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ARIZONA STATE SENATE
Fifty-Fifth Legislature, Second Regular Session
constitutional property tax exemptions; consolidation
Purpose
Subject to voter approval, constitutionally allows the Legislature to determine by law the qualifications for, and the amount of, outlined property tax exemptions.
Background
The property of Arizona residents who are widows, widowers, persons with disabilities or honorably discharged veterans with a service or nonservice-connected disability is exempt from taxation to the extent allowed by the Arizona Constitution and subject to the conditions and limitations prescribed by statute (A.R.S. § 42-11111).
In Benjamin v. Arizona Department of Revenue, 163 Ariz. 182 (App. 1989), the Arizona Court of Appeals held that the veteran’s property tax exemption was unconstitutional because it imposed an Arizona residency requirement that violated the 14th Amendment to the U.S. Constitution.
The Legislature may exempt up to $50,000 of the full cash value of personal property used for agriculture purposes or in trade or business (Ariz. Const. art. 9 § 2). The Legislature codified an exemption for personal property used for agriculture purposes or in trade or business, which is annually adjusted for inflation and is currently valued at $207,366 in TY 2022 (A.R.S. § 42-11127; ADOR).
The Joint Legislative Budget Committee fiscal note estimates, beginning in FY 2024, a net state General Fund cost of $2.1 million, which could be offset by savings under the automatic school tax rate adjustments provided by under the state’s Truth-in-Taxation provisions resulting in a net state General Fund savings of $1 million beginning in FY 2024 (JLBC fiscal note).
Provisions
1. Removes the constitutional determination of the amounts of the property tax exemption for widows, widowers, persons with a total and permanent disability and honorably discharged veterans with a service or nonservice-connected disability, and instead allows the Legislature to determine by law the qualifications for, and the amount of, the property tax exemption.
2. Increases, from $207,366 in TY 2022 to $220,000, the exemption amount for property used in trade or in business or for agricultural purposes.
3. Specifies that an Arizona resident is not eligible for exemption under more than one category as a widow, widower, person with a disability or veteran with a disability.
4. Removes the requirement that a property tax exemption for a widow or widower be available if the widow or widower resided in Arizona with their last spouse at the time of the spouse's death or had been a widow or widower and Arizona resident prior to January 1, 1969.
5. Removes the requirement that a property tax exemption for an honorably discharged member of the U.S. uniformed services with a service-connected disability be available only if the veteran was an Arizona resident prior to September 1, 1945, or had been an Arizona resident for at least four years prior to their original entry into military service.
6. Removes the requirement that a property tax exemption for an honorably discharged member of the U.S. uniformed services with a nonservice-connected disability be available only if the veteran served at least 60 days during time of war after World War I and had been an Arizona resident prior to September 1, 1945.
7. Requires the Secretary of State to submit the proposition to the voters at the next general election.
8. Becomes effective if approved by the voters and on proclamation of the Governor.
House Action
WM 2/9/22 DP 8-0-0-2
3rd Read 2/17/22 51-7-2
Prepared by Senate Research
March 14, 2022
MG/slp