WEST virginia legislature

2017 regular session

Committee Substitute for

Senate Joint Resolution  8

By Senator Karnes

[Originated in the Select Committee on Tax Reform; Reported on March 25, 2017]

Proposing an amendment to the Constitution of the State of West Virginia, amending article X thereof by repealing sections one, one-a, one-b, one-c, eight, eight-a, ten and eleven; adding thereto a new section, designated section thirteen, relating to fair and simple tax reform; preserving rights, duties and obligations of taxpayers, local taxing authorities and the State for periods prior to ratification of this amendment; repealing the personal property tax; authorizing new classes of real property for the purpose of taxation; authorizing taxing authorities to administer levies and excess levies; creating a State infrastructure and equalization fund; providing for block grants to local schools and governments for education and infrastructure; establishing exemptions to the real property tax; backing bond revenue with the full faith and credit of West Virginia; grandfathering tax benefits earned prior to the ratification of this amendment; providing for the enactment of new benefits; establishing a supremacy clause; providing for general law implementation; numbering and designating such proposed amendment; and providing a summarized statement of the purpose of such proposed amendment.

Resolved by the Legislature of West Virginia, two-thirds of the members elected to each House agreeing thereto:

That the question of ratification or rejection of an amendment to the Constitution of the State of West Virginia be submitted to the voters of the State at the next general election to be held in the year 2018, which proposed amendment is that article X thereof be amended by repealing sections one, one-a, one-b, one-c, eight, eight-a, ten and eleven and adding thereto a new section, designated section thirteen, to read as follows:

ARTICLE X.  TAXATION AND FINANCE.

§1. [Repealed]

§1a. [Repealed]

§1b. [Repealed]

§1c. [Repealed]

§8. [Repealed]

§8a. [Repealed]

§10. [Repealed]

§11. [Repealed]

§13. Fair and simple tax reform (FASTR).

Subsection A — Preserving Rights, Duties & Obligations.

The rights, duties and obligations of taxpayers, local taxing authorities and the State contained in the sections of article X that shall be repealed when the voters of this State ratify this amendment shall be fully and completely preserved for all periods prior to ratification.

Subsection B — Personal Property Tax.

Notwithstanding any provision of this Constitution, or of any statute to the contrary, for purposes of this section, the term “personal property” shall have the meaning of that term as established in the common law of property.

The personal property tax on motor vehicles is abolished on January 1 of the year following the ratification of this amendment by the voters of this State. The personal property tax on all other taxable personal property shall be assessed at the value on the date this amendment is ratified by the voters of this State for the purpose of taxation. The personal property tax, except for that imposed on the tangible personal property of public services companies, shall be reduced by ten percent annually for ten years until it is eliminated beginning on January 1 of the year following the ratification of this amendment by the voters of this State.

All personal property tax exemptions in effect on the date this amendment is ratified by the voters of this State shall remain in effect until the personal property tax is eliminated. All new personal property purchased after the ratification of this amendment by the voters of this State, except for the tangible personal property of public service companies, assessed by the Board of Public Works, shall not be subject to personal property tax. Thereafter, the personal property tax is prohibited, except the tax on the tangible personal property of public service companies which shall continue to be imposed under assessments made by the Board of Public Works.

Subsection C — Real Property Taxation Classifications.

Notwithstanding any provision of this Constitution, or of any statute to the contrary, for purposes of this section, the term “real property” shall have the meaning of that term as established in the common law of property. A three-class system for taxation of real property shall be established and shall replace all other forms of real property taxation authorized by this Constitution. The real property taxes shall be based on fair market value.

Class A shall consist of real property used primarily for agricultural and commercial forestry purposes. Class A property shall be taxed based on its economic output capacity as such: Provided, That Class A property shall not be taxed more than $.50 per $100 of valuation.

Class B shall consist of residential real property, including rental property used exclusively for residential purposes. Class B property shall not be taxed more than $1.50 per $100 of valuation.

Class C shall consist of all other forms of real property, including but not limited to, commercial office buildings and the land on which they are situate. Class C property shall not be taxed more than $1.75 per $100 valuation.

Subsection D — Taxing Authorities’ Levy & Excess Levy.

For Class A, B and C, the ratio of the tax rates levied by a particular taxing authority in any particular county shall bear the same ratio among them as the foregoing maximum rates of taxation for the three said classes of property bear to each other.  For Class B and C property a system shall be established to determine fair market valuation. The system shall consider current sales and market data for each county or municipality wherein the property is located. Increases or decreases in real property tax rates occurring as a result of this amendment shall be phased in over a period not more than ten years.

