HB1386
To Amend The Law Concerning The Assessment Of Property; To Amend The Law Concerning Substantial Improvements To Real Property; And To Amend The Method Of Valuation For Real Property Under Arkansas Constitution, Article 16, § 5.
AI-Generated Summary
This bill proposes amendments to Arkansas law concerning property assessment and valuation. It introduces a definition for "substantial improvement," specifying that it is an improvement increasing a property's assessed value by at least 25%. However, necessary repairs to remedy natural disaster damage are excluded from this definition, unless they use materials of higher quality than the original damaged property. The bill also modifies the rules for determining the true market value of real property. For residential property, only property within the state will be considered. For commercial property, out-of-state property may be considered only if no comparable in-state commercial property exists. These changes are set to take effect for assessment years beginning on or after January 1, 2025. The Act aims to clarify and potentially alter how certain property improvements and valuations are handled for tax assessment purposes.
Potential Impact Analysis
Who Might Benefit?
Property owners in Arkansas who undertake substantial improvements to their real property, particularly those making necessary repairs after a natural disaster, may benefit from this bill. The exclusion of necessary repairs from the definition of a "substantial improvement" could prevent an immediate increase in assessed property value and subsequent property taxes, provided the repairs do not exceed the quality of the original components. Additionally, commercial property owners who may have had their property valuation influenced by comparable out-of-state properties could see a change in their assessment if this bill limits such considerations.
Who Might Suffer?
Local government entities responsible for property tax assessment and revenue collection could be negatively impacted. The new definition of "substantial improvement" may lead to fewer properties being revalued upwards due to repairs after natural disasters, potentially reducing the tax base. Furthermore, changes in how commercial property valuation is determined, by potentially limiting the use of out-of-state comparables, could affect assessed values and thus tax revenue for these entities if it results in lower valuations. Property owners who undertake improvements that exceed the 25% assessed value threshold, or who use higher-quality materials in repairs after a disaster, might see their property taxes increase.