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Home > Archive > Nov 9, 2006

By Cathy Wentz
Staff Writer

Based on information provided by the Utah Voter Information Pamphlet, this amendment alters a section of the Utah Constitution that addresses property tax exemptions. The amendment allows the Utah Legislature to create a property tax exemption for tangible personal property that generates an inconsequential amount of tax revenue.

Tangible property such as home furnishings and equipment used exclusively by the owner for the maintenance of the owner’s home is already on the list of property that may be exempted from property tax by legislation. This falls under a list of exemptions that the state legislature may vote into law within the framework of the Utah Constitution, Article VIII, Section 3, Subsection 2(a)(v), which is basically a home furnishings exemption.

However similar property owned by business taxpayers is not currently on that list of possible exemptions. Regardless of the amount of tangible personal property owned, business taxpayers are still required to pay taxes on that property. In many cases the burden of complying with tax requirements may not be worth the amount of tax paid. Also, the amount of tax collected by the state for tangible personal property is not worth the effort that goes into collecting it.

Although the state legislature can enact laws that create exemptions to taxes on tangible personal property, the type of exemptions must be listed in the state Constitution under Article VIII, Section 3, Subsections 2 through 4. If the exemption is not on that list, then the legislature cannot vote to make it a statute.

That is the purpose of this Constitutional amendment. It will add a sixth possible exemption in Subsection 2 that will read, “and tangible personal property that, if subject to property tax, would generate an inconsequential amount of revenue.”

This exemption is not necessarily automatic. It is just added to a list of exemptions in the Constitution that the state legislature can vote into law. In this case, however, there is a bill (HB 338) that is poised to become law if the Constitutional Amendment passes.

Under HB 338, if the value of all of a business’s or individual taxpayer’s tangible personal property is $3,500 or less, the taxpayer would not be required to pay tax on that property. After 2007, the $3,500 amount is annually adjusted for inflation.

The Voters Pamphlet also says that the primary fiscal impact that would result from the passage of Constitutional Amendment 1 is that it will result in HB 338 becoming effective Jan. 1, 2007. By making HB 338 effective, the tax burden will shift slightly to all other property taxpayers. The reason for the shift is that state law requires that the total amount of property tax collected by a county, city or other taxing entity must remain basically the same from year to year.

Therefore, if the total amount of property tax collected by taxing entity drops because a certain type of tax is no longer collected, all other taxpayers will pay more so that the amount collected by a taxing entity does not change.

The total annual amount of the shift in tax burden under HB 338 is estimated to be approximately $1.6 million statewide. The estimated impact is 67 cents for every $1,000 in property taxes.

There is an argument in favor of Constitutional Amendment 1 in the voters pamphlet that basically concludes the results of the amendment will be “strong small businesses, a vibrant Utah economy, and simplified, meaningful property tax reform.” The argument for the amendment also reports that it was passed in the Utah House of Representatives by a vote of 73 to zero, and in the Utah Senate by a vote of 22 to one.

State Senator Dave L. Thomas from Davis and Weber Counties was the only “no” vote. He was unavailable for comment.

The argument for the amendment was approved by a list of 12 state officials including Gov. Jon Huntsman, Senator and President of the Utah Senate John Valentine, Speaker of the State House of Representatives Greg Curtis, and Salt Lake County Mayor Peter Corroon.

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