DLGF Updates Tax Bills, Circuit Breakers, and Other Topics IASBO - - PowerPoint PPT Presentation

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DLGF Updates Tax Bills, Circuit Breakers, and Other Topics IASBO Annual Conference May 2018 Matthew Parkinson Deputy Commissioner and Chief of Staff 1 An Important Disclaimer The topics we are covering today are very complex. For

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SLIDE 1

DLGF Updates – Tax Bills, Circuit Breakers, and Other Topics

IASBO Annual Conference May 2018 Matthew Parkinson Deputy Commissioner and Chief of Staff

1

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SLIDE 2

An Important Disclaimer

2

The topics we are covering today are very

  • complex. For virtually every rule, there is an
  • exception. This PowerPoint deck and

accompanying presentation are designed to be conceptual in nature. They do not cover every

  • possibility. Furthermore, many formulas,

explanations, and definitions are simplified for ease of demonstration.

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SLIDE 3

Operations Fund

Generally used to pay non-academic expenses and consolidates the following funds and levies:

  • Transportation
  • Bus Replacement
  • Capital Projects
  • Art Association
  • Historical Society
  • Public Playground
  • Racial Balance
  • Note: Plans are required to be filed with the Department of

Local Government prior to spending on these purposes.

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SLIDE 4

Operations Fund

The Department will set an initial max levy for 2019 equal to the sum of the individual levies:

  • Transportation
  • Bus Replacement
  • Capital Projects
  • Art Association
  • Historical Society
  • Public Playground
  • Racial Balance

4

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SLIDE 5

Operations Fund

  • 2019 Max Levy = 2018 maximum after

eliminating temporary adjustments * AVGQ.

  • Years after 2019: Prior maximum levy after

eliminating temporary adjustments * AVGQ.

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SLIDE 6

Operations Fund

  • Initial Max Levy Notes – Former Capital Project Fund
  • 2019 capital projects levy = (2018 maximum rate

+ 2018 Utility and Insurance Rate) times (Assessed Value / 100 * AVGQ)

  • Note 1: that this will remove the rate-controlled

element of the capital projects fund.

  • Note 2: Utilities and Insurance Adjustment will

be a one-time, permanent adjustment for 2019.

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SLIDE 7

2019 Max Levy Calculation

  • Example School Corporation:
  • 2018 Bus Replacement Max: $250,000
  • 2018 Transportation Max: $1,000,000
  • 2018 CPF Max Rate: $0.2300
  • 2018 U&I Rate: $0.0700
  • 2018 CNAV: $800,000,000

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SLIDE 8

2019 Max Levy Calculation

  • 2018 CPF Equivalent Maximum Levy:
  • 2018 CPF Max Rate: $0.2300
  • 2018 U&I Rate: $0.0700
  • 2018 CNAV: $800,000,000
  • (CPF Max Rate + U&I Rate) * CNAV / 100
  • ($0.2300 + 0.0700) * 800,000,000 / 100
  • $2,400,000

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SLIDE 9

2019 Max Levy Calculation

  • Example School Corporation:

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Pay 2018 Levy Type Amount 2018 Bus Replacement Max 250,000 2018 Transportation Max 1,000,000 2018 CPF Equivalent Max 2,400,000 18p19 Max Starting Point 3,650,000

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SLIDE 10

2019 Max Levy Calculation

  • Example School Corporation:
  • Assumptions:
  • AVGQ: 1.035
  • No levy appeals

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SLIDE 11

2019 Max Levy Calculation

  • Example School Corporation:

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18p19 Max Starting Point 3,650,000 x AVGQ 1.035 18p19 Operations Fund Max 3,777,750

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SLIDE 12

AVGQ

  • Assessed Value Growth Quotient
  • IC 6-1.1-18.5-2
  • Calculated by State Budget Agency
  • Non-farm personal income growth over a six

year period.

  • Assessed Value is not part of the equation.

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SLIDE 13

AVGQ

Pay Year AVGQ 2015 pay 2016 1.026 2016 pay 2017 1.038 2017 pay 2018 1.040 2018 pay 2019 TBD

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SLIDE 14

Pay 2018 AVGQ

Year # Year Income Growth 2010 226,136,980 1 2011 240,119,346 1.062 2 2012 251,476,282 1.047 3 2013 251,982,975 1.002 4 2014 263,829,681 1.047 5 2015 276,338,980 1.047 6 2016 286,364,908 1.036 Growth Total 6.241

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SLIDE 15

Pay 2018 AVGQ

Growth Growth Total 6.241 Growth Total / 6 1.040 AVGQ is lesser of above total or 1.060 1.040

15

  • 2017 pay 2018 AVGQ: 1.040
  • 2018 pay 2019 AVGQ will be computed in

June 2018.

