Legislature resurrects proposal to reset property tax valuation when home is sold

Yahoo

01-04-2025

If approved by voters, the change would result in significantly more money for local governments and school districts, who rely on property tax for funding, without changing the state's tax rate or the beloved tax cap. (Photo: Ronda Churchill/Nevada Current)
Another legislative session brings another swing at reforming Nevada's seemingly untouchable property tax structure.
Among this year's proposals: Letting voters in 2028 decide whether the taxable value of property should reset when a home is sold.
Currently, it does not, meaning the benefits of a depreciation factor and abatements used when calculating property tax stays with a home after it is sold to a new owner.
Assembly Joint Resolution 1, sponsored by Democratic Assemblymember Natha Anderson, proposes changing that by essentially establishing a reset button on property taxes whenever a home is sold. The resolution requires amending the state constitution, meaning it must pass the Legislature in two consecutive sessions (this year and 2027), then go before voters for final approval in the 2028 general election.
If approved by voters, the change would result in significantly more money for local governments and school districts, who rely on property tax for funding, without changing the state's tax rate or the beloved tax cap that limits the increase of homeowners' tax bills to no more than 3% a year regardless of how large the increase in property valuation.
Anderson told lawmakers on the Assembly Revenue Committee, which heard the bill Thursday, that the change is needed because the state's property tax structure 'is complex, cumbersome, not efficiently used and most importantly not meeting the needs of our local communities.'
To illustrate the inequities created by the current property tax structure, Anderson's co-presenter, Dylan Shaver of New Day Nevada, highlighted two properties in Carson City that, as of last week, were listed for sale.
The first, a 3,500-square-foot historic mansion listed for $2.4 million, has an assessed value for property tax purposes of around $75,000. The second, a new build with just under 2,000 square feet of living space, is listed for $550,000 and an assessed value around $84,500.
For the municipalities serving both neighborhoods, this property tax structure 'creates holes that cannot be resolved,' said Shaver. 'We have painted ourselves in a corner that is very difficult to get out of.'
Nevada is the only state in the country that applies a depreciation formula to real estate, Anderson noted.
AJR1 would not remove the depreciation formula and would not affect any current homeowners.
'Certainly at that point of sale, the depreciation clock would restart,' said Shaver. 'Realistically, that's just how property value works under state law…'
The property tax rate for a home's new owner would be baked into the home at the time of purchase — just as it is for purchasers of new homes.
Republican Assemblymembers Greg Hafen and Danielle Gallant said the end result is people paying more in property taxes.
Shaver, who previously worked for the City of Reno and whose current clients as a lobbyist include the City of Las Vegas and the Washoe County School District, noted that property taxes pay for municipal services like sewers, roads, police, fire and schools.
'The thing that funds all of that is property taxes,' he said, which is a problem because property tax is 'linked to a ticking clock that ticks ever downward.'
Sparks Mayor Ed Lawson, a longtime critic of the state's property tax system, said his city's expenses have increased 54% in the last five years while revenue has gone up only 16%.
'I challenge any of you to run any kind of government or business with those kinds of numbers,' he said.
In a letter he submitted to committee, Lawson wrote that the 2005 Legislature implemented property tax caps as an emergency response to rapidly rising property values and said they intended to study the property tax statutes for a longer-term solution.
Then, the Great Recession began, devastating local government budgets. No significant changes were ever made.
Calen Evans, president of the Washoe Education Association, which also supports the resolution, called the current property tax structure 'regressive and frankly absurd.'
'It shields the wealthiest property owners and starves the public services our communities rely on,' he added. 'They weakened the systems meant to support us. Nowhere is that more obvious than in education.'
Other education advocates pointed to the Commission on School Funding, which has identified property tax and sales tax reform as the clearest ways to boost the state's education funding to national average.
The resolution also saw support from groups representing municipalities and their workers, including the Nevada League of Cities & Municipalities and the Urban Consortium, which includes the cities of Las Vegas, Henderson, Reno and Sparks.
'I don't like to pay for anything I don't have to either,' said Todd Ingalsbee, a lobbyist for the Professional Firefighters of Nevada, 'but the fact is we have to invest in ourselves, we have to invest in our communities.'
The Retail Association of Nevada is also supporting the resolution on the grounds that when local governments cannot raise the revenue they need, they often turn to raising licensing or business fees.
Those in opposition, which include Nevada Families for Freedom, the Nevada Republican Party, and Nevada Realtors, argued that people are paying enough in taxes and that the change would further strain the housing market.
Anderson's resolution is nearly identical to 2017's Senate Joint Resolution 14, which was sponsored by then-state Sen Julia Ratti. Ratti's resolution passed the full Legislature in 2017 but was not reconsidered and passed again during the 2019 session. If it had, it would have appeared on the 2020 ballot.
In 2017,the Legislature commissioned a report from Applied Analysis to analyze the expected revenue impact of Ratti's proposal. In an exhaustive 377-page report, the researchers documented that resetting the property tax's assessed value after a sale would result in $13.2 billion in additional revenue over a 12-year period.
That estimate includes nearly $3.2 billion for the state's education budget, $601 million for Clark County and $75.4 million for Washoe County.
A more recent analysis, conducted by the City of Reno in support of AJR1, estimated a reset of property tax after the sale of 4,000 parcels sold in the city in the last fiscal year would have brought in an additional $11.9 million in property tax revenue.
The City of Reno's share of that would have been approximately $3.9 million. The State of Nevada, Washoe County, and the Washoe County School District also would have benefitted, though the city's memo did not include what their share was estimated at.