LEGISLATIVE ACTION NEEDED 

In our earlier notice, we have informed you of legislation we have filed to prohibit tax assessors from sitting on jury like boards and commissions which decide property tax appeal cases. 

We have previously been successful in passing legislation to prohibit assessors and tax collectors from sitting on local county boards of equalization.  So that the taxpayers will be guaranteed fair hearings throughout the appeals process, it is important that assessors also be prohibited from sitting on the Tennessee Assessment Appeals Commission .

However, we have discovered a bill filed in the Legislature which would guarantee that a tax assessor will sit as a member of the Appeals Commission.

This bill is Senate Bill 3588 / House Bill 2833.

Please contact the bill’s sponsors tell them that you are opposed to their bill which would permit tax assessors to sit on the Tennessee Assessment Appeals Commission.

Please email or call each and tell them you are opposed to SB 3588 and HB 2833. 

Contact Information:

Representative Curry Todd  - HB 2833
rep.curry.todd@capitol.tn.gov   -  615-741-1866

Senator Bill Ketron –  SB 3588
sen.bill.ketron@capitol.tn.gov  -  615-741-6853

Thank you for your help and cooperation.

Email this post

Proposed Legislation for 2010

Tennessee Taxpayers has proposed new legislation to correct inequities to the taxpayers. 

 Assessment Appeals Commission
 
This bill is regarding who may sit on the Tennessee Assessment Appeals Commission. The Appeals Commission was created for the sole purpose to provide fair and impartial tax hearings.   Therefore, the Commission membership must be fairly constituted with no member having the appearance of bias or conflict of interest.

As you know from our earlier report, Assessors Should Not Sit on Assessment Appeals Commission, at the present time there are a number of Assessors on this Commission.  This is clearly unfair to the taxpayers. 

 The Assessors are the parties opposing the taxpayers. 

The proposed legislation would prohibit Assessors, or any government employees or officials, from sitting as members of the Commission.  (Read Bill)

This legislation is similar to that enacted earlier regarding county boards of equalization where the Legislature also prohibited Assessors and government officials from sitting on those boards.

In order to guarantee fair hearings, similar remedial legislation must be passed regarding the Appeals Commission.

Business Gross Receipts Tax Audits

Beginning this year, the State has taken over the administrative functions of the local business taxes.   Taxpayers will now file all city and county gross receipts tax returns to the State instead of to their local governments. (Read Previous Report – More Control by State – Higher Taxes for Taxpayers. 

The local governments will still be sent their share of the funds as required by present law (approximately 60%).

However, the State conducts audits and if any taxes are shown to be underpaid, then the State keeps all of these additional taxes including the local governments’ share.

This appears to us to be inappropriate. 

A share of these underpaid taxes no doubt belongs to the local governments.    

Our bill (Read Bill) provides that the State may retain the costs of audits, but must return to the local governments their proper share of the additional taxes.

Other Important Issues:

There are, of course, other important tax issues pending in the Legislature. 

For example, the issue of our governments hiring lobbyists to enact legislation to decrease our rights or increase our taxes is an issue which must be addressed.  See our report, Our Governments Hire Lobbyists to Raise Our Taxes.  

Also, our report, Is Real Assessment Equalization Dead In Tennessee, discusses the loss of the taxpayers’ rights to compare the assessments and taxes of their neighbors’ properties.   Until recent times, taxpayers could judge their assessments by comparing them to their neighbors. 

Not anymore.  The right has been taken away. This has been accomplished through some suspicious decisions in the administrative appeals process.  The right to really equalize asessments needs to be restored to the taxpayers.

Another  important issue concerns equalizing rights to amend tangible personal property returns.   Read our post, What a Difference a Word Makes!

We have numerous other bills pending regarding tax issues which are being unfairly applied to taxpayers.

Of course, we always review all pending tax legislation and will oppose any bill which would impose unfair provisions upon taxpayers or will delete any of the rights we now have.  

We can make a difference in the Legislature and achieve legislation fair to the taxpayers.  If we take no action, all that will result is more unfair procedures and tax increases.

©  copyright – Tennessee Taxpayers Association – January 28, 2010

Email this post

Are Taxes Ever Fair? Beware!

This year there have been numerous reports issued by various tax organizations regarding  the effect of the different taxes that Tennessee taxpayers are required to pay.   Some of the organizations proclaim taxes are unfair to certain groups of taxpayers and others tell us what a good deal we have in Tennessee. 

For example, it was just reported in November by the Commercial Appeal that Tennesseans who earn under $17,000 pay 11.7 per cent of their income in State and local taxes while those with incomes greater than $414,000 pay only 3 percent of their income in State and local taxes.  The Institute on Taxation and Economic Policy issued the report:

NASHVILLE  The Tennessee tax system is the fourth most regressive among the states, with lower-income families paying a higher portion of their income in state and local taxes than do more affluent households, according to a national study released Wednesday.

When all of Tennessee’s state and local taxes are considered, the study found that Tennessee families earning less than $17,000 per year pay 11.7 percent of their income in state and local taxes, compared to 3.1 percent paid by households earning $414,000 or more, the top 1percent.  Read More.

Unfair?  Probably to those making less that $17,000, but not reported in the article were  the number of taxpayers having incomes under $17,000 and the number of taxpayers having incomes greater than $414,000.  Also, omitted were the incomes and percentage of taxes for the obvious large number of taxpayers who are between those reported incomes.

In October this year, the Chattanooga Free Times interviewed The Tax Foundation which revealed that Tennessee has the highest combined State and local sales tax in the country.

Tennessee has the highest combined state and local sales tax rate in the nation, the Tax Foundation reported today.

The average combined state and county sales tax rate in Tennessee is 9.41 percent.  By comparison, the combined state and local sales tax rate averaged 7.02 percent in Georgia and 6.15 percent in Alabama.