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SLIDE 16

Tax Bills – Overall equation

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  • Most basic formula:

Net Assessed Value x Tax Rate Tax Bill

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SLIDE 17

Assessed Values

17

  • Assessed Value equation:

Gross Assessed Value

  • (Deductions + Exemptions + Abatements)

Net Assessed Value

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SLIDE 18

Deductions and Exemptions

18

  • Common Deductions:
  • Standard Deduction
  • Supplemental Homestead Deduction
  • Mortgage Deduction
  • Over 65 Deduction

This is not a comprehensive list.

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SLIDE 19

Deductions and Exemptions

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This is not a comprehensive list and is shorthand for convenience. Actual eligibility and amounts are more nuanced than what is listed here.

Deduction Eligibility Amount Homestead Standard

  • Principal place of

residence

  • Up to one acre

Lesser of:

  • 60% of Gross AV
  • $45,000

Supplemental Homestead Same as Standard Deduction After Standard Deduction:

  • 35% of AV under

$600,000

  • 25% of AV over

$600,000

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SLIDE 20

Deductions and Exemptions

20

This is not a comprehensive list and is shorthand for convenience. Actual eligibility and amounts are more nuanced than what is listed here.

Deduction Eligibility Amount Mortgage

  • Owner of mortgaged

real property Lesser of:

  • Balance of mortgage
  • ½ of AV
  • $3,000

Over 65

  • At least 65 years old
  • Gross income <

$25,001

  • Various others

Lesser of:

  • ½ of AV
  • $12,480
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SLIDE 21

Assessed Value Example

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The Smith family:

  • Family members:
  • John, 31
  • Sally, 29
  • Residence:
  • $100,000 Gross AV house
  • 0.75 acres
  • $80,000 outstanding on mortgage
  • New Castle, Indiana (Henry County)
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SLIDE 22

Assessed Value Example

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  • Assessed Value equation:

Gross Assessed Value

  • (Deductions + Exemptions + Abatements)

Net Assessed Value

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SLIDE 23

Assessed Value Example

23

  • Assessed Value equation:

Gross Assessed Value $100,000 Less Standard Deduction ($45,000) Less Supplemental Deduction ($19,250) Less Mortgage Deduction ($3,000) Net Assessed Value $32,750

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SLIDE 24

Tax Rate

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Tax District Unit Type Unit Code Unit Name Certified Tax Rate 016 1 0000 Henry County 0.7146 016 2 0007 Henry Township 0.0450 016 3 0203 New Castle Civil City 2.2765 016 4 3445 New Castle Community School Corporation 1.1488 016 5 0293 New Castle-Henry County Public Library 0.1656 016 6 1071 Henry County Solid Waste Management District District Total 4.3505

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SLIDE 25

Tax Rate

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  • Sum of tax rates for all funds in the taxing

district

  • Expressed as a decimal representing tax

dollars per $100 of Assessed Value

  • A tax rate of $4.3505 means a taxpayer will
  • we $4.3505 in property taxes for every $100
  • f Net Assessed Value.
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SLIDE 26

Tax Bill Example

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  • Tax Bill equation:

Net Assessed Value x Tax Rate Gross Tax Bill

  • Credits

Net Tax Bill

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SLIDE 27

Tax Bill Example

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  • Tax Bill equation:

Net Assessed Value $32,750 x Tax Rate $4.3505 Gross Tax Bill $1,424.79

  • Credits

TBD Net Tax Bill $TBD

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SLIDE 28

Full Tax Bill Example

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  • Full Tax Bill equation:

Gross Assessed Value

  • (Deductions + Exemptions + Abatements)

Net Assessed Value x Tax Rate Gross Tax Bill

  • Credits

Net Tax Bill

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SLIDE 29

Full Tax Bill Example

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  • Tax Bill equation:

Gross Assessed Value $100,000 Less Standard Deduction ($45,000) Less Supplemental Deduction ($19,250) Less Mortgage Deduction ($3,000) Net Assessed Value $32,750 x Tax Rate $4.3505 Gross Tax Bill $1,424.79 Less PTR Credits (TBD) Less Circuit Breaker Credits (TBD) Net Tax Bill $TBD

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Property Tax Relief Credits

  • Funded through income taxes.
  • Henry County provides property tax relief to

1% taxpayers.

