HLS 21RS-975 ORIGINAL
2021 Regular Session
HOUSE BILL NO. 613
BY REPRESENTATIVE ROMERO
Prefiled pursuant to Article III, Section 2(A)(4)(b)(i) of the Constitution of Louisiana.
TAX/AD VALOREM TAX: Provides for the determination of fair market value for
purposes of ad valorem property taxation
1 AN ACT
2To amend and reenact R.S. 47:2321 and 2323, relative to ad valorem taxation; to provide for
3 the definition of fair market value; to provide for the requirements of certain uniform
4 guidelines implemented to determine fair market value; to provide for the market
5 approach, the cost approach, and the income approach in determining fair market
6 value; to require the assessor to continuously collect certain data; to provide for a
7 definition of comparable sales; to provide for certain types of depreciation; to
8 provide for net income capitalization; to provide for valuation methodologies
9 requiring the consideration of furniture, fixtures or other equipment; to provide for
10 certain requirements and limitations; and to provide for related matters.
11Be it enacted by the Legislature of Louisiana:
12 Section 1. R.S. 47:2321 and 2323 are hereby amended and reenacted to read as
13follows:
14 §2321. Fair market value; defined
15 Fair market value is the price for property which would be agreed upon
16 between a willing and informed buyer and a willing and informed seller under usual
17 and ordinary circumstances;. it Fair market value shall be the highest price estimated
18 in terms of money which or the equivalent of, under prevailing market conditions
19 that the property will bring if exposed for sale on the open market with reasonable
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1 time allowed to find a purchaser who is buying with knowledge of all the uses and
2 purposes to which the property is best adapted and for which it can be legally used.
3 * * *
4 §2323. Criteria for determining fair market value; real and personal property;
5 unoccupied residential immovable property
6 A. The criteria for determining fair market value shall apply uniformly
7 throughout the state. Uniform guidelines, procedures and rules and regulations as
8 are necessary to implement said criteria shall be adopted by the Louisiana Tax
9 Commission only after public hearings held pursuant to the Administrative
10 Procedure Act. The uniform guidelines, procedures, and rules and regulations shall
11 comply with appraisal publications of the International Association of Assessing
12 Officers.
13 B. Each assessor shall follow the uniform guidelines, procedures, and rules
14 and regulations in determining the fair market value of all property subject to
15 taxation within his respective parish or district. Any manual or manuals used by an
16 assessor shall be subject to approval by the Louisiana Tax Commission or its
17 successor agency. The fair market value of property shall be determined based upon
18 the individual characteristics of the property that affect the market value of the
19 property. The same or similar methods and techniques shall be used to determine the
20 fair market value of same or similar types of property. The assessor shall utilize all
21 available data that is specific to the valuation of property used to determine the fair
22 market value of property.
23 C. Criteria.
24 The fair market value of real and personal property shall be determined by
25 the following generally recognized appraisal procedures: the market approach, the
26 cost approach, and/or or the income approach, or a combination of the three.
27 (1)(a) In utilizing the market approach, the assessor shall use an appraisal
28 technique in which the market value estimate is predicated upon prices paid in actual
29 market transactions and current listings.
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1 (b) The assessor shall continuously collect relevant comparable sales data
2 within his respective parish or district. The sales data shall be used to determine the
3 fair market value of property in the applicable parish or district.
4 (c) For the purposes of this Section, comparable sales data shall only include
5 data from sales which have occurred within twenty-four months of the date in which
6 the fair market value of a property is to be determined.
7 (d) A sale may be considered a comparable sale if there were not enough
8 comparable properties sold during the time period provided for in Subparagraph (c)
9 of this Paragraph to constitute a representative sample.
10 (2) In utilizing the cost approach, the assessor shall use a method in which
11 the value of a property is derived by estimating the replacement or reproduction cost
12 of the improvements;, deducting therefrom the estimated physical, functional or
13 external depreciation; and then adding the market value of the land, if any.
14 (3) In utilizing the income approach, the assessor shall use an appraisal
15 technique in which the anticipated net income is capitalized to indicate the capital
16 amount of the investment which produces the net income convert the future benefits
17 of property ownership into an expression of present value.
18 D.(1) In determining which appraisal procedure to use for the final
19 determination of fair market value, the assessor shall consider:
20 (a) The relevance of each approach to the property being valued.
21 (b) The amount and accuracy of the data used in each approach.
22 (c) The strengths and weaknesses of each approach.
23 (2) If the fair market value of property is determined by a method that
24 considers the value of furniture, fixtures, or equipment in or on the real property, the
25 furniture, fixtures, and equipment shall not be subject to additional valuation or
26 taxation as personal property.
