100 Percent Exemption Proposed Constitutional Amendment
BACKGROUND
This proposal would amend the Pennsylvania Constitution to enable local taxing jurisdictions to double their homestead exclusion from 50 to 100 percent of the assessed value of one’s property. Currently, the taxing jurisdictions can authorize a tax exemption of up to 50 percent of a property’s medium assessed value.
To amend the constitution, a bill must win approval by the legislature in two consecutive sessions and be approved by the voters via referendum.
This legislation (House Bill 147) was originally introduced in the House on January 22, 2015. The measure was unanimously approved by the House and later approved by the Senate by a 45-2 vote. It was enacted as Pamphlet Laws Resolution #2 of 2016.
Fulfilling the second consecutive session approval requirement, the House unanimously passed House Bill 1285 (same language as House Bill 147) in June of 2017. The Senate also adopted the bill by a vote of 46-2 later that month. The Joint Resolution will now go to a voter referendum, and, if approved, would amend the Pennsylvania Constitution.
If the referendum is approved by the voters, the measure would amend Section 2(b)(vi) of Article VIII of the Pennsylvania Constitution. Specifically, the bill would remove the phrasing “one-half of the median assessed value of all” and replace the language with “100% of the assessed value of each.”
Q & A
Q: What is the question that will be posed to voters this fall, and why?
A: The question, which will be drafted by the state attorney general, will ask voters if local taxing jurisdictions may increase the homestead and farmstead exemption from 50 percent of the median assessed value to 100 percent of assessed value of a property.
Q: What is the current Homestead and Farmstead Exemption?
A: It is a Constitutional amendment adopted in 1997 that allows taxing authorities to exempt up to 50 percent of the median assessed value of all homestead or farmstead value in the jurisdiction. For example, a municipality has three homesteads—one assessed at $50,000, one assessed at $100,000, and one assessed at $200,000. The median assessed value in that taxing jurisdiction is $100,000. Currently, the municipality may exempt up to 50 percent—in this case $50,000—of all homestead properties from taxation. So, the homestead assessed at $200,000, is taxed on $150,000 of its assessed value; while the homestead assessed at $50,000, is fully exempt from taxation by that jurisdiction.
Q: If passed by voters this fall, what would this Constitutional amendment do?
A: It would allow a taxing authority (county, municipality, school district) to exempt 100 percent of the assessed value of a homestead or farmstead from taxation.
Q: So, if the voters pass this, then taxing authorities can do away with all property taxes, as proposed in SB/HB 76?
A: No. This is an only a first step. Enabling legislation is required to allow the local taxing authorities to increase other taxes to make up for the anticipated loss of property tax revenue. In order to exempt homesteads and farmsteads from property taxes, taxing districts must find replacement sources of revenue to provide government services.
In addition, this law would only affect homesteads and farmsteads—one’s primary domicile and the property upon which it is built—and not businesses or vacant property. SB/HB 76 eliminates school property taxes on all properties, including commercial, without regard to a homestead exemption.
Q: How else is this different than SB/HB 76?
A: SB/HB 76 allows for the revenue to be raised to offset the abolition of local property taxes at the state level, then distributes the revenue down to the municipalities and school districts. This exemption of property taxes proposed in the constitutional amendment and associated raising of revenue to offset the tax loss would be done at the local level.
Q: Could the taxing authority simply increase the property tax millage rate on businesses to make up for the difference without raising other taxes?
A: No. The Joint Resolution explicitly prohibits a taxing authority from increasing millage rates to increase tax revenues.