  • 1% Property Tax Relief Rate: 18.4623.
  • Property Tax Relief is applied after gross

taxes are calculated and before circuit breaker credits are applied.

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SLIDE 31

Tax Bill Example

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  • Tax Bill equation:

Gross Taxes Due $1,424.79 x Property Tax Relief Percentage 18.4623 Property Tax Relief Credits $263.05 Gross Taxes Due $1,424.79

  • Property Tax Relief Credits

($263.05) Tax Bill after Property Tax Relief $1161.74

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SLIDE 32

Full Tax Bill Example

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  • Tax Bill equation:

Gross Assessed Value $100,000 Less Standard Deduction ($45,000) Less Supplemental Deduction ($19,250) Less Mortgage Deduction ($3,000) Net Assessed Value $32,750 x Tax Rate $4.3505 Gross Tax Bill $1,424.79 Less PTR Credits ($263.05) Less Circuit Breaker Credits (TBD) Net Tax Bill $TBD

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SLIDE 33

Tax Bill Circuit Breaker

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Circuit Breaker Type/Cap Property Type/Eligibility 1% of Gross AV

  • Homestead

2% of Gross AV

  • Residential
  • Long Term Care
  • Agricultural

3% of Gross AV

  • Nonresidential real property
  • Personal property

Over 65

  • Must be Homestead property
  • Gross AV of Homestead less than $160,000
  • At least 65 years old
  • Income Tax AGI less than $30,001 ($40,001 if

married)

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SLIDE 34

Same Tax Bill, Higher Rate

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  • Tax Bill equation:

Gross Assessed Value $100,000 Less Standard Deduction ($45,000) Less Supplemental Deduction ($19,250) Less Mortgage Deduction ($3,000) Net Assessed Value $32,750 x Tax Rate $4.3505 Gross Tax Bill $1,424.79 Less PTR Credits ($263.05) Less Circuit Breaker Credits (TBD) Net Tax Bill $TBD

Tax bill after subtracting PTR credits exceeds 1% of Gross AV.

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SLIDE 35

CB Credit Calculation

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  • Tax bill will be the lower of:
  • Calculated Tax Bill after PTR OR
  • Maximum Tax Bill

Calculated Tax Bill after PTR (CTB) Maximum Tax Bill (MTB) Gross AV less Exemptions $100,000 Credit Type 1% $1,161.74 Maximum Tax Bill $1,000

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SLIDE 36

CB Credit Calculation

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  • If CTB > MTB then

CB Credit = CTB - MTB else CB Credit = $0

Calculated Tax Bill $1,161.74 Maximum Tax Bill ($1,000.00) 1% CB Credit $161.74

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SLIDE 37

Same Tax Bill, Higher Rate

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  • Tax Bill equation:

Gross Assessed Value $100,000 Less Standard Deduction ($45,000) Less Supplemental Deduction ($19,250) Less Mortgage Deduction ($3,000) Net Assessed Value $32,750 x Tax Rate $4.3505 Gross Tax Bill $1,424.79 Less PTR Credits ($263.05) Less Circuit Breaker Credits ($161.74) Net Tax Bill $1,000

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SLIDE 38

Tax Bill Circuit Breakers

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  • Common circuit breaker variables:
  • Tax Rate
  • Assessed Value
  • Property Type
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SLIDE 39

3% Gross AV Example

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  • Tax Bill equation:

*At this step, there is an implied division by $100.

Gross Assessed Value $1,000,000 Deductions, Exemptions, and Abatements ($0) Net Assessed Value $1,000,000 x Tax Rate $4.3505* Gross Tax Bill $43,505.00 Less Circuit Breaker Credits ($13,505.00) Net Tax Bill $30,000.00

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SLIDE 40

1% Tax Bill with Exempt Rate

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  • The school unit in the district has an exempt

fund with a maximum $0.3505 rate.

Net Assessed Value $32,750 x Non-exempt Tax Rate $4.0000 Gross Non-Exempt Tax Bill $1,310.00 Net Assessed Value $32,750 x Exempt Tax Rate $0.3505 Exempt Tax Bill $114.79

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SLIDE 41

1% Tax Bill with Exempt Rate

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  • The school unit in the district has an exempt

fund with a maximum $0.3505 rate.

