2004 edition
ArizonA CApitol times
Arizona Tax Research Association
2016
Edition
An explanation of
2016 Arizona Property Taxes Explained
1
Introduction
This pamphlet was prepared to assist citizens in understanding Arizona’s
property tax system. Although the subject is complex, we have attempted
to present this information in a simple, brief format.
Arizona’s Property Tax System
Beginning in Tax Year 2015, Arizona uses one type of property value for
taxing purposes, known as the Limited Property Value (LPV).
In the 2012 General Election, Arizona voters approved Proposition 117,
which replaced Arizona’s dual valuation tax system with a single taxable
value (LPV) and limits its annual growth to 5%.
The Full Cash Value (FCV) should reflect the market value of all real
property. Arizona courts have interpreted the term “full cash value” to
mean the “cash equivalent value” of the property. Although the FCV is
synonymous with market value, the value established by the assessor may
be equal to, or less than, the actual market value.
The county assessor annually determines the FCV, which is the appealable
value by the property owner. Since the FCV should reflect market value,
there is no limit on its annual growth. Although the county assessor is
required to determine the FCV of all property, it is not a taxable value.
The LPV is limited by the Constitution to 5% annual growth and the
LPV cannot exceed the FCV. The assessor establishes both the FCV and
the LPV each year; however, the LPV is the only taxable value, which is
referred to as the Net Assessed Value (NAV). The NAV is calculated by
multiplying the class-specific assessment ratio by the LPV. The NAV is the
tax base for both primary and secondary taxes.
There are a few exceptions to the calculation of the LPV. The LPV, in the
case of new construction, errors in assessments, and changes in property
use, for instance, is set at the same level as the LPVs of other properties
with the same use. Additionally, the 5% valuation limit does not apply to
centrally assessed property, such as utilities and mines.
2016 Arizona Property Taxes Explained
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Property Tax Levies
Primary Tax Levies
Primary property taxes fund the maintenance and operation budgets of
state and local governments, such as school districts, counties, cities, and
community colleges.
The Arizona Constitution limits the total amount of primary property taxes
that counties, cities, and community college districts can levy to 2% each
year plus new construction. The levy limit operates off of a base year levy
established in fiscal year (FY) 1979-80, which was recalculated in 2006
due to a subsequent constitutional amendment. As a result, the actual
primary property tax levy in 2005 became the new base for the calculation
of future levy limits. The levy limit increases each year regardless of use,
so there is no loss of future capacity if the jurisdiction does not levy to
its limit. School district primary levies are not limited by the Constitution
but are set annually by the Legislature. In most instances, the majority of
property taxes are primary levies.
An additional limitation affects owner-occupied residences (class 3). The
combined primary tax from all jurisdictions on such property may not
exceed 1% of the LPV. In cases where the tax exceeds that amount (a
primary tax rate greater than $10 per $100 of assessed value), school
district primary taxes are reduced accordingly and, up until tax year
2014, the state provided additional aid to the school district to make up
the difference between the overall primary tax rate and the 1% rate cap.
Beginning in Tax Year 2015, state law limited these additional state aid
payments to $1 million per county and any amount remaining must be
transferred by the taxing jurisdictions within the affected school district(s)
as determined by the Property Tax Oversight Commission (PTOC).
The primary tax rate for class 3 property often stays below the $10 level
because the state pays the lesser of 45.003% (in tax year 2015) of the
school district primary tax rate or the qualifying tax rate (QTR). (For tax
years 2013 through 2016, the homeowner rebate percentage is
2016 Arizona Property Taxes Explained
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determined by the Department of Revenue. See the discussion under “The
Classification System.”) In tax year 2015, the QTR is $4.1954 for unified
school districts and $2.0977 for non-unified school districts. The amount
paid by the state for each property is capped at $600 (A.R.S. § 15-972).