The state of Alaska, which benefits by its tax collections from oil, gas and other natural resources, has the lowest combined sales tax rate average at 1.61 percent.  Read More.

Unfair?  Again probably.   There has never been any doubt that  Tennessee sales taxes are high.

On the other hand,  in the same month the Chattanooga Free Press interviewed The Tax Foundation on where Tennessee stood in the Nation with regard to property taxes.   The Foundation gave Tennessee taxpayers pretty good news.  Here’s part of the story:

Property taxes in Tennessee are only about half the U.S. average . . . .   Read More.

Fair?  Yes, for most property taxpayers.  Yet,  Shelby County taxpayers don’t think so.  Their property taxes are far above these levels, e.g. property taxes in Memphis are 75% more than in Nashville and 53% more than Chattanooga.

The Nashville Business Journal reported that a study by Kiplinger.com  indicated that Tennessee was among the best places in the Country for retirees. 

Tennessee is considered as one of the better states for retirees when it comes to taxes, according to a state-by-state analysis published by Kiplinger.com.

The Volunteer state ranks high because it has no broad-based income taxes — which means Social Security benefits, IRA distributions and pension income are not taxed.   Read More.

Fair?  Maybe for the retirees.  But some other taxpayers complain that they have to make up the lost tax income to subsidize the costs of government enjoyed by these retirees. 

In July, The Tax Foundation reported that Tennessee has a very favorable tax climate:

Tennessee’s State/Local Tax Burden Among Nation’s Lowest.  During the past three decades Tennessee’s state and local tax burden has consistently ranked among the nation’s lowest.  Estimated at 8.3% of income, Tennessee’s state/local tax burden percentage ranks 44th highest nationally, well below the national average of 9.7%.   Read More.

This report indicates that while there may be inequities within the system, Tennessee taxes rate low in the overall tax burden.  That good report covers three decades.  

Fair is a word you often hear in taxes, but is rarely achieved.  What is viewed by one group of taxpayers as fair is viewed as unfair by another group.  There are  many special interest groups seeking exemptions and the State and local tax codes are unbelievably rife with such exemptions which have been granted over the years. 

Other special interest groups want to directly transfer most of the tax burden to one group.  

This is where the taxpayers should beware!

The above report releases by the various tax organizations appear to be good recipe for passing the State Income tax. 

Releases such as Tennessee’s taxes are among the most regressive, we have the highest sales tax rates, our property taxes are low, and that overall our tax standing is among the nation’s lowest.   All those are good fuel for advocates of the State income tax.

There are special interest groups out there working diligently to achieve a State income tax, i.e. Tennesseans for Fair Taxation.  Their legislative bill to achieve this is still filed in the Legislature.  They seek to repeal sales tax on food and reduce the sales tax to 3%, but only after enacting a progressive State income tax.     

We don’t view the income tax as the means to solving any of Tennessee’s financial problems.   Perhaps it would be perceived as fair to those who would be forced to pay little or no income tax, but to most of the Tennessee’s taxpayers it would be perceived as unfair.  

A State income tax would also be devastating to the taxpayers, especially in view of the economy and the expected increases in the Federal Income Tax from the Obama administration.  

We have enough taxes. Yet, it seems our governments are very creative in seeking new ways to tax us more.  For example in Shelby County, the politicians are now talking about a hospital bed tax to fund The Med.   Read   On a national level,  there’s Obama’s war tax.  It never ends.    

However, even though there are some unfair inequities within our tax system, we have a favorable report from The Tax Foundation.  Overall, our taxes are among the lowest in the Nation.  

We need to keep it that way.  

We also agree the  sales tax should be reduced and/or eliminated on many items.

We feel that the only way to fair taxation is to reduce government expenses.   Then, some of the regressive taxes could be reduced.

It can’t be done?  Don’t think so?

Take a look at Representative Stacy Campfield’s list of things to do to save tax money.   List   

There are many other things governments could do.  A couple more to start with would be to stop hiring lobbyists and quit taking expensive trips (the Governor has been to China twice in the past two years).

Governor Bredesen is struggling at the present time with what cuts could be made.   However, he has so far only mentioned items that always make taxpayers uneasy to be without.  Read  Governor Struggles! 

At the same time the Governor talks about decreases in government spending, he predicts another increase in the unemployment tax paid by employers (which we all know are eventually passed on to the consumers, us).  Read Unemployment Tax Hike Unavoidable.  

This increase would follow a $160 million unemployment tax increase imposed on employers just this year.

Something has to give from the government side. 

Beware reports on taxes from special interest groups.  Most have an agenda and it could be to get more of your money.

If you wish to email your Legislators to let them know the we should cut spending and not raise taxes or impose new ones, here is a link to a list of the Legislators.    List

Email this post

More Control by State – Higher Taxes for Taxpayers 

During this Legislative session, some State  agencies were busy pushing for laws to takeover more local city and county taxing functions.  These new laws will eventually, and in many cases immediately, mean higher taxes for all State taxpayers.

Takeover – Gross Receipts Business Tax

The Tennessee Department of Revenue was successful in including a major tax law change in the Governor’s Technical Corrections Bill.  

Governor Phil

Omnibus Public Chapter 530 consists of 52 pages and 132 sections of tax law changes.

A review by our attorneys indicate that Section 92 of the Public Chapter 530 requires changes with respect to the filing of returns, computing tax amounts, and the method for payment of the gross receipts business taxes.  

  

Following is how our attorneys see the effects of the new taxing procedures.

 

1.  All business tax returns must be filed with, and all taxes must be paid to, the Department of Revenue.
 
Previously all business tax returns were filed with, and all taxes were paid to, the local governments.  Then the local governments sent the State its portion of the taxes.

True, the State receives a share of the taxes and will return the local governments’ portion.  However, the local governments receive the major portion of the taxes and have always retained control of the process.  

We feel it is wrong to take away local taxpayers’ contact with the local officials they elected to administer the taxes. 

