Pennsylvania Property Tax

 

Pennsylvania Property Tax Information

Appeal Tax

Appeal of an Assessment

The assessment laws afford to the property owner and the taxing districts the opportunity to appeal an assessment to the county board of appeals (and, subsequently, the court of common pleas, if applicable). In an appeal, the burden of proof rests with the party bringing the appeal to produce sufficient, credible, and relevant evidence as to the value of his property once the county board of assessment establishes prima facie validity of its assessment by placing the record into evidence. The law stipulates that an appeal does not prevent the collection of taxes upon the assessment.

 

In any appeal, the board or court is required to determine the following:


The market value of the property as of the date such appeal was filed with the board;

The common level ratio published by the STEB on or before the first day of July of the year prior to the tax year being appealed to the board.

 


After determining the market value of the property, the county board responsible for hearing assessment appeals must then apply the established predetermined ratio to this value unless the common level ratio published by the STEB varies by more than fifteen percent (15 percent) from the established predetermined ratio, in which case the board shall apply that same common level ratio to the market value of the property.

 

Valuation of Property

Pennsylvania assessment laws require that real estate be valued according to its “actual value” and at a bona fide rate and price for which the property would separately sell. The courts have interpreted actual value to mean market value. Market value has been defined by the Pennsylvania State Supreme Court as “the price in a competitive market a purchaser, willing but not obligated to buy, would pay an owner,willing but not obligated to sell, taking into consideration all the legal uses to which the property can be adapted and might reasonably be applied.” To establish the “actual” value of property, the county may use current year market values or it may adopt a base year for market values. For the most part, properties are assessed at a set percentage of base year values. Property is only assessed at current market value when a countywide reassessment has been conducted and implemented. Unless a county reassesses all properties every year, the property assessments will be predicated upon base year values (the last year in which the county reassessed). The same methodology must be used to value property throughout the county; that is, when a county adopts a base year for market value, then all property in the county must be valued as of the same base year. The assessment laws state that “the price at which any property may actually have been sold in the base year or the current tax year is to be considered but is not controlling. Such selling prices can be increased or decreased as part of the valuation process to accomplish equalization with other similar property within the taxing district.” Recent sales of comparable properties, that is, properties of a similar nature, are persuasive but not conclusive in helping to establish the market value. The properties selected need not be identical. The sales prices, however, are useful in showing relative values by bringing out characteristic qualities, whether similar or divergent.

Comparison based on sales may be made according to location, age, income, expense, use, size, type of construction and in numerous other ways. When valuing property, three approaches must be considered in conjunction with one another; they are cost (reproduction or replacement, as applicable, less depreciation and all forms of obsolescence), comparable sales, and income approaches. Although all three approaches must be considered, they do not all have to be used in arriving at the final valuation of the property. The approach used may differ dependingupon the type of property involved (e.g., commercial, residential, income-producing).

 

Calculating the Tax Bill

Once the market value of the property is established, then the county predetermined ratio is applied to the value to determine assessed value. The board of county commissioners in each county is empowered to set the county predetermined ratio. This ratio of assessed to market value may not exceed 100 percent. The county predetermined ratio is then applied to the base year value or the current market year value to calculate the assessed value of properties throughout the county.


An assessment, then, is a percentage of the market value of the property. The assessment is the foundation which the taxing authorities use to determine the amount of real estate taxes based on their tax rates.

For example: If the current market value or base year value of Property A is $100,000 and the county’s predetermined ratio is 40 percent, then the assessed value is $40,000 [$100,000 x 40 percent].


Hypothetically, the county may levy five mills for the real estate tax; the township in which the property is located may levy ten mills for the real estate tax; and the coterminous school district may levy 20 mills for the real estate tax. The owner of Property A would, therefore, be liable to pay real estate taxes in the amounts of $200 to the county [$40,000 x .005], $400 to the township [$40,000 x .01], and $800 to the school district [$40,000 x .02]. This is the general method by which property is valued and assessed throughout the Commonwealth.

 

MARKET VALUE X COUNTY PREDETERMINED RATIO  ASSESSMENT


ASSESSMENT X MILLAGE RATE
  TAX BILL

 

All properties within the taxing district must be “uniformly” assessed at a similar ratio. This is necessary in order to satisfy the requirements of Article VIII, Section I, of the Pennsylvania Constitution that provide that all taxes must be uniform on the same class of subjects within the territorial limits of the authority levying the tax. The controlling principle in matters of valuation is
that no one taxpayer should pay anymore or less than their proportionate share of the cost of government. Equalization may require periodic reappraisals of all parcels within the county, initiated at the discretion of the county commissioners.

Until recently, Pennsylvania courts had upheld the statutory measure of assessment uniformity using thecounty’s common level ratio last published by the STEB (see definitions). In so doing, the courts had repeatedly stated that a taxpayer may not successfully raise a uniformity challenge by comparing his or herassessment-to-market-value ratio with assessment-to-market-value ratios of neighboring properties. Uniformity was only to be determined by applying the STEB ratio to the property’s market value in order to arrive at the correct assessment. On December 27, 2006, the Pennsylvania Supreme Court held that courts were required to examine evidence of the assessment-to-market-value ratio of comparable properties in determining whether or not uniformity was violated, if such evidence was presented. This case may raise concerns about the constitutional validity of statutory provisions that preclude examination of comparable property in the appeal process.

