The foregoing transmittal was prepared by Michael P. Infanti. Mr. Infanti, Sam Norton and Peter Skokos comprise the transactional real estate department in the Sarasota law firm of Norton, Hammersley, Lopez & Skokos, P.A. Founded in 1988, the firm has consistently provided quality legal services to clients throughout the State of Florida and the United States. With 11 attorneys and over 100 years in combined legal experience, the firm holds the Martindale-Hubbell Law Directory's highest attainable rating for legal services and ethics. Some of the firm's legal areas of expertise includes real estate development and leasing, banking and finance, alternative dispute resolution, general business and commercial litigation (with an emphasis in construction litigation), business organization law, and estate planning and probate. To learn more about the firm, and its various areas of practice, please visit our website at http://www.nhlslaw.com/. If you have any real estate questions for Mr. Infanti, or any specific tax questions that you would like to have answered by attorney John Chapman, please feel free to respectively e-mail either of them at minfanti@nhlslaw.com or jchapman@nhlslaw.com
REAL PROPERTY TAX LAW CHANGES - WHAT DOES IT ALL MEAN?
After months of consternation and debate over property tax reform, the Florida Legislature finally approved a historic property tax proposal on October 29, 2007. On January 29, 2008, the citizens of the State of Florida will vote to either approve or reject the new proposal, which is actually an Amendment to the Florida Constitution. In order to pass the new tax measure, 60% of Florida's voting population will need to approve the Amendment. Among other things, the new tax proposal pledges to (1) double the current $25,000 homestead exemption, (2) provide for the Statewide portability of the Save Our Homes differential, (3) cap annual non-homestead property tax assessments at 10%, and (4) exempt $25,000 in tangible personal property. But, what does all this really mean to you?
1. DOUBLE THE CURRENT $25,000 HOMESTEAD EXEMPTION
Currently, homeowners can deduct $25,000 from the assessed value of their primary residence for tax purposes. Thus, an individual who owns a primary residence that has an assessed value of $100,000 will currently only pay taxes on $75,000. Under the new property tax proposal, this exemption will increase from $25,000 to $50,000. The average State millage rate is about 20 mills, or 2%, of the taxable value of a home. Therefore, the increased homestead exemption will equate to an average additional tax savings of approximately $500 a year.
2. STATEWIDE PORTABILITY OF THE SAVE OUR HOMES DIFFERENTIAL
Currently, the assessed value of a primary residence can only increase by the lesser of 3% per year, or the percentage change in the National Consumer Price Index. This is known as the Save Our Homes tax cap. Currently, the Save Our Homes tax cap cannot be transferred from one homestead to another, and, therefore, only effectively benefits those who have owned their primary residence for many years. However, under the new property tax proposal, homeowners will be entitled to "port" their Save Our
Homes tax cap from one homestead to another. More specifically, a homeowner will be entitled to take full advantage of the Save Our Homes tax cap if the homeowner is "upsizing" in value (up to an amount not to exceed $500,000), or benefit from a pro-rata discount if the homeowner is "downsizing" in value. Thus, for example, under the new tax proposal, if an individual owns a primary residence that has a market value of $1,000,000, and an assessed value of only $500,000, the individual could "port" the full amount of the differential (or $500,000), towards the purchase of a new primary residence, for say $2,000,000, thus effectively reducing his assessed value from the $2,000,000 purchase price to $1,500,000 ($2,000,000 - $500,000 = $1,500,000). From that point forward, the primary residence may only increase by the lesser of 3% per year, or the percentage change in the National Consumer Price Index.
3. CAP ON ANNUAL NON-HOMESTEAD PROPERTY ASSESSMENTS
Currently, there is no cap on the annual assessment of non-homestead property. Stated differently, the annual assessed value of all second homes, investment and commercial properties in the State of Florida may increase to infinite values based solely on the then current market conditions of the underlying asset. Under the new property tax proposal, the assessed value of all non-homestead real property, including second homes, investment and commercial properties, cannot increase more than 10% per year. Pursuant to the new property tax proposal, the non-homestead assessment cap will "sunset" (expire) in 10 years unless an extension is subsequently approved by the Florida voters.
4. $25,000 EXEMPTION FOR PERSONAL PROPERTY
Currently, business owners are required to file personal property tax returns for all personal property existing on their premises as of January 1 of each calendar year. Currently, no exemption exists for the tax on tangible personal property. Under the new property tax proposal, business owners may deduct $25,000 from the value of their tangible personal property. Thus, under the new property tax proposal, a business owner who owns $100,000 of personal property will only be required to pay taxes on $75,000.
CONCLUSION
Although many believe that the new property tax proposal offered by the Florida Legislature does not go far enough to reduce the existing burden on Florida taxpayers, or is aggressive enough to encourage foreign businesses and second home owners to move to the State of Florida, it is uniformly acknowledged that the proposed tax plan will not be further modified prior to the general vote on January 29, 2008. Therefore, although the proposed tax plan does not include several hallmarks contained within the initial Bill, including a 5% annual cap on all non-homestead assessments, a provision for first-time homebuyer relief, general property tax caps, affordable housing credits, working waterfront provisions, low income senior credits, and local revenue caps, voters will nonetheless be required to consider the plan, in its entirety, on election day.
THE FOREGOING IS ONLY A BRIEF SUMMARY OF SOME OF THE PROPOSED TAX LAW CHANGES. PLEASE CONSULT A PROFESSIONAL FOR SPECIFIC ADVICE AND COUNSEL.