For each class of property, taxing authority shall be allocated as follows; counties fifteen percent, municipalities ten percent, local school districts sixty-five percent and the State Equalization and Infrastructure Fund established in subsection E ten percent. The allocation for municipalities shall not be levied for property located outside of municipalities. No taxing authority is required to levy their full allocation. In the case of each taxing authority, no more than eighty percent of its allocation shall be employed to levy taxes without a vote of the people in accordance with provisions for excess levies.

The Legislature shall provide by general law the provisions for submitting an excess levy question to the voters of each taxing authority. No excess levy above the taxing authority’s eighty percent allocation shall be effective unless at least sixty percent of the qualified voters approve the exercise of some or all of the taxing authority’s remaining twenty percent of its allocation. Any excess levy increase over the taxing authority’s eighty percent allocation shall not continue for a period longer than three years at any one time. No excess levy shall exceed the remaining twenty percent of the taxing authority’s allocation. No taxing authority shall be entitled to utilize the allocation of a different taxing authority. Local school districts shall retain all proceeds from their utilized allocation and may expend the proceeds for any educational purpose consistent with general law.

Subsection E —  Equalization and Infrastructure Fund.

During the ten year transition period eliminating the personal property tax in subsection B, the funds contained in the Equalization and Infrastructure Fund shall be appropriated by the Legislature and divided among the taxing authorities on a pro-rata basis according to revenue shortages directly resulting from the reduction in and abolishment of the personal property tax for which increases in real property tax revenues do not cover the deficiency.

After the ten year transition period eliminating the personal property tax in subsection B, the Equalization and Infrastructure Fund shall provide per pupil funding block grants to local school districts and funding to local governments to develop or maintain any and all nonhighway publicly owned infrastructure. The Legislature shall not be obligated to expend the entirety of the fund in any year or period of years. If the balance of the fund exceeds ten percent of general revenue, the excess may be used for any purpose as the Legislature may direct.

Subsection F — Real Property Exemptions.

Senior and Disabled Exemption- A “Senior and Disabled Exemption” shall be established by the Legislature. The exemption shall exempt from taxation an amount of not less than $30,000 of the fair market valuation of real property, used exclusively for residential purposes, by at least one of its owners, who is a bona fide resident of this State and who has  either attained the age of sixty-five years or is permanently and totally disabled, or both.  

Homestead Exemption- A “Homestead Exemption” may be established by the Legislature by general law. If established, the exemption shall exempt from taxation the real property, used exclusively for residential purposes, by at least one of its owners, who is a bona fide resident of this State, and who has not attained the age of sixty-five years old and is not permanently and totally disabled. The amount of this exemption, if established by the Legislature, shall not exceed fifty percent of the “Senior and Disabled Exemption.”

The “Senior and Disabled Exemption,” and the “Homestead Exemption,” if any, shall be phased in over a period of not more than five years.

Other Exemptions — Public property shall be exempt from taxation and the Legislature may, by general law, exempt real property used for educational, literary, scientific, religious or charitable purposes.

Subsection G — Bonds.

Any bonds in effect on the date of ratification of this amendment by the voters of this State for which personal property tax revenues are obligated shall be backed by the full faith and credit of the State of West Virginia. The Legislature shall through general law provide the authority, terms and procedure for all new State, local government and school district bond issuances after the ratification of this amendment by the voters of this State.

Subsection H — Grandfather Clause for Earned Tax Relief Benefits; Enactment of New Benefits.

The economic benefit of all authorized tax credits, deductions, discounts and other tax relief benefits, earned prior to the ratification of this amendment by the voters of this State, shall be preserved and applied in a manner to be determined by the Legislature: Provided, That any new credits and other similar tax relief provisions may only be enacted by a three-fifths majority vote of each House of the Legislature.

Subsection I — Supremacy.

            Except where herein expressly provided otherwise, the provisions of this section shall be read and applied in harmony with, and to effectuate the purposes of, all other provisions of this Constitution: Provided, That in the event of any inconsistency between any of the provisions of this section and other provisions of this Constitution, the provisions of this section shall prevail.

Subsection J — General Law.  

The Legislature by general law shall enact the provisions contained in this section and any other provisions required to carry out the provisions of this section.

Resolved further, That in accordance with the provisions of article eleven, chapter three of the Code of West Virginia, 1931, as amended, such amendment is hereby numbered “Amendment No. 1” and designated as the “Fair and Simple Tax Reform or FASTR amendment” and the purpose of the proposed amendment is summarized as follows: “To reform the taxation system of the State.”

NOTE: The purpose of this resolution is to enact a Fair and Simple Tax Reform or FASTR amendment to the Constitution.

Strike-throughs indicate language that would be stricken from a heading or the present law and underscoring indicates new language that would be added.