Property tax reappraisal and certified tax rates

The closest thing to a prohibition on property taxes being higher in a year of reappraisal is the certified tax rate law, sometimes called “truth in taxation.” This is a summary of the law.

Property taxes and reappraisal

Property taxes are the largest single source of funding for local governments, and are used primarily to fund public schools. The tax is based on a percentage of the fair market value of property determined as of January 1 of the tax year. The percentage of value, known as assessed value, varies according to whether the property is farm/residential property (25% of fair market value), commercial/industrial property (40%) or public utility property (55%). In addition to the property value, the other determinant of the total tax bill is the tax rate, expressed as an amount per $100 of assessed value, which is adopted by county commissions and city councils each year after considering their annual budgets. Taxpayers can discuss or complain about property value at the office of the assessor and the county board of equalization, usually during May or June of the year, and they can discuss or complain about the tax rate at the office or meetings of their county commissioners or city councilmen or aldermen, beginning usually in July of the year.

The law requires that land and buildings be revalued for property tax purposes at least every six years (sometimes more often) because actual property values change at different rates in different parts of the county. Unless the assessor’s recorded values change with these actual rates of change in value, the tax as a percentage of the actual value will be greater for one homeowner or business than for another owner of the same type of property.

Certified tax rates

Higher values during a reappraisal do not necessarily mean higher taxes. The law requires the counties and cities to reexamine property tax rates after a reappraisal to make sure higher taxable values do not automatically result in a tax increase. Known as the certified tax rate law or “truth-in-taxation”, the law requires local governments to conduct public hearings before adopting a property tax rate that generates more taxes overall in a reappraisal year than were billed the year before at the previous year’s lower values. If the new tax rate following a revaluation does not exceed the certified rate, the average tax bill may actually remain the same. If the property value increased as the result of the revaluation more than the average, the taxes may be somewhat higher, while if the value increased less than the average, the tax bill may actually be lower in a revaluation year compared to the year before.

Once a certified rate is calculated by the assessor and chief executive of the tax jurisdiction, and reviewed by the State Board of Equalization, it is submitted to the jurisdiction’s governing body for formal determination, usually for consideration with the budget. If the budget will require an increase above the certified rate, the governing body must publish notice of a public hearing on whether to exceed the certified rate and then may proceed to adopt an actual tax rate after the hearing. If the certified tax rate is exceeded, the jurisdiction must send the State Board of Equalization an affidavit of publication for the hearing notice, and a certified copy of the final tax rate ordinance or resolution.

Revising tax rates for error in CTR

Certified Tax Rate Workshop

Questions about the certified tax rate law may be directed to the State Board of Equalization at (615) 401-7883, or e-mailed to sb.web@cot.tn.gov.