COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:0684S.01I Bill No.:SB 105 Subject:Taxation and Revenue - Property Type:Original Date:February 7, 2023Bill Summary:This proposal reduces the assessment percentage of real property.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND
AFFECTED
FY 2024FY 2025FY 2026Fully
Implemented
(FY 2028)
General Revenue
Fund $0$427,678$1,435,056 $3,908,525
Total Estimated
Net Effect on
General
Revenue $0$427,678$1,435,056 $3,908,525
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND
AFFECTED
FY 2024FY 2025FY 2026Fully
Implemented
(FY 2028)
Blind Pension
Fund $0($702,055)($1,404,109)($2,808,219)
Total Estimated
Net Effect on
Other State
Funds $0($702,055)($1,404,109)($2,808,219)
Numbers within parentheses: () indicate costs or losses. L.R. No. 0684S.01I
Bill No. SB 105
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ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND
AFFECTED
FY 2024FY 2025FY 2026Fully
Implemented
(FY 2028)
Total Estimated
Net Effect on
All Federal
Funds $0$0$0$0
ESTIMATED NET EFFECT ON FULL TIME EQUIVALENT (FTE)FUND
AFFECTED
FY 2024FY 2025FY 2026Fully
Implemented
(FY 2028)
Total Estimated
Net Effect on
FTE 000$0
☒ Estimated Net Effect (expenditures or reduced revenues) expected to exceed $250,000 in any
of the three fiscal years after implementation of the act or at full implementation of the act.
☒ Estimated Net Effect (savings or increased revenues) expected to exceed $250,000 in any of
the three fiscal years after implementation of the act or at full implementation of the act.
ESTIMATED NET EFFECT ON LOCAL FUNDSFUND
AFFECTED
FY 2024FY 2025FY 2026Fully
Implemented
(FY 2028)
Local
Government*$0
Up to
($187,402,998)
Up to
($374,805,996)
Up to
($749,611,992)
*Oversight notes local property tax revenues are designed to be revenue neutral from year to
year. The tax levy is adjusted relative to the assessed value to produce roughly the same revenue
from the prior year with an allowance for growth. Some taxing entities will be able to increase
the tax rate levied on other property to make-up for the lost revenue from reduced assessments
for residential property. L.R. No. 0684S.01I
Bill No. SB 105
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February 7, 2023
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FISCAL ANALYSIS
ASSUMPTION
Section 137.115 Residential Property Tax
Officials from the Department of Revenue (DOR) note that currently residential property is
assessed at a rate of 19% of appraised value to determine its assessed value. This proposal
starting January 1, 2024 through December 31, 2026 would lower that rate by 1% per year,
reducing the assessed value of the property. This would reduce the rate to 16% by December 31,
2026. Then on January 1, 2027, it would set the new permanent residential property assessment
rate at 15%. The County Assessors and the State Tax Commission handle the assessment of
personal property. DOR will defer to them for the fiscal impact of this provision on the counties.
The Department notes that the constitutionally created Blind Pension Fund (Article III, Section
38(b)) receives $.03 for each $100 valuation of taxable property in the state of Missouri.
Reducing the assessed rate will decrease the amount they receive. DOR defers to the
Department of Social Services for the estimated loss of funding.
The Department administers the Senior Property tax credit that gives seniors a tax credit for the
amount of residential property tax paid or the amount of property tax paid as part of their rent.
When residential property tax is reduced by this proposal, this would result in a savings to the
state from some of these credits no longer being able to be claimed. Below is the amount
claimed each of the last three years.
Tax Year Number of Filers Amount Claimed
2019 149,941 $86,159,181
2020 142,947 $82,894,597
2021 131,235 $79,049,535
DOR is not able to determine exactly how much this will reduce what can be claimed due to the
income limits also on the tax credits. However, since the new assessment rate is approximately
20% less than the current, assuming a same 20% decrease in use of the PTC program DOR could
potentially see a savings of $15 million annually. DOR will show the impact as could exceed $1
million annually.
Officials from the Office of Administration - Budget and Planning note this proposal reduces
the real property assessment value percentage on subclass (1) property from 19% to 15%
beginning with tax year 2024. B&P notes that subclass (1) real property is residential real
property. For calendar years 2024 through 2027, the assessment percentage is reduced by 1%
from the previous year’s percentage. Beginning with calendar year 2027, personal property is to
be assessed at 15% of its true value. L.R. No. 0684S.01I
Bill No. SB 105
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Based on data published by the U.S. Census Bureau, there were $3,573,996,000 in real
residential property taxes paid in Missouri during 2021. Using data published by the State Tax
Commission (STC) and the 2021 property tax levy audit report, B&P estimates that subclass (1)
property makes up approximately 42.7% of all locally assessed property. B&P then used the
above data to estimate a population weighted statewide local property tax levy. In addition, B&P
notes that the Blind Pension Trust Fund has a property tax levy of $0.03 per $100 valuation.