This “homeowner rebate” appears automatically on tax bills and is
reflected on the line titled STATE AID (TO EDUCATION). An example of the
homeowner rebate calculation may be found in the forthcoming section
under “Calculating the Tax.”
In an effort to ensure proper classification of class 3 property, the
Legislature enacted specific requirements for assessors to verify the
accurate use of such property. Beginning in 2013 and during each elective
term of office thereafter, each county assessor is required to send owners
of class 3 property a notice if the assessor believes the property does
not qualify as class 3 according to the following criteria: the owner has
a mailing address outside the county in which the property is located;
the owner has a mailing address, other than a post office box, that is
different from the situs address; the owner has the same mailing address
for multiple parcels listed under class 3; or the owner appears to be a
business entity. If the owner doesn’t respond within 30 days, the assessor
must send a final notice within 30 days. If the owner fails to respond to
the final notice within 15 days, the assessor must reclassify the property
from class 3 to class 4 and the county treasurer is required to assess a
civil penalty against the owner equal to the homeowner rebate paid with
respect to the property in the preceding year. The owner of property
reclassified as class 4 may appeal the reclassification to the county board
of supervisors within 30 days.
Secondary Tax Levies
Secondary property taxes fund voter-approved general obligation bonds,
budget overrides, and special districts. Counties, community college
districts, and K-12 school districts may exceed their primary levy limit with
voter-approved secondary property tax overrides for up to seven years.
2016 Arizona Property Taxes Explained
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The myriad of special taxing districts that levy secondary property taxes
are subject to different statutory tax limits. For example, the annual
growth in secondary taxes levied by fire districts is limited to 8% but are
subject to a $3.25 statutory tax rate cap. The levy limits of fire districts
increase each year regardless of use. However, a fire district may override
its levy limit upon voter approval in one of two ways: 1) a permanent
override within the existing $3.25 rate cap or 2) a five-year temporary
override to exceed the $3.25 rate cap but subject to an annual increase
of 5% if the total net assessed value (NAV) of the property in the district
decreases by a combined 20% or more over two consecutive years (A.R.S.
§ 48-807). Some countywide special taxing districts, such as jails, flood
control, public health services, and the fire district assistance tax have tax
rate caps but no levy limits. On the other hand, the secondary taxes levied
for library districts do not have a tax rate cap or levy limit.
Property Tax Exemptions
Arizona provides property tax exemptions in varying dollar amounts to
disabled persons and to widows and widowers whose spouses died while
they were residents of Arizona. The dollar amounts are adjusted annually
for inflation and are scaled to the combined value of property owned.
Eligibility is restricted to individuals with total household income equal to
or less than $31,035 (no children under the age of 18 reside with claimant)
or $37,231 (children under the age of 18 reside with claimant). For tax
year 2015, the maximum allowable exemption is $3,724 of assessed value
if the total assessed value does not exceed $25,306 (A.R.S. § 42-11111).
In addition, property tax deferrals are provided to qualified homeowners
over the age of 69. Qualifications and procedures are outlined in A.R.S. §
42-17301.
Article IX, §18 of the Constitution allows residents 65 years or older, with
annual incomes below established thresholds, to apply to the county
assessor to freeze the limited property value of their primary residence
for up to three years. Income limits are set at 400% of the Supplemental
Security Income (SSI) benefit rate provided for in the Social Security Act
2016 Arizona Property Taxes Explained
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for one owner and 500% for more than one owner. In tax year 2015, the
income threshold for an individual property owner is $35,184 and $43,980
for two or more property owners. Property owners must apply every
three years to the assessor in the county in which the property is located.
All taxpayers interested in receiving this benefit should contact their local
assessor.
The Classification System
Arizona’s property tax system classifies property according to its use.
Each class of property is assigned an assessment ratio, pursuant to state
law, ranging from 1% to 18.5% (in tax year 2015). The assessment ratios
are applied to the LPV of a property to determine a property’s net assessed
value (NAV). All classifications use the same tax rates (with exception of
the homeowner rebate on class 3 property).
