax bills.

Now they have control of the appeal process in the remaining five (5) counties.  This makes the Division a powerful non-elected organization wielding enormous influence over local property taxation. 

However, in these five (5) large counties the Division does not make the assessments and nobody there voted for them to make assessments or contest taxpayer appeals. 

These counties also did not ask for the Division to have the unconditional right to intervene into local appeals affairs. 

Many taxpayers may be  surprised to see, instead of their elected Assessor, an unknown non-elected State representative opposing them in their appeals and protests.

This is yet another recently passed law that allows the State more control over our local taxing function and received no opposition to its passage!

© copyright – Tennessee Taxpayers Association – October 15, 2009

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Unfair for Assessors to Decide Taxpayer Appeals
 

The Tennessee Assessment Appeals Commission meets throughout the State to hear property tax appeals from local property taxpayers.  This Commission is specifically charged by law to  “hear and act upon all complaints and appeals regarding the assessment, classification and value of property for purposes of taxation . . .

Having first been through the lower appeals process consisting of the Assessor, the county board of equalization, and the State Board’s Hearing Officer, the taxpayer’s last hope may be with this Commission.  

Its powerful decisions overrule all the lower officials and board decisions. 

The Commission’s decisions, therefore, set precedent for future assessment, tax, and appeal procedures that must be followed by all the assessors, lower officers, boards of equalization, and of course, the taxpayers of Tennessee. 

While The State Board has the power to review and reverse the Appeals Commission’s decisions, the State Board rarely reviews any.

It is absolutely essential then that the Appeals Commission be composed of independent members who have no inherent bias for or against any of the parties involved in a property tax appeal.

The Appeals Commission is typically composed of six primary members and a panel of nine alternate members.  Various members and alternates hear appeals depending upon whether the appeals are located in west, middle, or east Tennessee.  The alternate members often hear cases when the Commission meets in their division of the State.

Our serious concern with the present member composition is that among the fifteen total members and alternates, six of them are Assessors of Property. Two Assessors are among the six regular members and four Assessors are included among the alternates.

We do not see how it is possible that Assessors may sit on the Appeals Commission without the appearance of inherent bias in favor of the Assessors’ side of the dispute. After all, the Appeals Commission is deciding disputes between the taxpayers and the Assessors. 

The Assessors are the parties opposing the taxpayers.

For example, some time ago members of the county boards of equalization included various local tax officials.  TTA was able to cure that inequity by presenting a bill to the Legislature to forbid such members.  The Legislature agreed and passed the bill into law.

The Attorney General, however, has issued his Opinion that it is not a conflict of interest for an Assessor to sit and decide assessment appeals on this high Commission.   Of course, it is only an Opinion, but one that will permit this practice to continue and the practice may even get worse.  Soon, more Assessors may sit on the Commission.

The Attorney General did leave doubt in his Opinion by the following statements:

As your request suggests, a local assessor should not hear property tax appeals from his own jurisdiction.  A local assessor also may be disqualified from hearing a particular matter if it will set a precedent for a particular case pending in his jurisdiction.

Our point is that common sense tells us every case this high Commission hears will set precedents for an Assessor member’s county.  Every case is precedent setting for all Assessors, taxpayers, State Division of Assesments, and  county boards of equalization.  There is no escape from these precedents for these lower assessment officials.

Therefore, there is absolutely no way we can be convinced that an Assessor of Property may hear and decide, without the appearance of inherent and inescapable bias, a property tax appeal as a member of the Appeals Commission. 

Our objections are summarized below:

• Even though Assessor members may recuse themselves should any appeal involve a property located in their counties, the appearance of bias is still unavoidable.  An Assessor’s mere presence as  a Commission member places unfair pressure upon the other members when it is time to vote for or against the Assessor member’s case before the Commission.  

• What responsible judges or members of a jury would not offer to recuse themselves if they knew one of the parties to a case they had to decide?   This would have to be necessary in just about every case with Assessors.   All appeals that comes before the Appeals Commission involves Assessors from other counties who the Assessor members probably know, belong to the same organizations, attend conferences with, and have common interests, even play golf together.  

• Again, of great importance is that on any appeal which the Assessor members vote, those votes will affect the member Assessors and their counties.   This is without doubt a fact because as pointed out earlier, Appeal Commission decisions are used a precedents and guidance by all Assessors (including Commission member Assessors), lower boards, State Hearing Officers, and taxpayers.  This fact is inescapable.

All these concerns present a horribly unfair bias against the property taxpayers of Tennessee.

Packing the Appeals Commissions with Assessors, who make the assessments and are always the opposing parties, is an unavoidable conflict of interest. 

We feel the members of the State Board of Equalization should refuse to appoint assessors to this Commission.  

©  copyright – Tennessee Taxpayers Association – November 7,  2009

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Others Join In

Our breaking report in August this year on taxpayer paid lobbyists (Our Governments Hire Lobbyists to Raise Our Taxes) exposed the widespread use of lobbyists by local governments and related associations. We reported that these governments are probably the largest users of lobbyists in Tennessee and most are paid with our taxpayer dollars.

We pointed out that lobbyists were hired to assist the governments in raising our taxes and to pass other laws which diminish many of our rights including those to protest taxes. Our report also listed the names of these governments and related Associations which use lobbyists as well as the names of their lobbyists.

We let you know that numerous other governmental related agencies such as utility companies and school districts also hired professional lobbyists.

It now appears that our report has attracted significant attention and has sparked others to report on and join in the fight against taxpayer funded lobbying.

After our report was released, the Tennessee Center for Policy Research prepared a supplementary report, but it reports on the issues further. The Center’s report reveals the actual amounts of tax dollars that our various governments have paid to these lobbyists. We found their complementary report very informative and helpful to Tennessee’s taxpayers.

The Center’s full report may be read by CLICKING HERE.

Our report listed that the City of Memphis hired more lobbyists than any other government and also listed the numerous hired lobbyists. The Center’s report supplemented this information by reporting that Memphis paid more tax dollars to lobbyists than any other government. For the period 2007-09, Memphis paid lobbyists $638,357 to lobby the Tennessee Legislature and $453,785 was paid for lobbying the Federal Government.

The Center’s report lists some very interesting examples of tax increases and other passed legislation adverse to taxpayer rights which involved governments that hired lobbyists. These are obvious abuses of our tax dollars.

We at Tennessee Taxpayers Association are pleased to see that our vigilance and publishing of public information helps spur taxpayers and other organizations to engage in the taxpayers’ fight to oppose unfair laws, rules, and procedures.

Thanks to all.

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