B&P further notes that property taxes are levied for a calendar year, with the taxes owed by
December 31
st
of that year. Therefore, a reduction to a tax year’s assessed value will impact
collections for the following fiscal year. For example: tax year 2024 reduction will impact FY25
collections.
B&P estimates that this proposal could reduce revenues to the Blind Pension Trust Fund by
$702,055 and local property tax collections by $187,402,998 in FY25. Once fully implemented
in FY28, this proposal could reduce revenues to the Blind Pension Trust Fund by $2,808,219 and
local property tax collections by $749,611,992. Table 1 shows the estimated impact per year.
Table 1: Estimated Impact per YearTax Year / Fiscal
Year
Estimated
Local Loss
Estimated Loss to
Blind Pension Fund
TY24 / FY25($187,402,998)($702,055)TY25 / FY26($374,805,996)($1,404,109)TY26 / FY27($562,208,994)($2,106,164)TY27/ FY28($749,611,992)($2,808,219)
PTC Claims
B&P notes that this proposal may also impact redemptions for the senior property tax credit
(PTC). In tax year 2021, 64,463 homeowners claimed the PTC for a total of $40,572,458.
However, the majority of homeowners pay more property taxes than the maximum credit amount
allowed. Therefore, while this proposal may reduce real residential property taxes, it will not
reduce PTC claims by a corresponding amount. Using data provided by DOR and the estimates
shown above, B&P estimates that this provision may reduce PTC claims and increase GR by
$427,678 in FY25. Once fully implemented, this proposal could increase GR by $3,908,525
annually. Table 2 shows the estimated impact per year.
Table 2: Estimated impact to GR by
Year
Tax Year / Fiscal
Year
GR Gain
TY24 / FY25$427,678 TY25 / FY26$1,435,056 TY26 / FY27$2,577,942 TY27/ FY28$3,908,525 L.R. No. 0684S.01I
Bill No. SB 105
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Summary
B&P estimates that this provision could reduce TSR by $274,377 in FY25. Once fully
implemented, this proposal could increase TSR by $1,100,306 annually. Table 3 shows the
estimated net state impact.
Table 3: Net State ImpactTax
Year /
Fiscal
Year
Blind
Pension
Trust Fund
General
Revenue
Net State
Impact
TY24
/
FY25($702,055)$427,678 ($274,377)
TY25
/
FY26($1,404,109)$1,435,056 $30,947
TY26
/
FY27($2,106,164)$2,577,942 $471,778
TY27/
FY28($2,808,219)$3,908,525 $1,100,306
Officials from the State Tax Commission note this proposal has a possible negative fiscal
impact on local taxing jurisdictions such as school districts, counties, cities who rely on property
tax assessments as a source of revenue. Under the criteria of SB 105, the percentage of true
market value for residential properties in class 1 is reduced by 1% per year until the assessed
value is 15% of the true market value. Using values for 2021 published on the State Tax
Commission website, the residential assessed values accounts for 54.43% of the total assessment,
which would equal $69,816,718,311.24. If the assessment percentage is reduced by 1%, the new
assessed value for residential would be $66,142,154,189.60. The loss in assessed value would
correlate to a loss in taxes collected of $256,484,575.68. It is not possible to calculate values for
the following 3 years of reductions due to changes in assessment of residential properties and tax
levy increases or rollbacks.
Officials from the Department of Social Services assume Section 137.115 is amended to
change the residential real property, as defined by 137.016 RSMo, tax rate as follows:
For all calendar years ending on or before December 31,
2023
Nineteen percent of true value
2024 calendar yearEighteen percent of true value2025 calendar yearSeventeen percent of true value2026 calendar yearSixteen percent of true value2027 calendar yearFifteen percent of true value L.R. No. 0684S.01I
Bill No. SB 105
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Blind Pension (BP) is funded from 0.03% of each $100 assessed valuation of taxable property.
Reducing taxes on residential real property could impact the amount collected for the BP fund.
According to the State Tax Commission Annual Report
all property in the State of Missouri is $128,268,819,238. Per the Missouri State Tax
Commission’s 2021 statistics, 54.43% of all property assessments were residential property
which means that $69,816,718,311 ($128,268,819,238 * .5443) is the total assessment for
residential real property. FSD made the assumption that this statute does not govern the
assessment percentages of real property assessed by the tax commission (Centrally Assessed
Companies). Therefore, any funds received for the BP fund from that source were not considered
in the calculation of the fiscal impact of this legislation.