The property tax reform legislation of 2005 reduced the assessment
ratio on class 1 (business) property from 25% to 20% over a ten-year
period and increased the homeowner rebate from 35% to 40% over five
years. Additional legislation passed during the 2007 legislative session
accelerated the reduction in the class 1 assessment ratio from a ten-year
phase down to six years. Legislation that passed during the 2011 Second
Special Session further reduced the assessment ratio on class 1 property
one-half percent each year beginning in tax year 2013, down to 18% in
tax year 2016, and for class 2 property, the assessment ratio will drop
from 16% to 15% in tax year 2016. Also as a result of this legislation,
between tax years 2013 and 2016, the Department of Revenue is required
to calculate the percentage that the state must pay in additional state aid in
order to offset any shift in property taxes as a result of the reduction in the
assessment ratio for class 1 (business) and class 2 (agricultural) property
to class 3 (residential) property.
2016 Arizona Property Taxes Explained
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Tax Year 2015
Class 1 (18.5%) Mines and mining claim property, and standing timber.
Local telecommunications service, gas, water and electric utility company
property, pipeline company property, producing oil, and gas property.
Commercial and industrial real property. Commercial and industrial
personal property exceeding $146,973 of full cash value (A.R.S. §
42-12001).
Class 2 (16%) Agricultural real property, golf courses, and vacant land
(A.R.S. § 42-12002). Agricultural personal property exceeding $146,973 of
full cash value (A.R.S. § 42-12002).
Class 3 (10%) Primary residential residence of owner or owner’s relative
(A.R.S. § 42-12003).
Class 4 (10%) Property used for residential rental purposes, including
property owned in foreclosure by a financial institution, that is not
otherwise included in any other class (A.R.S. § 42-12004).
Class 5 (15%) Railroad, private rail car, and airline flight property (A.R.S.
§ 42-12005).
Class 6 (5%) Noncommercial historic property, foreign trade zone
property, qualifying military reuse zone property, enterprise zone property
that qualified prior to the 7/1/11 sunset (primary taxes only), qualifying
environmental technology property, and qualifying environmental
remediation property (A.R.S. § 42-12006).
Class 7 Historic commercial and industrial property (18.5%) and
renovations (1%) (A.R.S. § 42-12007 and 42-12101).
Class 8 Residential rental historic property (10%) and renovations (1%)
(A.R.S. § 42-12008 and 42-12101).
2016 Arizona Property Taxes Explained
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Class 9 (1%) Possessory Interests and real property and
improvements, regardless of ownership, leased and used exclusively
by a nonprofit organization that operates as a charter school or church,
religious assembly or religious institution (A.R.S. § 42-12009).
How “Net Assessed Value” is Calculated:
Using the classifications and limitations explained so far, this example will
illustrate how a home and business, which have a FCV of $200,000 and
$1,000,000, respectively, might appear on the tax rolls in tax year 2015.
Note that the net assessed value (NAV) of the home is 10% of the LPV,
while the business is assessed at 18.5%.
Calculating the Tax:
Using the most recent tax rates in the Gilbert Unified School District
within the Town of Gilbert, the following would be the taxes levied on a
hypothetical residential and business property.
*For TY 2015, the state will pay 45.003% of the homeowner’s primary
school district rate, up to the qualifying tax rate (QTR). In this school
district, the rebate reduces the tax rate by $1.8881.