27 D. E. When performing a valuation of unoccupied residential immovable
28 property held for sale by a juridical person prior to the initial occupancy of such
29 property, the assessor may when considering the income approach to value consider
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HB NO. 613
1 factors such as the estimated sales price of the unoccupied immovable property, the
2 estimated holding period needed to sell the property, expenses, including expenses
3 incurred during the holding period, and the capitalization rate which includes the
4 economic risks associated with the holding period. For purposes of this Section, the
5 initial occupancy shall mean the first occupancy of the property by a natural person,
6 as well as occupancy by a natural person after substantial modification has been
7 made to the property.
8 E. F. When performing a valuation of any affordable rental housing property,
9 the assessor shall not consider any of the following in determining fair market value:
10 (1) Income tax credits available to the property under Section 42 of the
11 Internal Revenue Code.
12 (2) Below-market interest rate on financing obtained under the Home
13 Investment Partnership Program under the Cranston-Gonzales National Affordable
14 Housing Act, or the Federal Home Loan Bank Affordable Housing Program
15 established pursuant to the Financial Institution Reform, Recovery, and Enforcement
16 Act of 1989.
(3) Any other federal, state, or similar program intended to provide or
17
18 finance affordable rental housing to persons of low or moderate income and
19 requiring restricted occupancy and rental rates based on the income of the persons
20 occupying such housing.
DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part
of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute
part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
HB 613 Original 2021 Regular Session Romero
Abstract: Provides for certain requirements and considerations in determining the fair
market value of certain property for the purpose of assessing ad valorem tax.
Present law defines fair market value as the price for property which would be agreed upon
between a willing and informed buyer and a willing and informed seller under usual and
ordinary circumstances. Further provides the fair market value shall be the highest price
estimated in terms of money which the property will bring if exposed for sale on the open
market.
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HB NO. 613
Proposed law changes the definition of fair market value from the highest price estimated
in terms of money to the price estimated in terms of money or the equivalent of, under
prevailing market conditions that the property will bring if exposed for sale on the open
market.
Present law requires the criteria for determining fair market value to be applied uniformly
throughout the state, and that uniform guidelines, procedures and rules be adopted by the La.
Tax Commission only after public hearings pursuant to the Administrative Procedure Act.
Proposed law requires uniform guidelines, procedures and rules to comply with appraisal
publications of the International Association of Assessing Officers.
Present law requires each assessor to follow the uniform guidelines, procedures and rules
in determining fair market value of property subject to taxation in his parish or district.
Further requires any manual used by the assessor to be subject to approval by the La. Tax
Commission.
Proposed law requires the fair market value to be determined based upon the individual
characteristics of the property that affect market value. Further requires the same or similar
methods to be used to determine the fair market value of same or similar types of property.
The assessor shall utilize all available data specific to the valuation process of property.
Present law requires the fair market value of real and personal property to be determined by
the market approach, the cost approach, the income approach, or a combination of the three.
Present law provides that in utilizing the market approach the assessor shall use an appraisal
technique in which the market value estimate is predicated upon prices paid in actual market
transactions and current listings.
Proposed law retains present law but adds a requirement that the assessor continuously
collect relevant comparable sales data and that the data be used to determine the fair market
value of property in the applicable parish or district.
Proposed law limits comparable sales data to data from sales which have occurred within
24 months of the date in which the fair market value of a property is to be determined.
Further provides a sale may be considered a comparable sale if there were not enough
comparable properties sold during the 24 month period to constitute a representative sample.
Present law provides that in utilizing the cost approach the assessor shall use a method in
which the value of a property is derived by estimating the replacement or reproduction cost
of improvements, then deducting estimated depreciation, and then adding the market value
of the land, if any.
Proposed law retains present law but permits depreciation to be subtracted from replacement
or reproduction costs specifically if caused by physical, functional, or external means.
Present law provides that in utilizing the income approach the assessor shall use an appraisal
technique in which the anticipated net income is capitalized to indicate the capital amount
of the investment which produces the net income.
Proposed law changes present law by requiring the assessor to use an income approach
appraisal process technique in which the anticipated net income is capitalized to convert the
future benefits of property ownership into an expression of present value.
Proposed law requires the assessor, when determining which appraisal value to use to
consider:
(1) The relevance of each approach to the property being valued.
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HB NO. 613
(2) The amount and accuracy of data used in each approach.
(3) The strengths and weaknesses of each approach.
Proposed law provides that if the fair market value of property is determined by a method
that considers the value of furniture, fixtures, or equipment in or on the real property, the
furniture, fixtures, or equipment shall not be subject to additional valuation or taxation as
personal property.
(Amends R.S. 47:2321 and 2323)
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