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A new, stronger law was recently approved to protect Missouri taxpayers from “back door” real estate tax increases caused solely by reassessment. The new legislation takes effect August 28, 2008 and will bring substantial changes beginning with the 2009 biennial reassessment.

Loophole Closed in Rollback Requirement

The 1980 Hancock Amendment to the Missouri Constitution states that if a taxing jurisdiction’s total real property assessed value (excluding new construction and improvements) rises due to reassessment by more than the rate of inflation, the taxing body shall reduce or “rollback” their maximum-allowed tax rate.

This prevents counties from getting a windfall tax increase due solely to the reassessment process. However, some local governments got around the rollback requirement by setting their tax rates below the voter-approved, maximum-allowed level.

The new law (SB 711) mandates that all taxing jurisdictions, regardless of whether they are operating at or below their legal tax rate ceiling, must roll back their tax rates to a roughly revenue-neutral point. The only remaining increases allowed in an reassessment year are for new construction & improvements, inflation and any new voter-approved rate increases.
 

In a non-reassessment year, a taxing jurisdiction may modify its tax rate up to its maximum authorized voter-approved levy through the adoption of an ordinance, resolution, or policy statement. The new law requires the taxing body to allow public testimony at a public hearing prior to setting the new tax rates.

The revised version of the law is more consistent with the original goal of the Hancock Amendment, which was to place and keep the power to increase taxes in the hands of the voters, not the taxing entities who receive and use the funds.

Improved Notification

Under the new law, assessors must notify property owners by June 15 each year of any real property assessment increases. At that time, they must also provide an estimate of the tax liability that will be due based upon the new value.

The notification requirement begins in 2009 for the largest, charter counties and the City of St. Louis. All the other counties in Missouri must do the same beginning in 2011.

Supporters of the bill say they hope the early notification will give taxpayers more time and information to appeal their assessment, if necessary.