In addition, these local government officials (usually County Court Clerks) are being paid to administer and collect these taxes. 

We don’t see any evidence of a planned tax reduction due to the lower costs of local government.

 

 2.  The deduction allowance against the business tax for the amount of personal property taxes paid is now reduced to no more than 50% of the total taxes paid to the local government and the State. 

Prior to the change, the taxpayer could deduct the amount of paid personal property taxes up to 100% of the business taxes.
 
This decrease in allowance is an obvious hidden tax increase for the taxpayers.   For some taxpayers, the increase will be substantial.

 

The new law goes on by making clear some unfair practices that the State claims are existing practices.

 

3.  It provides that the local governments receive the first 5% of the revenues and then the remainder is split 57% to the  local governments and 43% to the State.

Not much change here.  The percentages work out close to the previous percentages. 

 

4.  The Department of Revenue also has the right to audit business taxpayer returns and the State gets to keep 100% of any funds recovered from the taxpayers.

This provision is clearly unjust to the local governments and the taxpayers who support them. 

The local governments and taxpayers are completely denied receiving their proper share of these recovered tax funds. 

 

 5.  The law further requires that businesses which are also located within a municipality, must pay the gross receipts business tax not only to the county but also must pay the same amount again to the municipality.

In addition, the State is to receive 43% of the extra tax paid to the municipality. 

 

Wait a minute!

Did we just notice that the business taxpayer pays the taxes once to the county and then if located within a municipality, must pay the same tax amount again to the municipality? 

That’s right.

However, what is not right is for the State to receive another 43% per cent of the tax paid to the municipality.  

Although not a new practice, it is made clear from the new law that if a business is located inside a city, the business must pay the State its 43% twice for the privilege of doing business in the State. 

Isn’t that double taxation?  

Our attorneys think it is.

The State Attorney General thinks it is too, but also thinks that it is legal double taxation.

Nevertheless, the business tax is a privilege tax for doing business in the State.  

Regardless of the legalities of the issue, we feel it is unfair for the State to be paid twice by one business in one location.   

 

There you have it: 

One more example of growing government control and taxes.

It is amazing that State and local governmental agencies are still able to write new tax laws and have many of them approved by the Legislature without opposition.

Help TTA oppose these expansions of government and hidden tax increases.  Join and support!

copyright – Tennessee Taxpayers Association – October 15, 2009

 

 

 

 

 

 

 

Email this post

 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

Email this post

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

Email this post

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

Email this post

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

Email this post

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.

Email this post

 It is our experience that fairness is not to be expected by Tennessee’s taxpayers. The only way to obtain such an unreasonable goal is to fight for it.            Jerry R. Caruthers, President

Not too long ago TTA finally convinced the Tennessee Legislature to permit tangible personal property taxpayers to file amended personal property assessment returns.   This right allowed the taxpayers to correct their errors, or request the Assessor to correct his or her errors, made in the original return. 

However, the State and local assessment officials strongly resisted, all the way to the bill’s final passage, to the taxpayers having this right.  On the other hand, with regard to just about any type tax return we can think of at any other governmental level, the taxpayers have long had the right, for a reasonable period of time (sometimes up to 3 years),  to file corrected or amended returns.  

Prior to passage of Amended Personal Property Return law the taxpayer’s only recourse was to catch errors early and file an appeal with local county board of equalization in June.   This allows the taxpayer about 3 months to file such an appeal.  

After the county board appeal rights have expired, if the taxpayer made a mistake in reporting the correct amounts of property, or if an unfavorable mathematical error was made by the taxpayer or the assessor, there was no way such errors could be corrected.  The taxpayer was just plain stuck with the erroneous taxes with no way to receive a refund of the overpaid amounts.

On top of all these injustices, a State administrative judge recently decided that only the original taxpayer or filer of the original return could file an amended return and, therefore, correct any errors made in the original return by the seller.

This meant that if a property was sold and the purchaser subsequently discovered errors in the return filed by the Seller, the State said no way can the purchaser file an amended return.   A purchaser, even though required to pay all or a portion of the the taxes, had no such rights as the original owners.

Justice Finally

After long appeals, the Tennessee Assessment Appeals Commission reversed the judge’s position and held that purchasers are successors in interest to the original owners and have the same rights to amend the original returns; a common sense ruling.  (Commission’s
Decision)

Thanks to this ruling, one more issue of fairness is again resolved in favor of the taxpayers, but not without fighting for it.

© copyright – Tennessee Taxpayers Association – September 30, 2009

Email this post

It Appears That the Various Levels of Our Government May be the Largest Users of Lobbyists in Tennessee 

There are government paid professional lobbyists, governmental association lobbyists, governmental staff members, and elected and appointed officials who are all lobbying our State Government to further governmental interests that are often adverse to the interests of taxpayers. 

Governmental lobbyists, governmental association lobbyists, governmental officials, officers, and employees are ubiquitous in the halls of the Legislature.

Why are they there?  Of course, it is usually all about the money.

Should the various governments be permitted to spend public funds to hire lobbyists to work against taxpayer interests?

NO! !

There is an obvious conflict with the taxpayers and citizens when these lobbyists are used in governmental efforts such as  1) seeking new forms of taxation  2) seeking to increase or expand existing taxes  3) seeking new or increased fees or charges against citizens  4) seeking to obtain hidden tax increases by deleting taxpayers’ rights in the taxing process and in appeals or protests  5) opposing legislation sponsored by individuals and private groups or associations which would promote fairness to taxpayers.

The conflict may even be an unavoidable one when public funds are used to pay lobbyists for any governmental purpose. 

Below is a list of single officials, cities, and counties that hire professional lobbyists.  There are numerous other government agencies and districts such as utility companies and school districts, but we don’t have to list these lobbyists to demonstate the broad use of lobbyists by our governments. 

This information was gathered from the records of the Tennessee Ethics Commission.

