Senate Bill 2937

AN ACT TO AMEND SECTION 27-35-50, MISSISSIPPI CODE OF 1972, TO REVISE THE MANNER IN WHICH THE APPRAISAL OF AFFORDABLE RENTAL HOUSING SHALL BE MADE FOR THE PURPOSE OF ARRIVING AT THE TRUE VALUE OF THE PROPERTY FOR AD VALOREM TAX PURPOSES; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. Section 27-35-50, Mississippi Code of 1972, is amended as follows:

27-35-50. (1) True value shall mean and include, but shall not be limited to, market value, cash value, actual cash value, proper value and value for the purposes of appraisal for ad valorem taxation.

(2) With respect to each and every parcel of property subject to assessment, the tax assessor shall, in ascertaining true value, consider whenever possible the income capitalization approach to value, the cost approach to value and the market data approach to value, as such approaches are determined by the Department of Revenue. For differing types of categories of property, differing approaches may be appropriate. The choice of the particular valuation approach or approaches to be used should be made by the assessor upon a consideration of the category or nature of the property, the approaches to value for which the highest quality data is available, and the current use of the property.

(3) Except as otherwise provided in subsection (4) of this section, in determining the true value of land and improvements thereon, factors to be taken into consideration are the proximity to navigation; to a highway; to a railroad; to a city, town, village or road; and any other circumstances that tend to affect its value, and not what it might bring at a forced sale but what the owner would be willing to accept and would expect to receive for it if he were disposed to sell it to another able and willing to buy.

(4) (a) In arriving at the true value of all Class I and Class II property and improvements, the appraisal shall be made according to current use, regardless of location.

(b) In arriving at the true value of any land used for agricultural purposes, the appraisal shall be made according to its use on January 1 of each year, regardless of its location; in making the appraisal, the assessor shall use soil types, productivity and other criteria set forth in the land appraisal manuals of the Department of Revenue, which criteria shall include, but not be limited to, an income capitalization approach with a capitalization rate of not less than ten percent (10%) and a moving average of not more than ten (10) years. However, for the year 1990, the moving average shall not be more than five (5) years; for the year 1991, not more than six (6) years; for the year 1992, not more than seven (7) years; for the year 1993, not more than eight (8) years; and for the year 1994, not more than nine (9) years; and for the year 1990, the variation up or down from the previous year shall not exceed twenty percent (20%) and thereafter, the variation, up or down, from a previous year shall not exceed ten percent (10%). The land shall be deemed to be used for agricultural purposes when it is devoted to the commercial production of crops and other commercial products of the soil, including, but not limited to, the production of fruits and timber or the raising of livestock and poultry; however, enrollment in the federal Conservation Reserve Program or in any other United States Department of Agriculture conservation program shall not preclude land being deemed to be used for agricultural purposes solely on the ground that the land is not being devoted to the production of commercial products of the soil, and income derived from participation in the federal program may be used in combination with other relevant criteria to determine the true value of such land. The true value of aquaculture shall be determined in the same manner as that used to determine the true value of row crops.

(c) In determining the true value based upon current use, no consideration shall be taken of the prospective value such property might have if it were put to some other possible use.

(d) (i) * * * The true value of affordable rental housing, based on its current use for purposes of ad valorem taxation, shall be the product of the gross collected rental income for the immediately preceding calendar year multiplied by a gross rental multiplier of three and seventy-eight one-hundredths (3.78); however, in no event shall the true value of affordable rental housing be less than fifty percent (50%) of the product of gross rental income as set forth in the pro forma included in the application for Low Income Housing Tax Credits as submitted to the Mississippi Home Corporation multiplied by a gross rental multiplier of three and seventy-eight one-hundredths (3.78).

(ii) The owner of affordable rental housing shall provide to the county tax assessor on or before April 15 of each year, an accurate sworn statement of the gross collected rental income for the immediately preceding calendar year * * *. The owner shall provide to the tax assessor upon written request:

1. A financial statement of the subject affordable rental housing for the previous calendar year certified by an independent certified public accountant showing the gross effective rental income;

2. A copy of the owner's federal income tax return for the previous calendar year; and

3. The applicable section of the pro forma included in the application for Low Income Housing Tax Credits as submitted to the Mississippi Home Corporation setting forth the projected gross rental income of the subject property.

(iii) For the year immediately following the first year of operation of an affordable rental housing property when there is no full year of operation upon which to calculate true value based on actual gross collected rental income, the true value of the property for the current year shall be based on the gross rental income as set forth in the pro forma included in the application for Low Income Housing Tax Credits as submitted to the Mississippi Home Corporation for those units for which the owner has obtained certificates of occupancy from the applicable governmental authority as of January 1 of the current year. The owner shall certify to the tax assessor under oath on or before April 15 of the current year the projected gross rental income for such units based on the pro forma. Units for which no certificate of occupancy has been issued on for before January 1 of the current year shall be assessed based on the value of land only. (iv) As used in this paragraph:

1. "Affordable rental housing" means residential housing subject to a land use restriction agreement consisting of one or more rental units, the * * * rental of which is subject to Section 42 of the Internal Revenue Code (26 USC 42) * * *.

2. "Land use restriction agreement" means a restriction imposed by an extended low-income housing agreement or other covenant recorded in the applicable land records or by applicable law or regulation restricting the maximum income of residents and/or the maximum rental rate in the affordable rental housing.

(v) Notwithstanding the other provisions of this paragraph, the true value of any affordable rental housing which was either placed in service or for which Low Income Housing Tax Credits (LIHTC) as provided for in Section 42 of the Internal Revenue Code (26 USC 42) or equivalent statutes were allocated by the Mississippi Home Corporation between April 4, 2005, and the later of December 31, 2010, or the date on which the last allocation of LIHTC for calendar year 2010 is made by the Mississippi Home Corporation, shall be determined in accordance with provisions of this section that were effective from and after January 1, 2005, through December 31, 2010, based on the net operating income attributable to the property (expressly not including the capitalized value of LIHTC) capitalized at a market value capitalization rate prescribed by the Department of Revenue.

(5) The true value of each class of property shall be determined annually.

(6) The Department of Revenue shall have the power to adopt, amend or repeal such rules or regulations in a manner consistent with the Constitution of the State of Mississippi to implement the duties assigned to the department in this section.

(7) It shall be the duty of the Department of Revenue to examine the assessment rolls of the counties for compliance with the provisions of this section. In the event that the department determines that a county has failed to comply with this section in regard to the assessment of affordable rental housing, the department shall withhold the county's homestead exemption reimbursement until such time as the county has complied with this section. In the event the county has not complied with this section in regard to the assessment of affordable rental housing by the end of the state fiscal year, the department shall place the funds so held in a special escrow account. All interest on this account shall accrue to the benefit of the county. Once the county achieves compliance with this section in regard to the assessment of affordable rental housing, the department shall release to the county all funds held in escrow during the period of noncompliance.

SECTION 2. Nothing in this act shall affect or defeat any claim, assessment, appeal, suit, right or cause of action for taxes due or accrued under the ad valorem tax laws before the date on which this act becomes effective, whether such claims, assessments, appeals, suits or actions have been begun before the date on which this act becomes effective or are begun thereafter; and the provisions of the ad valorem tax laws are expressly continued in full force, effect and operation for the purpose of the assessment, collection and enrollment of liens for any taxes due or accrued and the execution of any warrant under such laws before the date on which this act becomes effective, and for the imposition of any penalties, forfeitures or claims for failure to comply with such laws.

SECTION 3. This act shall take effect and be in force from and after January 1, 2011.