Residential real property is currently assessed at 19% of true value in money. Therefore,
$367,456,412,163 ($69,816,718,311/0.19) is the true value of residential property. This
proposed legislation will affect he BP fund as follows:
Calendar
Year
True Value of
Residential Real
Property
Assessed at
Current Rate of
19%
Assessment
Rate, as
amended
per year
Amended
Assessed Value
of Real
Residential
Property
Residential
Real
Property
Tax
Collections
for the BP
fund (0.03%
of each $100
assessed)
Reduction
in
Collections
for the BP
Fund
2023$367,456,412,16319%$69,816,718,311$20,945,015$02024$367,456,412,16318%$66,142,154,189$19,842,646$1,102,3692025$367,456,412,16317%$62,467,590,068$18,740,277$2,204,7382026$367,456,412,16316%$58,793,025,946$17,637,908$3,307,1082027$367,456,412,16315%$55,118,461,824$16,535,539$4,409,477
Therefore, FSD estimates that the fiscal impact to the BP fund as a result of this legislation
would be $1,102,369 in SFY 24; $2,204,738 in SFY 25; $3,307,108 in SFY 26; $4,409,477 in
SFY 27 and ongoing.
If the state chooses to continue funding BP payments at the current level, a general revenue
pickup would be needed to replace lost BP fund revenue resulting from this legislation. The
current BP payment is $750 per participant. If enacted, the BP payment would be reduced by
$532 to $218 without the replacement of funding.
Officials from the Office of the Secretary of State (SOS) note many bills considered by the
General Assembly include provisions allowing or requiring agencies to submit rules and
regulations to implement the act. The Secretary of State’s office is provided with core funding to
handle a certain amount of normal activity resulting from each year’s legislative session. The
fiscal impact for this fiscal note to Secretary of State’s office for Administrative Rules is less L.R. No. 0684S.01I
Bill No. SB 105
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February 7, 2023
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than $5,000. The Secretary of State’s office recognizes that this is a small amount and does not
expect that additional funding would be required to meet these costs. However, SOS also
recognizes that many such bills may be passed by the General Assembly in a given year and that
collectively the costs may be in excess of what their office can sustain with their core
budget. Therefore, the Office of the Secretary of State reserves the right to request funding for
the cost of supporting administrative rules requirements should the need arise based on a review
of the finally approved bills signed by the governor.
Officials from the City of Kansas City, City of Springfield, Newton County Health
Department, St Louis County Health Department, and the Gasconade County Assessor each
assume this proposal would have a negative fiscal impact on their respective cities of an
indeterminate amount. Oversight notes the proposed reduction in the percentage at which real
residential property is assessed could reduce the maximum allowed revenue growth (relative to
current law) which could impact all taxing entities. Therefore, Oversight will note B&P’s
estimated impact for all local political subdivisions on the fiscal note.
Officials from the Office of the State Auditor assume the proposal will have no fiscal impact on
their organization. Oversight does not have any information to the contrary. Therefore,
Oversight will reflect a zero impact in the fiscal note for this agency.
Officials from the Lincoln County Assessor assume this proposal would cause a tax burden
shift for taxing entities; do not expect the proposal to affect their duties or procedures.
Local Political Subdivisions
Oversight assumes this proposal reduces the percentage at which real residential property is
assessed, effectively reducing the assessed value of real residential property over time. Oversight
notes the revenue growth in property tax is determined by the following method:
Last year’s revenues plus an allowance for growth equal to either:
• Inflation;
• Growth in total assessed value, or;
• 5%, whichever is lowest.
Oversight assumes if
any reduction in the percentage at which real residential property is assessed would reduce the
maximum allowed revenue growth (relative to current law) which could impact all taxing
entities. For example:
Year
Assessed Value
Real
Assessed
Value PP
Total Assessed
Value Real
and PP
Revenue
Growth
Factor
Maximum
Allowed
Revenue L.R. No. 0684S.01I
Bill No. SB 105
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Base Year
(Assumed) $4,250,000,000$750,000,000$5,000,000,000$6,240,000
Current Law
(Next Year) (19%) $4,377,500,000$772,500,000$5,150,000,0003%$6,427,200
Next Proposed
(Next Year) (18%) $4,147,105,263$772,500,000$4,919,605,263-1.63%$6,138,028
Oversight applied a 3% growth in real and personal property. To calculate the proposed assessed
value, Oversight reduced the 19% currently applied to real residential property values by the
proposed 1% reduction in year one (19% - 1% = 18%).
*Using the $4,250,000,000 assessed value for real property; Oversight calculated the full value
of the real residential property:
Full Value of real residential Property *.19 = $4,250,000,000
Full Value of real residential Property = $4,250,000,000 /.19
Full Value of real residential Property = $22,368,421,053
Using the full value of the real property, Oversight applied a growth rate of 3% and calculated
the different assessed values below.