In addition to these directly hired lobbyists, often governments and government officials will join together in associations in order to be more effective in influencing the Legislature and/or the Administration.  In this way all the interests of governments and/or the actual officials can be represented by lobbyists.  

The largest local government associations that hire professional lobbyists are:

The County Services  Association is comprised of three other associations;  the Association of County Mayors, the Tennessee County Commissioners Association, and the Tennessee County Highway Officials Association.  

The County Officials Association is composed of County Clerks, State Court Clerks, Registers and Trustees.  

The TN Municipal League is composed of Tennessee cities and towns. 

Some of these same Associations, plus others, also have in-house registered lobbyists. 

There are also other governmental agencies and associations whose officers or directors regularly lobby legislators on behalf of their agencies or associations but have not registered as lobbyists with the Tennessee Ethics Commission.  For example:

This Assessors Association proudly proclaims on their website how well their Director has shepherded important legislation through the Legislature.

Therefore, governments, in one form or another, wield enormous power and influence through the use of lobbyists.

Taxpayers presently do not match the power of these government lobbyists, but collectively they do have the potential to far surpass them.  After all, there are more taxpayers than government officials and taxpayers can collectively afford to counter any efforts by the governments to take and/or waste our funds through direct or hidden agenda tax legislation.

Taxpayer power in government affairs is possible and can be obtained through the efforts of the Tennessee Taxpayers Association.   Join and Support.

       copyright – Tennessee Taxpayers Association – August 16, 2009

Email this post

 
Taxpayers in Memphis & Shelby County Pay Extra $61 million in Taxes to Allow for Appeals.
 

Our original article dated July 2, 2009, Truth in Taxation in Tennessee: It Needs to be Enforced, contained information about the allowance for decreases in assessments and taxes that local governments are permitted to charge taxpayers in the tax rates for estimated tax losses due to taxpayer appeals.

Local governments are required to reduce the tax rate in a reappraisal year to compensate for the value increases the Assessor gives them in increased property values for assessments.  However, there is one loophole.  The governments may add to the reduced tax rate an allowance for estimated tax reductions resulting from appeals of the assessments and taxes.

It was reported in the July article that Shelby County had estimated that over $40 million (actually now over $42.8 million) in County taxes would be lost through appeals.  We pointed out that we thought the estimate was excessive and just another way for a hidden tax rate increase.   

We now have learned that the City of Memphis has provided in its tax rate an extra $18.5 million ($.16 of its tax rate) to allow for anticipated tax losses due to taxpayer protests and appeals.

This means that taken together over $61 million in extra taxes are being collected from Memphis and Shelby taxpayers to allow for tax appeals reduction estimates. 

We do not yet have the Knoxville and Knox County allowance for tax appeal losses, but we do have that information for Nashville and Davidson county. 

Davidson county (USD) has estimated $1.3 million dollars in anticipated tax losses to appeal and Nashville (GSD) has an allowance of slightly over $11.2 million. 

Together, Nashville and Davidson County have estimated tax appeal losses of over $12.5 million and are charging their taxpayers that much more in taxes for 2009 to allow for those expected losses. 

In order to compare these allowances to Memphis and Shelby County, the assessment bases have to be compared. 

Guess what?  The assessment base in Davidson County is almost the same as the Shelby County assessment base.  Davidson County’s total property assessment is approximately $19.6 billion and Shelby County total property assessment is approximately $19.5 billion. 

Why then have Memphis and Shelby County increased their taxpayers’ taxes by over $61 million to allow for expected tax appeal losses while Nashville and Davidson have increased taxes on their taxpayers by only $12.5 million to allow for appeal losses?

Some of the difference is explained in that Nashville and Davidson County’s total tax rate is only $4.13 while the total tax rate for Memphis and Shelby County is $7.2157 or almost 75% more.  

This should not, however,  make Memphis and Shelby County taxpayers feel much better because it shows them that due to the higher tax rate they have to pay 75% more taxes on their homes and other property than Nashville and Davidson County taxpayers. 

If the Nashville and Davidson County appeals allowance is increased by 75% that would be an adjusted equivalent appeals loss allowance of approximately $21.9 million for Memphis and Shelby County, still way short of the extra $61 million charged their taxpayers for anticipated tax losses to appeals.

The message from this information appears to be that Memphis and Shelby County taxpayers may be well overtaxed for the appeals allowance. 

We won’t know for sure until next year and the big question then is, will the governments give any excess back to the taxpayers? 

We think not.

copyright – Tennessee Taxpayers Asssociation – August 6, 2009

Email this post

It appears that for at least the last four years, perhaps more, Shelby County taxed properties located outside of Memphis based on tax rates higher than the tax rates applied on properties located inside Memphis.

For example, in 2008 for homeowners who were located inside Memphis, the County tax rate applied to their assessments was $4.04 per $100 assessment.   Homeowners located outside of Memphis, received a tax rate of  $4.09 per $100 assessment, $.05 per $100 more than City homeowners.   The higher tax rate was, of course, also applied to commercial and industrial properties. 

For 2009, Shelby County has done it again.  For properties inside Memphis City limits the tax rate is $4.02 and for properties located outside the City limits, the tax rate is $4.06, or, $.04 less if located inside Memphis.

Why did Shelby County charge the County taxpayers located outside of Memphis more?

It is generally explained that the higher rate was necessary to retire a bond issue for schools.

We’re not sure that it is fair that County residents must pay on a higher tax rate, but these days in government “fair” doesn’t get much consideration. 

But, there is a larger question looming on this less than “uniform” County tax rate. 

Did Shelby County violate the Tennessee Constitution and State statutes in setting separate tax rates for properties based upon whether they were  located inside or outside Memphis city limits?

According to our legal advisors, the Tennessee Constitution requires uniformity in taxation.  They advise that Article II, Section 28(c), specifically states that with regard to tax rates:

Each respective taxing authority shall apply the same tax rate to all property within its jurisdiction.

