Legislative proposal would end rural property tax exemption
BISMARCK (AP) -- State lawmakers are considering a proposal that would cut the property tax bills of all North Dakota homeowners while eliminating a property tax exemption for farm residences.
It would replace an existing two-year, $341.8 million subsidy plan that provides money to finance reductions in North Dakota school districts' property tax rates.
Rural lawmakers on the Legislature's Taxation Committee, which discussed the idea Friday, said they expect opposition to the plan's suggestion to eliminate a long-standing property tax exemption on farm homes.
North Dakota farmers and ranchers pay property taxes on land they use to raise crops and graze cattle, but their homes and the land upon which their homes sit are exempt.
Rep. Craig Headland, R-Montpelier, said farmers' property tax bills already rise as the value of their property increases. Eliminating the tax exemption for their homes would be another burden, he said.
"You're going to essentially give 21,000 North Dakota residents a property tax increase on their house," Headland said Friday.
The committee's chairman, Sen. David Hogue, R-Minot, said the plan would extend property tax credits to all resident North Dakota homeowners. The credits would ease, if not eliminate, the impact of the removal of the farm-residence tax exemption, Hogue said.
The Taxation Committee will vote later on whether to endorse the proposal. It is preparing suggested bills for the 2013 Legislature, which begins in January.
The present property tax subsidy plan benefits all North Dakota real estate owners. It lowers the property tax bills of homeowners, farmers, ranchers and business people, and benefits property owners who live outside North Dakota.
Only North Dakota resident homeowners would benefit from the new proposal, which would reduce the market value of their homes before the property tax is calculated.
One suggestion would knock $75,000 off a home's market value before its property tax is added up. The approach would exempt a home worth $75,000 or less from property taxes and knock down the bill for a house valued at $100,000 by more than 70 percent.
A $75,000 credit against the value of all North Dakota homes would reduce local governments' property tax collections by $364 million over two years, the state Tax Department estimates. Under the plan, the Legislature would provide money to local governments to make up the difference.
Hogue said the idea would focus subsidy benefits on homeowners, who are the most vocal source of complaints about their property tax bills.
"This would be more efficient," Hogue said. "There's always been a recognition that property taxes on a pipeline, or on a commercial building, is different than on a residence for somebody who is on a fixed income."