Net Assessed Value $32,750 x Tax Rate $4.3505 Gross Tax Bill before PTR $1,424.79 Maximum Non-Exempt Tax Bill $1,000 + Exempt Tax Amount $114.79 Maximum Tax Bill $1,114.79

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SLIDE 42

1% Tax Bill with Exempt Rate

  • Property tax relief is applied only to the non-

referendum tax rates.

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Gross Non-Exempt Tax Bill before PTR $1,310.00 x Property Tax Relief Percentage 18.4623 Property Tax Relief Credits $241.86

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SLIDE 43

1% Tax Bill with Exempt Rate

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  • The school unit in the district has an exempt

fund with a maximum $0.3505 rate.

Gross Tax Bill $1,424.79 Less PTR Credits (241.86) Gross Tax Bill after PTR $1182.93 Gross Tax Bill after PTR $1,182.93 Maximum Tax Bill (1,114.79) 1% CB Credit $68.14

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SLIDE 44

1% Tax Bill with Exempt Rate

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  • The school unit in the district has an exempt

fund with a $0.3505 rate.

Gross Assessed Value $100,000 Less Standard Deduction ($45,000) Less Supplemental Deduction ($19,250) Less Mortgage Deduction ($3,000) Net Assessed Value $32,750 x Tax Rate $4.3505 Gross Tax Bill $1,424.79 Less PTR Credits ($241.86) Less Circuit Breaker Credits ($68.14) Net Tax Bill $1,114.79

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County-wide CB Procedures

  • Circuit breaker calculations rely primarily on

abstract data.

  • The quick summary:
  • Circuit breakers are calculated for

individual taxpayers.

  • A taxing district has >= $0 in CB credits to

spread.

  • Circuit breakers are spread to funds and

units within districts proportionally, except as otherwise specified in statute.

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SLIDE 46

County-wide CB Procedures

  • For explanation, I will leave out discussion of

phase-in districts, TIF AV add-in, and certain

  • ther details, focusing on the big picture.
  • New Castle Schools, Henry County, Indiana
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County-wide CB Procedures

  • 1. Identify whether a taxing district has circuit

breaker credits. If not, stop.

  • Henry County TD016 has circuit breaker

credits.

  • 1/2/3%: $5,723,363.06
  • Over 65: $49,149.71.
  • 2. Identify the Tax District’s AV.
  • TD016: $386,597,297.
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SLIDE 48

County-wide CB Procedures

  • 3. Calculate the levy for each fund. Levy based
  • n Abstract AV = AV * Tax Rate.

Fund Name Abstract AV Rate Levy Debt Service 386,597,297 0.3270 1,264,173 Operations 386,597,297 0.8218 3,177,057

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SLIDE 49

County-wide CB Procedures

  • 4. Identify the total rate for each unit within the

district.

Unit Name Rate Henry County 0.7146 Henry Township 0.0450 New Castle 2.2765 New Castle Schools 1.1488 New Castle Library 0.1656 Total 4.3505

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SLIDE 50

County-wide CB Procedures

  • 5. Identify the total rate for each unit for non-

exempt funds.

  • Debt Service: $0.3270
  • Operations: $0.8218.
  • 6. Calculate proportional overall rate within the

district for each fund for each unit.

Fund Name Rate Proportion of Rate Debt Service 0.3270 28.5% Operations 0.8218 71.5%

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SLIDE 51

County-wide CB Procedures

  • 7. If the taxing district has Over 65 CB credits,

allocate them proportionally within the district to each unit.

  • New Castle Schools proportion:
  • 1.1488 / 4.3505 = 26.4%.
  • $49,149.71 * 26.4% = $12,978.55.
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SLIDE 52

County-wide CB Procedures

  • 8. After allocating Over 65 CB credits to units

within taxing districts, allocate to each fund proportionally within that taxing district.

  • New Castle Schools Over 65 Credits:

$12,978.55.

Fund Name Rate Proportion of Rate Over 65 Credits Debt Service 0.3270 28.5% 3,694.28 Operations 0.8218 71.5% 9,284.27

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SLIDE 53

County-wide CB Procedures

  • 9. For funds that are non-exempt and non-

protected, calculate the fund’s proportion of the total non-exempt and non-protected rate for the unit within a taxing district.

  • Operations: 0.8218 / 0.8218 = 100%.
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SLIDE 54

County-wide CB Procedures

10.Calculate the non-exempt total rate for every unit within a taxing district.