This is clear language that raises the question whether the County could have been wrong in applying two different tax rates to its taxpayers based upon location. 

Shelby County is a single taxing authority, yet its tax rate varies within certain districts.   In other words, the same tax rate has not been uniformly applied to all property within the County jurisdiction.

We understand that a suit may be filed to seek County tax refunds and reduced tax bills for properties located outside the City of Memphis. 

Regardless of need for extra revenue, we all should abide by the Constitution and the State Statutes.

copyright – Tennessee Taxpayers Association – August 2, 2009

Email this post

We are sending out a partial copy of the  July 1, 2009, post on their research page, The Facts on Tennessee’s Tax Climate report.  Some of these statistics indicate that Tennessee has a favorable tax climate in many areas. 

Following is the report:

Tennessee’s State/Local Tax Burden Among Nation’s Lowest
During the past three decades Tennessee’s state and local tax burden has consistently ranked among the nation’s lowest. Estimated at 8.3% of income, Tennessee’s state/local tax burden percentage ranks 44th highest nationally, well below the national average of 9.7%. Tennessee taxpayers pay $3,160 per capita in state and local taxes.
Tennessee’s State-Local Tax Burden, 1977-Present
Other States’ State/Local Tax Burdens
Historical Chart Comparing All States’ State/Local Tax Burdens from 1977 to 2008

Tennessee’s 2009 Business Tax Climate Ranks 17th
Tennessee ranks 17th in the Tax Foundation’s State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. Neighboring states ranked as follows: Kentucky (34th), Virginia (15th), North Carolina (39th), Georgia (27th), Alabama (21st), Mississippi (19th), Arkansas (35th) and Missouri (16th).
50-State Comparison of Business Tax Climates (data only)
2009 State Business Tax Climate Index, Sixth Edition (full study)

Tennessee’s Individual Income Tax System
Tennessee’s personal income tax system consists of a flat 6% rate on exclusively dividend and interest income. No other personal income is subject to state taxation. Tennessee’s 2006 individual income tax collections were $32 per person, which ranked 43rd among states levying personal income taxes.
50-State Table of Individual Income Tax Rates
50-State Table of State Individual Income Tax Collections
50-State Table of State and Local Individual Income Tax Collections Per Capita

 

Tennessee’s Corporate Income Tax System
Tennessee’s corporate tax structure consists of a flat rate of 6.5% on all corporate income. Among states levying corporate income taxes, Tennessee’s rate ranks 29th highest nationally. In 2007, state-level corporate tax collections (excluding local taxes) were $183 per capita, which ranked 18th highest nationally. 
50-State Table of Corporate Income Tax Rates, 2000-2009
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household, 2005
50-State Table of State Corporate Income Tax Collections Per Capita, 2006

Tennessee Levies Sales Tax above National Median; Cigarette Tax among Lowest in Nation
Tennessee levies a 7% general sales or use tax on consumers, above the national median of 6%.State and local governments combined collected $1,360 per capita in general sales taxes in 2005, which ranks 5th highest nationally. Tennessee’s gasoline tax stands at 21.4 cents per gallon, ranking 34th highest nationally. Tennessee’s cigarette tax stands at 62 cents per pack of twenty and ranks 38th highest nationally. The sales tax was adopted in 1947, the gasoline tax in 1923 and the cigarette tax in 1925. 
50-State Table of Sales and Excise Tax Rates
50-State Table of State and Local General Sales and Gross Receipts Tax Collections Per Household and Per Capita, Fiscal Year 2005

Tennessee Property Tax Collections Low
Tennessee’s local governments collected $683.96 per capita in property taxes during fiscal year 2006, which is the latest year the Census Bureau published state-by-state property tax collections. Tennessee is one of the13 states that collect no state-level property taxes. Its per capita property tax collections in FY2006 rank 42nd nationally.
State property tax collections per capita by state

Federal Tax Burdens and Expenditures: Tennessee is a Beneficiary State:
Tennessee taxpayers receive more federal funding per dollar of federal taxes paid compared to the average state. Per dollar of Federal tax collected in 2005, Tennessee citizens received approximately $1.27 in the way of federal spending. This ranks the state 19th highest nationally and represents a rise from 1995 when Tennessee received $1.07 per dollar of taxes in federal spending (25th highest). Neighboring states and the amount of federal spending per dollar of federal taxes collected were: Kentucky ($1.51), Virginia ($1.51), North Carolina ($1.08), Georgia ($1.01), Alabama ($1.66), Mississippi ($2.02), Arkansas ($1.41) and Missouri ($1.32).
Comparing the amount of federal taxes sent to Washington with the amount of federal spending coming back to the state

Email this post

 This new tax is a result of  recent legislation which increased the taxable wage base and added a surcharge to the tax rates. 

 Legal advice has indicated to us that employers should pay the increase in unemployment tax under protest.   There may be a constitutional challenge to the legislation and if the taxpayers have not paid the taxes under protest, they may have to forfeit a refund of the additional taxes.  

 Legal advice also indicates that each employer should make sure the payment check clearly indicates “Paid Under Protest”.  It is also recommended that “Paid Under Protest” be written on the transmitting document and a short letter sent indicating that the taxes are being paid under protest.

 This year the Legislature enacted legislation permitting the Department of Labor and Workforce Development to increase taxes on employers in order to keep the reserve fund in a positive balance. Both the wage limits and the tax rate were increased.

The recent legislation increased the taxable wage base from $7,000 limit to $9,000 limit and an additional fee of .6% on all premium rates was added.

These increases are reported to produce more than $240 million dollars in annual revenue.

The Department of Labor Commissioner James Neeley estimated that the additional tax would cost employers $108 per employee.

There was considerable controversy in the House side of the Legislature as the bill advanced toward passage. It appeared to us that answers to some questions posed were not completely understood.  There was enormous stress on the extreme urgency that we must raise taxes on employers in order to keep the Federal Government from taking over the State’s unemployment compensation system.

