In response to the protests of property owners, the State of Ohio, over the last decade, has adopted several property tax relief measures.
The Non-Business Credit (formerly known as the 10% Rollback): A 10% across-the-board rollback on all real property tax bill was enacted in 1971. This real property tax benefit was added to win legislative support for Ohio’s first enacted income tax. Over time, this benefit has undergone changes. In 2006, House Bill 66 removed this rollback on all commercial and industrial properties. The benefit was further diluted with the elimination of the credit for residential and agricultural parcels, beginning with “new money” levies passing in the November 2013 election. Levies categorized as “new money” levies include additional (new) levies, replacement levies (that increase the effective tax rate), and the “increase” portion of levies classified as “renewal with an increase.” The benefit remains intact for any old/original levies passed prior to November 2013.
Owner Occupancy Credit (formerly known as the 2 ½ % Rollback): In 1979, an additional 2 ½ percent rollback was applied to owner occupied homes. However, like the 10% rollback, this benefit was also diluted with the elimination of the credit for residential and agricultural parcels, beginning with “new money” levies passing in the November 2013 election. Again, covered under “new money” levies include additional (new) levies, replacement levies (that increase the effective tax rate), and the “increase” portion of levies classified as “renewal with an increase.” The benefit remains intact for any old/original levies passed prior to November 2013.
Homestead Exemption: Authorized via a constitutional amendment in 1970 and beginning in 1971, Ohio granted property tax relief through a homestead exemption program. Originally designed for low-income homeowners aged 65 and older, the program included 3 tiers of possible amounts exempted from taxation, based upon income. The program was overhauled in 2007. The changes removed the income requirements, making the homestead benefit available to all homeowners age 65 and older, and those permanently and totally disabled. Moreover, the computation of the homeowner benefit changed substantially. The new benefit was fixed with a reduction of $25,000 in the market value of the homestead property. Existing recipients at the time that the 2007 change was made received the greater of their original benefit, or new benefit available on the 2007 ($25,000 market value reduction) program.
Beginning in 2014, means testing (income requirements) again apply to new recipients. Therefore, the homestead benefit has become more restrictive, and new recipients are eligible only if their income is equal to or less than the amount prescribed by State law, adjusted to annually correspond to changes in consumer price index (CPI). At the time of legislative passage, that amount was $30,000 of Ohio Adjusted Gross Income. The amount for the first year that the means test will be in effect, considering the CPI changes is $30,500. The benefit for those homestead recipients previously qualifying remains intact in the most beneficial of the previously determined methodologies.
Although local taxing authorities do not lose funds as a result of the rollback and homestead exemptions, recent changes in the homestead and rollback laws shift the burden of property tax from the State of Ohio to local homeowners.
Local taxing districts do not lose money as a result of the rollback or homestead exemptions. The state fully reimburses each taxing district using state tax money.
CAUV (Current Agricultural Use Value): Special tax treatment for agricultural land was authorized by Constitutional amendments in 1973. Land used for agricultural purposes may be valued and taxed on the basis of its agricultural use rather than on its “highest and best” use. This gives farmers, especially in urban fringe areas, a tax break. It is authorized in the conservation section of the Constitution with special treatment for certain forest land.
House Bill 920 (H.B. 920): The most controversial and complicated measure to limit property taxes is the use of tax credits to calculate real property taxes. It is an accepted tenet in Ohio that voter approval of a specific number of mills on the ballot is not authorization for a set tax rate into the future, but rather is approval for collecting the amount of money that the approved millage produces when voted. This view of taxation holds that property taxes should not increase through appreciation in property values due to inflation, but only through a vote of the people.
Until 1976, the Ohio legislature subscribed to a policy of reducing outside millage whenever property increased in assessed value so that only the same amount of revenue was collected as the previous year. In 1976, the legislature enacted H.B. 920, a new procedure to limit property tax growth. The new law authorized H.B. 920 credits that reduce millage rates to keep increased property valuations from producing “windfall” revenues for taxing districts.
The Department of Tax Equalization calculates the percentage reduction in voted levies necessary to provide the same number of dollars to each local government as it received the previous year from the same millage. That percentage, the tax reduction factor, is applied to each parcel of property in that taxing district. The 920 credits do not apply to revenue from the inside millage, increases from new construction, or to taxes levied to repay debt. These are the only areas of property tax revenue growth.
These credits offer relief to taxpayers by restricting much of the growth in property tax revenue from inflation. But this “freeze” causes serious problems for local governments, especially school districts, when costs continue to inflate rapidly. There is no state reimbursement for revenue not collected as a result of these credits.
Real Estate Tax Exemption: Qualifying non-profit organizations that own real estate may be exempt from real estate taxation.