$22,368,421,053 x 1.03$23,039,473,684Total RP Value w/Growth$23,039,473,684 x .19$4,377,500,000Assessed Value RP (Current Law)Or$23,039,473,684 x .18$4,147,105,263Assessed Value RP (Proposed Law)
Oversight notes, in the example above, the proposal functionally eliminates the allowable
increase in revenues attributable to growth. Revenues become fixed in time. However, Oversight
notes the maximum allowed revenue would be lower than what could have been achieved under
current law. Oversight notes the above example only includes the initial 1% reduction in
assessed value and does not account for the implications of the three future reductions.
Alternatively, if inflation or 5% is the lowest option for determining the maximum allowed
revenue, the calculation of revenue growth may not be limited by the reduction in assessed
personal property. However, Oversight notes property tax revenues are designed to be revenue
neutral from year to year. The tax rate is adjusted relative to the assessed value to produce
roughly the same revenue from the prior year with an allowance for growth. Therefore, this
proposal may result in a higher tax rate relative to current law thus distributing more of the tax
burden to personal property owners (as real property assessed values decrease).
Oversight notes some taxing entities have tax rate ceilings that are at their statutory or voter
approved maximum or are at a fixed rate. For these taxing entities, any decrease in the assessed L.R. No. 0684S.01I
Bill No. SB 105
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values would not be offset by a higher tax rate (relative to current law), rather it would result in
an actual loss of revenue.
Based on information provided by the Office of the State Auditor, Oversight notes, in 2020,
there were over 2,500 tax entities with 4,000 different tax rates. Of those entities, 2,980 tax rate
ceilings were below the entities’ statutory or voter approved maximum tax rate and 1,098 tax rate
ceilings were at the entities’ statutory or voter approved maximum rate. (These numbers do not
include entities, which use a multi-rate method and calculate a separate tax rate for each subclass
of property.)
Oversight notes the Office of Administration - Budget and Planning assumes this proposal
could reduce revenues to the Blind Pension Trust Fund and local property tax collections
beginning in FY 2025. Oversight does not have information to the contrary and therefore,
Oversight will reflect the estimates as provided by B&P to show the loss in property tax revenue
for local political subdivisions and the Blind Pension Fund.
Oversight notes that this proposal may also impact the amount of claims for the senior property
tax credit. For the purpose of this fiscal note, Oversight will note B&P’s estimated impact for the
revenue savings to general revenue from the reduced claims.
FISCAL IMPACT –
State Government
FY 2024
(10 Mo.)
FY 2025FY 2026Fully
Implemented
(FY 2028)
GENERAL
REVENUE
Revenue Savings -
§137.115 - Reduced
Property Tax Credit
Claims p. 4$0$427,678$1,435,056 $3,908,525
ESTIMATED NET
EFFECT ON
GENERAL
REVENUE$0$427,678$1,435,056 $3,908,525
BLIND PENSION
FUND
Revenue Reduction -
§137.115 - Reduced
Real Residential
Property Taxes p. 4$0($702,055)($1,404,109)($2,808,219) L.R. No. 0684S.01I
Bill No. SB 105
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ESTIMATED NET
EFFECT ON BLIND
PENSION FUND$0($702,055)($1,404,109)($2,808,219)
FISCAL IMPACT –
Local Government
FY 2024
(10 Mo.)
FY 2025FY 2026Fully
Implemented
(FY 2028)
LOCAL POLITICAL
SUBDIVISIONS
Revenue Reduction -
§137.115 - Reduced
Real Residential
Property Taxes p. 4$0
Up to
($187,402,998)
Up to
($374,805,996)
Up to
($749,611,992)
ESTIMATED NET
EFFECT ON
LOCAL POLITICAL
SUBDIVISIONS$0
Up to
($187,402,998)
Up to
($374,805,996)
Up to
($749,611,992)
FISCAL IMPACT – Small Business
No direct fiscal impact to small businesses would be expected as a result of this proposal.
FISCAL DESCRIPTION
Current law requires residential real property to be assessed at 19% of its true value in money.
Beginning with the 2024 calendar year, this act reduces such percentage by one percent a year
through the 2026 calendar year. Beginning with the 2027 calendar year, residential real property
shall be assessed at 15% of its true value in money.
This legislation is not federally mandated, would not duplicate any other program and would not
require additional capital improvements or rental space.
SOURCES OF INFORMATION
Office of Administration - Budget and Planning
Department of Revenue
Office of the Secretary of State L.R. No. 0684S.01I
Bill No. SB 105
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Office of the State Auditor
State Tax Commission
City of Kansas City
City of Springfield
Newton County Health Department
St Louis County Health Department
Lincoln County Assessor
Gasconade County Assessor
Julie MorffRoss StropeDirectorAssistant DirectorFebruary 7, 2023February 7, 2023