 

Pennsylvania Homestead/Farmstead Exclusion - Act 50:

Passed in 1998 lets participating counties to offer property tax reductions on their primary residence. To recieve
the discount you need to file a homestead or farmstead exclusion with your local assessors office.

 

GOVERNOR RENDELL SIGNS BILL TO DELIVER LARGEST PROPERTY TAX CUT IN PENNSYLVANIA HISTORY $1 BILLION CUT WILL BE DELIVERED TO PENNSYLVANIA

HOMEOWNERS; SENIORS WIN BIG

Governor Edward G. Rendell today signed Special Session House Bill 39 (SS HB 39) into law at the home of Nellie Hughes, which will completely eliminate the Nanticoke woman’s property tax burden, as well as property taxes for hundreds-of-thousands of seniors.  SS HB 39 delivers the largest property tax cut in Pennsylvania history – $1 billion annually to all Pennsylvania homeowners. 

“After 30 years of debate and failed plans, Pennsylvanians like Nellie Hughes will finally get the tax relief they deserve,” said Governor Rendell, who was joined by other Nanticoke homeowners who will also see significant property tax relief.  “Today is a great day for Pennsylvania homeowners, especially seniors who have been driven from their homes as they attempt to escape the burden of skyrocketing property taxes for far too long.   Here in Luzerne County, 42 percent of all seniors will get the full cost of their school property taxes paid for by the state – that is nothing short of remarkable.

“This day is a major victory for Pennsylvanians who have fought for decades to have their property taxes cut.  Every homeowner in Pennsylvania will not only get significant reduction, but they will finally get a say in future tax increases.   This bill represents a victory of the possible over politics-as-usual.”

In addition to guaranteed property tax relief for every homeowner from gaming revenue, SS HB 39 guarantees Pennsylvania voters will have the option of reducing their property taxes by at least another $1.4 billion in the spring of 2007 by voting to shift a portion of their property taxes to local income taxes. 

SS HB 39 also ensures that more than $250 million of the $1 billion from gaming will go to seniors with incomes under $35,000.  Nearly 600,000 Pennsylvania seniors will benefit from higher state rebates or will be added to the state rebate program for the first time by increasing the maximum income limit to $35,000 (which excludes half of Social Security income) and raising the top rebate to $650. 

The historic property tax reduction will mean Mrs. Hughes, 88, who has lived in her home for more than 50 years, will receive the top rebate and drop her property tax bill to $48. Once gaming revenue hits $400 million, the Greater Nanticoke Area School District resident will pay zero property tax.

“When I traveled across this state as a candidate, I heard from seniors in every corner of Pennsylvania who shared the dire circumstances they face and the difficult decisions they must make to keep their homes.  From putting off purchasing medicine to skipping meals, Pennsylvania’s seniors were falling victims to rising property tax bills. Today, more than 200,000 seniors will have that burden lifted completely – and, another half-a-million will finally get tremendous relief. 

“This bill will not just benefit seniors, however.  When I called a Special Session of the Legislature on Property Taxes last September, I asked that each and every homeowner benefit from gaming proceeds.  By signing this bill, we guarantee that every Pennsylvania homeowner’s property tax bill is reduced, and that taxpayers will have input in their school tax bills.

“While our work is never really finished as we work to improve the lives of Pennsylvanians, today we made a tremendous step in the right direction.”

Governor Rendell said this bill was the product of that special session and he thanked House and Senate leaders and members who worked very hard to craft the bill he signed.


Highlights of SS HB 39

Fast property tax relief.  Pennsylvania’s senior citizens – who are on fixed incomes and need the most immediate tax relief – will not have to wait for the revenue from gaming to start coming in before they receive tax relief.  And, relief for all taxpayers will come sooner because of the requirement that $100 million be held in reserve (The initial reserve was $400 million).  This more reasonable reserve level will expedite the delivery of broad-based property tax relief.

No State imposed income tax shift.  A previous requirement to raise the earned income tax (EIT) by one-tenth-of-one percent in order to qualify for state-funded tax relief is eliminated.  Now, every school district will be able to receive tax relief from the state – without any mandate to raise local taxes.  SS HB 39 leaves the decision to shift to income taxes up to local voters, with no strings attached.

Greater taxpayer control over future school tax increases in every school district.  Beginning this year, taxpayers in every school district will have a greater voice in tax increases.  School boards will still be able to raise property taxes each year to keep up with inflation – and even more in many communities – but sensible and fair voter controls mean that taxpayers will now have a direct say in the most extreme tax increases.

More flexible referendum exceptions.  The new law wisely expands the exceptions for special education, health care costs and pension obligations.  The 10 exceptions that school boards could seek in order to raise taxes faster than inflation because of emergencies or educational necessities are maintained – and they add greater flexibility where school districts need it the most.

New ability to combat high wage taxes:  SS HB 39 gives Scranton the power to use up to half of its state allocation from gaming to reduce its wage tax – which is the second highest in the state.  The law also maintains Philadelphia’s historic wage tax relief, which, when combined with the city’s own mandated tax reductions will bring the wage tax below 4 percent for city residents starting in 2009.  Because cities with high wage taxes will be unlikely to ever make a shift to increase their earned income taxes to fund property tax relief, senior citizens in Pittsburgh, Philadelphia and Scranton who earn up to $30,000 a year will have their property tax rebate increase by an additional 50 percent.


Pennsylvania Counties

 
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