Property Class Home (10%) Business (18.5%)
Full Cash Value $200,000 $1,000,000
Limited Property Value $180,000 $900,000
Net Assessed Value $18,000 $166,500
Property Class Home (10%) Business (18.5%)
Full Cash Value $200,000 $1,000,000
Limited Property Value $180,000 $900,000
NAV $18,000 $166,500
Total Secondary Rate $3.2032 $3.2032
Secondary Taxes Owed $576.58 $5,333.33
Effective Primary Rate* $6.5009 $8.3890
Primary Taxes Owed $1,170.16 $13,967.69
TOTAL TAXES OWED $1,746.74 $19,301.01
2016 Arizona Property Taxes Explained
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Mobile Homes
A mobile home may be treated as real or personal property, depending on
who owns the property on which it is located. Persons who own a mobile
home (one that is permanently affixed to the land) and the real property on
which it is located, may record an Affidavit of Affixture with the assessor’s
office. Once the affidavit is recorded, the mobile home is considered real
property, subject to real property liens. Taxes are levied against mobile
homes, whether treated as real or personal, in the same manner as real
property and are subject to all other state laws regarding property taxes.
Unsecured mobile homes are also subject to the $0.50 per $100 of
assessed value mobile home relocation primary tax (A.R.S. § 33-1476.03).
VALUATION CALENDAR
Notice of Valuation to Property Owners
Notice of Valuation Form: On or before March 1 of each year, the county
assessor is required to notify each property owner regarding the full cash
value and limited value of the property. This form shows both full cash and
limited values for the current and preceding years.
Appeals
If a property owner believes that the values or classification are excessive
or erroneous, the owner may file an appeal with the county assessor
within 60 days after the date the assessor mails the “notice of valuation.”
If requested by the property owner, the assessor is required to meet with
the owner and rule on the appeal by August 15. If the owner does not
wish to meet with the assessor, the owner may submit written evidence
to support the appeal. A property owner whose appeal is denied may
appeal to the County Board of Equalization (CBOE) or the State Board of
Equalization (SBOE) within 25 days after the assessor’s decision is mailed.
If the property under appeal is located within Maricopa or Pima County,
the taxpayer is required to file an appeal with the SBOE; otherwise, the
taxpayer is required to file the appeal with the CBOE. The CBOE and SBOE
2016 Arizona Property Taxes Explained
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are required to rule on all appeals by October 15 except for properties
valued by the Department of Revenue, in which case the decisions shall be
issued on or before November 15. Decisions of the CBOE and SBOE may
be appealed to tax court within 60 days from the last date of decision of an
administrative appeal. If no administrative appeal is filed, a property owner
may appeal the valuation or classification directly to tax court on or before
December 15 of the valuation year. Additionally, new owners may appeal
their valuations by December 15 of the tax year if their properties were
valued and ownership changed after December 15 of the valuation year.
New Construction, Additions, Deletions, and
Changes in Use
Property that changes due to new construction, additions or deletions, or
changes in use that occur after September 30 of the previous year may
be added to the roll, on or before September 30 of the valuation year. The
assessor is required to notify the property owner of any change in the
valuation on or before September 30. Within 25 days of the assessor’s
notice, the property owner may appeal the valuation to the SBOE or CBOE.
The SBOE and CBOE are required to rule on these appeals by the third
Friday in November. A further appeal to tax court must be filed within 60
days from the date the decision is mailed (A.R.S. § 42-16205).
Paying Taxes
Property taxes are levied on a calendar year, although Arizona
governments work on a fiscal year. Property values are established as of
January 1 of each year, while the tax rates on those values are set on the
third Monday in August of the following year. The first installment on the
tax bill is due on October 1 and is considered delinquent after November 1.
The entire amount may be paid in October if the taxpayer so desires, and
taxes of $100 or less are due in full on October 1, delinquent November
1. Taxpayers who miss the November 1 payment can pay the entire year’s
taxes without penalty or interest if paid by December 31. The second
installment is due March 1 and is delinquent after May 1.
2016 Arizona Property Taxes Explained
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More information and forms may be obtained from the offices of the County Assessor, the County Board of
Supervisors or the State Board of Equalization.
Arizona State Board of Equalization •
100 N. 15th Ave., Suite 130 • Phoenix, AZ 85007 • (602) 364-1600
For new construction, additions, deletions, and changes that occur after September 30 of the previous year
and up to September 30 of the valuation year, the County Assessor shall notify the owner of any changes in
valuation on or before September 30. The owner may appeal to the Board of Equalization within 25 days.