Some Legislators asked the sponsors and Labor Department representatives if there were possible alternatives to an increase; such as, employees sharing the costs, not extending the benefits, increasing the taxes by smaller amounts, or obtaining funds from general revenues. Some Legislators felt that the placing all the increase on the employers was plainly the wrong time to increase taxes on employers when unemployment is so high.

Other Legislators reasoned that increased taxes would be an incentive for employers to lay off, or not hire, more employees in order to save taxes. These Legislators felt that increasing this tax was taking us in the wrong direction in the middle of a deep recession.

Taking a position on this bill was indeed a problem for the Legislators. No-one wanted to deny extended benefits to unemployed workers and no-one wanted the Department’s reserve to be exhausted which was warned to be low and would default if the bill was not passed.

The American Recovery and Reinvestment Act made $141 million dollars available to Tennessee to extend unemployment benefits for up to 20 weeks to unemployed workers. In order to receive these funds, Tennessee agreed to extend unemployment benefits to part time and seasonal workers.

Also, included in the requirements, were increased benefits for unemployed workers with dependents at $15 each per week for those dependents under 18 years old.

Legislators were told that the $141 million from the Federal Government would take care of these extra benefits for about six years at $25 million per year. The question would not be answered if Tennessee would continue these benefits on its own at the end of this period.

Other Legislators were confused about sunset provisions. There were some. The increased wage base for the increased reserve does sunset once the reserve reaches $1 billion, but would decrease some when the reserve reached $900 million. The increased tax rate would sunset after the reserve reaches $ 600 million.

The reasons for this tax increase are definitely a problem. Some Legislators were told that Tennessee needs to catch up in its reserves and should tax employers more to be equal with other states. We are not sure about this and do not favor tax increases just to keep up with other states.

We feel that other sources of revenues should have been explored before increasing taxes by $240 million against employers. It was never satisfactorily explained that other sources or other methods of taxes were even considered.

While the unemployed deserve compensation and should not be denied, taking $240 million away from employers is going to make it difficult for the employers and may even cause more unemployment. There was also no fairness in the bill by making large employers who lay off more employees pay more of the additional taxes.

It appears to us that this legislation could have considered other sources of revenues for the unemployed, been more fairly distributed among employers, and now may even wind up being unconstitutional.

Email this post

Re: SB 2196 / HB 2175 – A Bill to Recognize Foreclosure Effects upon Assessment Values

Tennessee Taxpayers Association prepared and presented this bill to the Legislature in order to permit Tennessee assessors to recognize that values in neighborhoods decrease from the effect of foreclosures.   The Shelby County Assessor of Property, Cheyenne Johnson, supported the concept of this bill before it was filed.  We do not believe that opponents in the Legislature would have initially accepted it without her assistance.

Prior to the passage of this new law, statutes, rules, and precedents prevented sales made at foreclosure from being used to establish values for other properties. 

This new law will make it possible for the assessors and the boards of equalization to treat taxpayers fairly in appraising their homes at what they are really worth; not some fictitious price higher than the true market value. Without this new law, it would have been very difficult (perhaps impossible) for Tennessee’s taxpayers to receive true justice reflected by real market values.  

Senator Jim Kyle (D) of Shelby County and Speaker Lois DeBerry (D) of Shelby County were the legislative sponsors of the bill and we are very grateful for their hard work to effect its passage. Many taxpayers will also be grateful to these sponsors once they protest their assessment values that have been affected by numerous foreclosures.

The bill started as a general bill with local application to only Shelby County because Shelby County had been hit particularly hard by many foreclosures.  Taxes are also much higher in Shelby County than in the other 94 counties. 

However, lawmakers from other counties recognized the value that this bill would have when their counties are reappraised for assessments and taxes. Therefore, an amendment was added  to make the bill have state-wide application. 

This bill should help many struggling taxpayers to possibly avoid foreclosure.  

Thanks again to the legislative sponsors, the Shelby County Assessor, and the Tennessee General Assembly for this new law.

Email this post

Taxpayers Pay Extra Taxes for Appeals Loss Allowance – But Unused Portion is Never Returned

After a county has completed a reappraisal, each local taxing jurisdiction is required to reduce its tax rate in order to generate the same revenue that was produced the prior year.  By keeping the same tax rate, local governments are kept from enjoying a windfall increase in revenues from the increased values .  

Prior to this requirement, local governments could leave the tax rate the same as the year before and claim they did not raise taxes, yet in fact they actually did through the valuation increases.

This reduced rate in Tennessee is called the “Certified Tax Rate”.  In most states it is referred to as the “Truth in Taxation” law.  

If the local governments need additional revenues, they must first lower the rate to the certified amount and then increase the rate.  This lets taxpayers know if a tax rate is increased.  

The system worked fine in Tennessee until the State permitted the local governments to add an estimate of refunded tax dollars to the reduced certified rate. The estimate is what the local government may have to pay to the taxpayers if  the appeals are successful.  

For example, in Shelby County this year the County reduced the tax rate from $4.04 to $3.81 due to the increases in assessments from the reappraisal.  The County then added back an estimated amount of $.21 to anticipate losses due to successful appeals. At this time, we have been unable to obtain the allowance for Nashville and the tax rate has not been set for Knoxville .   We will follow up on these.

This tax rate allowance was based upon estimated assessment losses of over $1.06 billion that will be reduced by appeals.   This amounts to over $40,000,000 in tax dollars estimated to be lost in appeals to the County Board of Equalization.  

That is believed to be well overestimated.   According to the Memphis Daily News, some members on the Commission expressed that everyone knew what was really going on.

The amount which is excessive and not reduced by the appeals should be returned to the taxpayers the following year. 

Our Association was present in the Legislature when the law was proposed to permit the local governments to add the expected tax loss from appeals to the certified rate. 

