Property tax tinkering continues as SD lawmakers advance ideas to rival, complement governor's plan

Yahoo

21-02-2025

A January 2025 view of the South Dakota State Capitol in Pierre. (Makenzie Huber/South Dakota Searchlight)
South Dakota lawmakers whittled down options for property tax relief legislation Friday at the Capitol in Pierre by moving two more solutions forward and rejecting others.
One of the endorsed bills would lower a cap on local governments' annual increases in property tax collections. The other would roll back assessments on owner-occupied homes and commercial properties and cap their increases.
Of five tax bills up for consideration Friday in the House State Affairs Committee, Sioux Falls Republican Greg Jamison's House Bill 1235 was the only one to make it through to the House.
The bill would lower limits on local governments' annual increases in property tax collections — for schools, counties, cities and others — from 3% to 2.5%, which could force local governments to make cuts and lower property tax burdens for all types of properties, Jamison said. If the local government decides the funding isn't enough, its citizens could vote for an opt out to raise taxes beyond the growth limit, he added.
'The intent of this bill is to send a message to those taxing districts that we've had enough,' Jamison said. 'We need to change. We need something different.'
Wendy Semmler, property tax director for the state Department of Revenue, said that if Jamison's bill and Gov. Larry Rhoden's proposed property tax legislation both pass the Legislature and are signed into law, local government budgets would 'be hit with a double whammy.' Rhoden's bill includes provisions to cap the growth in countywide home values for five years, trim the amount of revenue counties and schools could collect based on new construction, and expand eligibility for a property tax freeze program benefiting elderly and disabled people.
Semmler also had concerns that the Jamison bill's inclusion of school districts would circumvent the state aid education funding formula. Jamison told lawmakers he'd be willing to talk with the Governor's Office to find a solution.
Governor's property tax plan gets endorsement, but not cheers
Semmler urged lawmakers to support the governor's 'comprehensive' plan instead of 'piecemeal' legislation.
Dan Klimisch, president of the South Dakota Association of County Commissioners and a Yankton County commissioner, told lawmakers the legislation would lead to cuts in services that aren't required by the state.
'What is going to happen is we're just going to end up cutting roads, bridges and infrastructure,' Klimisch said. 'That's our biggest funding part: our highway department.'
Lawmakers on the committee endorsed the bill with a 9-3 vote. Assistant House Majority Leader Marty Overweg, R-New Holland, said the legislation was the first property tax bill 'that makes total sense' to him.
'It taxes everybody. It hurts everybody a little bit. But it also helps everybody a little bit,' Overweg said. 'There's no carve-out for anybody. Straight across-the-board cuts, straight across-the-board hurts.'
The legislation will head to the House next.
Bills defeated in the House State Affairs Committee would have created new taxes on advertising in the state, taxed pharmaceutical advertisements, limited annual valuation increases on some properties, and limited property tax increases on owner-occupied properties.
In the Senate Taxation Committee on Friday, two bills introduced by Rep. Amber Hulse, R-Hot Springs, passed out of committee.
Senate Bill 169 would require local governments to put an extra notice in a newspaper or on their website if they plan to consider an opt out to raise property taxes beyond limits in state law. It passed the House unanimously.
Senate Bill 191 would roll back owner-occupied residential and commercial property valuations to 2020 assessments for those who bought a property prior to November of that year. For those who bought a property after that, the valuation would roll back to the fair market value at the time of the purchase. In both cases, future annual valuation increases would be capped at 3% until the property is sold, transferred or significantly renovated.
It would allow homeowners to renovate or improve their home without triggering an assessment increase, as long as the improvements are less than 40% of the home's current value — similar to a provision in Rhoden's bill.
Hulse and other proponents said the legislation would protect homeowners from unexpected property tax hikes, allow them to budget better, and stay longer in their homes.
Clark Verhulst, a Spearfish resident, told lawmakers he prefers Hulse's bill over the governor's because his home's current property tax bill is $9,100, which isn't sustainable for him. Prior to 2020, he was able to afford to live in his home.
'It's totally out of whack the way it is right now,' Verhulst said.
A similar bill was introduced last year but was rejected because of constitutionality concerns surrounding uniformity within property tax classes. If the legislation passes, South Dakota courts will 'scrutinize' whether it treats similar properties within the same class differently, said South Dakota Department of Revenue Secretary Michael Houdyshell.
'My comment last year was based on the fact that that proposal, which is similar to this one, creates non-uniformity of taxation within the same class of property which is owner-occupied,' Houdyshell said. 'Now we're adding non-agricultural property to the mix as well based on a point in time when the property is purchased.'
Semmler, of the Department of Revenue, said the bill would result in $31 billion of taxable value being 'wiped off the books.' That would impact local government funding and $114 million in 'local effort' education funding.
The state would have to make up that $114 million to fund public schools, Semmler said, or increase maximum levies, which would impact agricultural properties.
Representatives of the South Dakota Farm Bureau, South Dakota Retailers Association and the South Dakota Association of Assessing Officers also opposed the bill.
'We don't see the solution to property tax relief as an assessment cap,' said Cori Kaufmann, with the assessor's association.
SB 191 passed unanimously out of the Senate Taxation Committee, with an expectation that Hulse would work with opponents to address some of their concerns.
Two bills that failed in the committee would lower property taxes while increasing sales taxes and freeze property tax revenues and assessments for two years.
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