The Board of Equalization decision may be appealed to Tax Court within 60 days from the date the decision
is mailed. A new owner of property may appeal to Tax Court on or before December 15 in the year taxes are
levied if the value was not appealed by the previous owner.
Arizona Property Valuation
& Classification Appeals Process
The County Assessor mails the notice of property valuation no later than
March 1. A.R.S. 42-15101
The Decision to Appeal
Any owner of property may file a petition with the Assessor in the county in which the
property is located if the owner believes that his or her property has been improperly valued or
incorrectly classified. A.R.S. 42-16051.
Tax Court Appeal
After receiving the notice of valuation, the property owner may appeal through the
Administrative Process or Superior Court. A.R.S. 42-16051/42-16201. If the property owner
does not file an appeal in the Administrative Process, the owner may file a petition with Tax
Court or Superior Court at any time after receiving the notice of valuation but not later than
December 15. A.R.S. 42-16201(A).
Administrative Process
The property owner may file a petition no later than the deadline date as it appears on
the notice of valuation (not more than 60 days after the date the notice is mailed).
A.R.S.
42-16051(D).
Petitioner may request a meeting with the County Assessor. The assessor will answer all requests
on or before August 15.
A.R.S. 42-16054.
Board of Equalization
Petitioners not satisfied with the decision of the assessor may file a petition with the Board
of Equalization for the county within 25 days of the date the decision is mailed or to Tax Court
or Superior Court within 60 days. A.R.S. 42-16056 (C)/42-16201(B).
Petitioners not satisfied with the decision of the County or State Board of Equalization may file a
petition with Tax Court within 60 days after the date the decision is mailed. A.R.S. 42-16202(A).
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2016 Arizona Property Taxes Explained
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Notice of Valuation Form
2016 Arizona Property Taxes Explained
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Tax Notice Form
2016 Arizona Property Taxes Explained
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County Assessors
Apache County Assessor
Rodger Dahozy
P.O. Box 770
St. Johns, AZ 85936
928-337-7615
Cochise County Assessor
Phil Leiendecker
1415 Melody Lane, Building B
Bisbee, AZ 85603
520-432-8650
Coconino County Assessor
Christine Mazon
110 East Cherry Avenue
Flagstaff, AZ 86001
928-679-7962
Gila County Assessor
Deborah Hughes
1400 East Ash Street
Globe, AZ 85501
928-425-3231, EXT. 8712
Graham County Assessor
Darlene Alder
921 Thatcher Boulevard
Safford, AZ 85546
928-428-2828
Greenlee County Assessor
Linda Durr
253 Fifth Street
P.O. Box 777
Clifton, AZ 85533
928-865-5302
La Paz County Assessor
Sharon Schuler
P.O. Box 790
Parker, AZ 85344
928-669-6165
Maricopa County Assessor
Paul Petersen
301 West Jefferson, Suite 330
Phoenix, AZ 85003
602-506-3877
Mohave County Assessor
Ron Nicholson
700 West Beale Street
Kingman, AZ 86402
928-753-0703
Navajo County Assessor
Cammy Darris
P.O. Box 668
Holbrook, AZ 86025
928-524-4086
Pima County Assessor
Bill Staples
240 N. Stone
Tucson, AZ 85701
520-724-8172
Pinal County Assessor
Douglas Wolf
P.O. Box 709
Florence, AZ 85232
520-866-6361
Santa Cruz County Assessor
Felipe Fuentes
P.O. Box 1150
Nogales, AZ 85621
520-375-8030
Yavapai County Assessor
Pamela Pearsall
1015 Fair Street
Prescott, AZ 86305
928-771-3220
Yuma County Assessor
Joe Wehrle
410 S. Maiden Ln.
Yuma, AZ 85364
928-373-6040
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