We recognized that this would be just another way of increasing the tax rate without the local government taking responsibility for the increase.  This was  because there was no provision requiring the local government to return the overestimated losses to the taxpayers.   

Therefore, this Association successfully added the following amendment to the statute permitting this loss estimate:

The state board of equalization shall order recapture of an excessive adjustment in the following year if the certified tax rate is found to have been overstated due to overestimation of the appeals adjustment, and in these cases the jurisdiction may exceed the recapture rate only after public hearing.  TCA § 67-5-1701(a)(5)

This amendment was meant to keep the estimates from getting out of hand. 

We could see that if there was no provision for return or accounting the next year, then there was great incentive to overestimate tax losses and increase local revenues without a visible tax rate increase.

It is the responsibility of the State Board of Equalization to order that the excessive adjustment be recaptured.  If the jurisdiction is going to exceed the recapture as ordered, there must be a public hearing on the matter so the public will know they are not going to receive a return of the overestimated tax losses and that the tax rate is actually being increased, all a part of “Truth in Taxation” as it should be.

This Association will be expecting enforcement of this law in Tennessee cites and counties at the proper time.

 copyright – Tennessee Taxpayers Association – July 2, 2009

Email this post

Could you get your assessment and taxes reduced if your neighbors’ assessments and taxes are lower?

Ask any taxing authority if you, as an owner and taxpayer, may compare your property’s assessment (per sq. ft. or other basis) to your neighbors’ or business competitors’ assessments in order to receive a similar assessment. The answer would probably be this process is not allowed. These authorities assert that this procedure is an improper basis for protest and appeal.

Sound unfair? It is! After all, we always thought we were supposed to be equal in the taxation of our property. To compare to similar properties and equalize assessments and taxes is a basis that taxpayers can understand and feel is fair.

Nevertheless, in the present system, you cannot use such as a basis for equalization.

Some years ago you could compare assessments to achieve fairness in taxation, and it worked well. In recent times, the State Board of Equalization has held, and enforced in the various counties, that equalization is achieved through application of an “overall sales ratio”.

Unfortunately, Tennessee is not alone in this application. Numerous states do the same, i.e. Florida. On the other hand, others, such as Texas specifically permit practical comparisons of assessments as a basis for appeal.

Now what does overall sales ratio mean and how does it work?

The Division of Property Assessments, under the guidance of the State Board of Equalization, performs sales ratio studies for each of our 95 counties. Simply put, this process is nothing more than comparing the assessor’s appraisals of properties which have sold to the sales prices and developing a percentage. For example, if the assessor’s appraisal is $95,000 and the property sold for $100,000, the sales or appraisal ratio for that property is 95%.

They also mix commercial, industrial, and residential sales all together and calculate an overall ratio. The State performs this function every two (2) years.

Once the ratio for a county is published, the taxpayer is technically stuck with only one way to a reduction; which is, prove that the assessor’s appraisal is above market value. Then, the taxpayer is entitled to the State’s form of equalization consisting of multiplying the proven market value times the overall sales ratio for the taxpayer’s county.

It is easy to see that if the ratio is 100%, and many are, then the taxpayer gets nothing in the way of equalization, only the market value. If the ratio is 95%, then the taxpayer gets a 5% reduction from the market value, but only after having first proved the market value of the property.

What a bad deal for the taxpayer! If the taxpayer cannot prove the taxpayer’s property is appraised at more than market value, even though his neighbors or competitors enjoy lesser assessments and taxes, the taxpayer loses. Practical fairness is no longer a factor.

What is wrong with using only an overall sales ratio method of equalization? Let us review a few things:

1. The overall part is clearly erroneous. We have classification in our State. Commercial and Industrial properties are assessed at 40% of value, Residential and Farms at 25% of value. There should be separate ratios applied from separate sales studies. There are clearly many more sales of residential properties than commercial and industrial properties. To mix all the sales of all the classes of properties together will produce an erroneous distorted result. That result is usually a higher ratio which favors the local governments over the taxpayers.

 

2. The studies are performed only every two (2) years. Several years ago the procedure was changed from every year presumably because as real estate values increase (at least on a historical basis recent economic downturn not considered) each year, the ratio would go down each year and would favor the taxpayer.

 

3. The assessors have the right to challenge and eliminate sales from the studies. Each county taxing jurisdiction desires a high ratio, so the pressure is there to eliminate those sales which would lower the ratio. Otherwise, the county could lose revenue through having a lower appraisal ratio applied to values. Please keep in mind that the appraisa ratio is automatically applied to all tangible personal property assesments. Therefore, there is even more pressure on the ratio.

 

4. The method for selecting sales to include in the study may be flawed because a review of the State’s sales ratios for 2008 indicate that most fall within 90% to 100%. This is a clear disadvantage to a taxpayer who feels that the taxpayer has been discriminated against in the appraised value.

 

5. Use of only the sales ratio method of equalization has relieved the assessors from the burden of explaining why a taxpayer’s neighbors may be assessed on a lower basis.

 

6. By eliminating practical comparison equalization, therefore the assessors do not have to justify to anyone any unequal appraisals. This has opened the door for possible political favoritism for some taxpayers over others. Before the market value and appraisal ratio system, the taxpayers were the best watchdogs of the property tax system by exposing any unequal appraisals or assessments to the boards of equalization.

 

Our firm has developed a proprietary method for introducing as much direct comparable evidence as we can to help equalize our clients’ taxes. We recommend the taxpayer present as much information as any body hearing the tax case will allow. Even though this evidence may not be considered, it could persuade the hearing body to consider more closely your other arguments to value.

In fact, our Counsel advises us there may be a legal basis for overturning overall ratio only equalization.

First, they advise that the State statutes provide that boards are unlike courts and are not restricted to strict rules of evidence. Further, they point out that the Tennessee Constitution requires equality and uniformity of assessment ratios within each class or subclass of property.