Unit Name Rate Henry County 0.7146 Henry Township 0.0450 New Castle 2.2765 New Castle Schools 1.1488 New Castle Library 0.1656 Total 4.3505

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SLIDE 55

County-wide CB Procedures

11.Calculate each taxing unit’s proportion of the total non-exempt rate for the taxing district.

  • New Castle Schools proportion:
  • 1.1488 / 4.3505 = 26.4%.
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SLIDE 56

County-wide CB Procedures

12.Obtain the taxing district’s total bucket (1%, 2%, and 3%) circuit breakers.

  • TD016: $5,723,363.06.
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SLIDE 57

County-wide CB Procedures

13.Calculate each taxing unit’s total share of 1/2/3% circuit breakers within a taxing district by multiplying the unit’s total non- exempt proportion by the district’s total 1/2/3% circuit breakers.

  • New Castle Schools: $5,723,363.06 *

26.4% = $1,511,320.

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SLIDE 58

County-wide CB Procedures

15.Allocate circuit breakers for each unit within each taxing district by each fund’s non- exempt, non-protected rate as a proportion

  • f the unit’s non-exempt, non-protected rate

within that district.

  • Operations: $1,511,320 * 100% =

$1,511,320.

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SLIDE 59

County-wide CB Procedures

16.If the total circuit breakers allocated to non- protected funds exceed levies for non- protected funds, the remaining CB credits are allocated to protected funds for that taxing unit within that taxing district.

  • $ 1,511,320 CBs < $3,177,057 levy, so N/A.
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SLIDE 60

County-wide CB Procedures

17.Total circuit breaker credits for a fund for a unit within a taxing district = 1/2/3% CBs + Over 65 CBs

  • Operations: $950.67 + $11.57 = $962.24.
  • Debt Service: $0 + $4.83 = $4.83.

Fund Name Over 65 Credits 1/2/3% Credits Total Credits Debt Service 3,694 3,694 Operations 9,284 1,511,320 1,520,604

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SLIDE 61

County-wide CB Procedures

18.Total circuit breaker credits for a fund for a unit regardless of taxing district = sum of CB credits for that fund for that unit for all taxing districts.

New Castle Schools Taxing District Debt Service Operations 015 $4,105 $75,475 016 $3,694 $1,520,605 019 $137 $13,259 Total $7,937 $1,609,339

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SLIDE 62

Notes about Circuit Breakers

  • Exempt funds generally do not receive circuit

breaker credits.

  • Exception: Over 65 Circuit Breaker.
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SLIDE 63

Notes about Circuit Breakers

  • Protected funds generally do not receive

circuit breaker credits.

  • Exception 1: Over 65 Circuit Breaker.
  • Exception 2: All non-exempt, non-

protected funds are fully exhausted by circuit breakers within a taxing district.

  • Protected funds do contribute to circuit

breaker credits in a taxing district.

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SLIDE 64

Upcoming Date Changes

  • For 2019 budgets:
  • Debt Service Reporting
  • Taxing units will report their estimated

debt service payments before May 1.

  • Payments will be used to compute

estimated debt service levies.

  • IC 6-1.1-17-0.7(a).

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SLIDE 65

SEA 321-2016

  • Budget Streamlining
  • Makes changes to certain parts of the budget

adoption process.

  • Beginning with 2019 budgets, budget orders

must be certified by December 31 or January 15 (depending on circumstances in county) instead of February 15.

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SLIDE 66

SEA 321-2016

  • SEA 321- Budget Streamlining
  • Budget Order Certification
  • The Department must certify budgets by

December 31.

  • If a taxing unit issues debt after December

1 or intends to file a shortfall appeal, the deadline is January 15.

  • IC 6-1.1-17-16(k)

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SLIDE 67

Budget 2019 - Best Practices

  • 1. Contact your Budget Field Reps
  • 2. Gateway Trainings
  • May and June 2018
  • 3. Budget Workshops
  • July and August 2018
  • 4. Review your school’s internal budget

calendar and plan on early submissions of your appeals, plans, and budget forms.

  • 5. Review your internal practices for Additional

Appropriations.

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SLIDE 68

Thank you!

  • Website: www.in.gov/dlgf
  • “Contact Us”: www.in.gov/dlgf/2338.htm
  • Matthew Parkinson, Deputy Commissioner
  • Telephone: 317.232.3759
  • E-mail: mparkinson@dlgf.in.gov

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