On Monday March 23rd, HB2128 was signed into law allowing state assessment ratios on property leased to churches or religious organizations to be reduced by 95%. According to Supervisor Buster Johnson, the reduction will only further impact the state’s troubled financial situation. “This bill will result in property tax losses for local governments as well as cost the state upwards to $2.1 million by fiscal year 2016,” Johnson stated.
The Joint Legislative Budget Committee (JLBC) currently predicts that by the end of the fiscal year state expenditures will be $257 million more than state revenue. The courts have also ruled that the state owes $1.3 billion to the schools for inflation back payments which lawmakers have not paid nor included in their current budget. “With the financial situation of both the state and counties, instead of legislators looking to close up loop holes they are adding more exemptions,” Johnson stated. “This reduction with also further hurt other taxing jurisdictions within the counties such as schools and fire districts,” Johnson continued.
According to Supervisor Johnson, this legislation is both costly and unnecessary. “Some commercial property owners help with lease payments for churches. The county’s libraries and senior centers are also available to all non-profits if they need space until they can afford to get their own building. We currently have one church who holds their Sunday service at the library for this very reason,” Johnson explained.
Under current Arizona law, buildings owned by churches or religious entities already receive a significant tax break. This bill will allow the landlords who rent to these organizations to receive the same break. According to Mohave County Assessor Ron Nicholson this is a significant reduction. “Instead of a commercial property owner paying taxes based on 18% of the property’s value, they will now pay 1% of that value,” Nicholson explained. An amendment added HB2128 would require the churches to sign an affidavit stating the savings was passed onto them.
“With the passage of this bill, more of the state budget is being funded on the backs of homeowners,” Johnson stated. In 2011, state lawmakers passed a corporate income tax reduction of 0.5 percentage points a year, settling at 4.9% in 2018 along with a 10% reduction in various business property-tax category assessments.
Supervisor Johnson feels this tax break makes an unequal playing field among non-profits and takes taxable property off the tax rolls. “By offering this tax break to property that is being leased we are doing unforeseen harm to the housing market by removing property that would otherwise bring in revenue for counties and the state,” Johnson said. “With other non-profits not getting this break, it could also open the door for more tax breaks in coming years for other types of organizations. This is bad legislation and will cost the state a considerable amount of revenue and hurt local taxpayers over time,” Johnson ended.
The bill passed the House on a 33-25 vote and the Senate on an 18-11 vote.