Practical equalization is what taxpayers understand and is the only way the general public will be able to use our system effectively. Practical equalization will also ensure that all taxpayers are treated as equally as possible. If not, at least it can be pointed out to the boards of equalization in a form everybody can understand.

copyright – Tennessee Taxpayers Association – July 1, 2009

Email this post

During the past and current Legislative Sessions, the local and State governmental agencies introduced legislation to add a single word to the statutes regarding the filing of  Tangible Personal Property Returns for property taxes.

That one word was “timely”.

The legislation passed (unopposed) and the word “timely” was inserted before the word “filed” in the statutes regarding amended property schedules and automatic application of appraisal ratios. 

If a taxpayer does file the tax schedule after March 1st, the typical procedure is for the county board of equalization to accept the schedule and value the property in the same manner as the timely filed schedules. The taxpayer usually has until June to file these late schedules with the county boards.

Here are the adverse effects to the taxpayers as a result of the legislative change:

1. If a taxpayer files the schedule timely (before March 1st), that taxpayer may correct any errors made by filing an amended schedule before September 1st of the following year. If the schedule is filed after March 1st, the taxpayer may not file an amended schedule at all and no errors may be corrected. If the errors are discovered after the county board deadline in June, there is no way for corrections to be made or for the taxpayer to receive a refund of the erroneous taxes.

 

2. If the Assessor of Property makes an audit of a “timely” filed schedule, the Assessor is limited to only auditing back one year. If the schedule is not filed “timely”, the Assessor may audit and increase assessments as far back as three years. This is a major financial change against the taxpayers.

 

3. Assessments resulting from “timely” filed schedules are eligible for automatic application of the appraisal ratio. The appraisal ratio is a percentage calculated by the State for each county. It is based upon a comparison of real estate sale prices and the Assessor’s appraisals. For example, in Nashville for 2008 the appraisal ratio was .8380. In Shelby County the ratio was .9330. Therefore, the assessment and taxes resulting from a “timely” filed schedule received an automatic reduction of 16.2% in Davidson County and 6.7% in Shelby County. If the schedule is filed even one day late, the taxpayer does not receive these reductions.

 

All these new enactments simply amount to hidden tax increases and a means to gain more tax dollars from audits. The Taxpayers become trapped and cannot escape erroneous assessments and taxes.

Extensions for filing the schedules are not available to the taxpayers in order that they may avoid these harsh hidden tax increases and tremendous loss of rights. This is extremely unfair to the taxpayers. The filing date of March 1st if very early compared to most states and most states do allow extensions to file without penalties. Tennessee is not tax friendly in that regard.

In addition, unbelievably, taxpayers who do not file tangible personal property schedules at all may be better off than those who file after the deadline of March 1st and  filed with the county boards of equalization that meet in June.

This resulted from a separate bill passed this year in which the Legislature approved legislation to permit  taxpayers, who failed to file any schedules at all for up to two years and received forced assessments, to file the very late schedules. If the assessments were excessive, the assessments were adjusted and refunds were issued less a penalty (25% of the reduction in taxes). Refunds, less penalties, are also available to these types of taxpayers if the forced assessments are audited and found excessive.

However, those taxpayers who actually filed schedules, but filed them after March 1st with the county boards of equalization, suffer penalties of 100% because no amended returns may be filed if mistakes were made in the original filing. In addition, if the account is audited and found to be over-assessed, those taxpayers are not eligible for any refunds.

by continuing to file inconsistent hidden tax seeking legislation, the local and State governmental agencies have created a very unfair tangible personal property assessment system in Tennessee.

Tennessee Taxpayers Association will be there in the future to keep such bad legislation from passing and also plans to have bills filed to correct some of these inequities.

Email this post

The press seems to blame any corruption or bad legislation mainly on the lobbyists.  Frankly, I have never read any good things that were printed in press articles which referred to lobbyists.

When there is reform due to some public corruption, the lobbyists usually wind up more restricted than the public office holders. 

This is why the public perception of lobbyists is so low.

We should feel differently.  Lobbyists are good for our system.  They serve the people.

They represent and make known to the Legislators the point of view and needs of their employers.  This needs to be done.  How else are the Legislators going to find out how a bill will affect the people or a segment of our society.   

With over 2,000 bills filed in the Legislature, the Senators and Representatives do not have time to read these bills.  Even reading them may not explain what a bill will actually do.  

To fully comprehend the effects of a bill, it is necessary that each law affected must be researched.  Then, often the punch line is missed, the hidden agenda, or the real purpose of the bill.

Therefore, the Legislators need lobbyists to explain the proposed legislation and how it will affect people.

Of course, just like any other profession or occupation, there are always a few bad apples in the barrel.  That will always be true.

However, lobbyists are good and honorable people who gain credibility by telling the truth to the Legislators. 

Once a Legislator has found out a lobbyist’s statements were misleading, the Legislator has lost reliance upon that particular Legislator.  Therefore, lobbyists must tell it like it is or they will lose their credibility and effectiveness and the Legislators no longer will listen.

There are all kinds of lobbyists.   There are large lobbyist firms with long client lists, small individual lobbyists, and in house lobbyists for Associations and Corporations.  

If these are all paid to lobby Legislators or the Administration, they must register with the Tennessee Ethics Commission which regulates them and their employers to ensure no illegal monies are paid or illegal activities take place.   The Commission polices the industry.

In Tennessee it is difficult and expensive to be a lobbyist.  It used to be easy.  Pay$25 and that was just about it.  The lobbyists were required to report their annual contributions to any Legislators and they were made public. 

The lobbyist laws are complex now and it is so difficult and regulated that some Legislators have even considered doing away with the Tennessee Ethics Commission and starting all over again.

Now, who uses lobbyists?  From the long list of employers registered with the Ethics Commission, the list is a cross segment of our society.   All types of special interest associations, corporations, individuals, and governments.

Therefore, we all directly or indirectly rely upon lobbyists to tell our story and protect our interests in the government process.

Email this post