BOISE – Some Idaho legislators say they’ll try again next year to eliminate a loophole in the state’s tax code that allows developers to virtually eliminate their property taxes on rural land.
The exemption, a 2002 law designed to give farmers and ranchers a tax break for land they intend to subdivide, has been a boon for developers across the state. It allows them to avoid paying taxes based on the market value of undeveloped acreage until building begins.
In Nez Perce County, for example, one property owner was able to reduce the assessment on his property to $463 from $90,000. Property taxes on that one-acre lot along the Clearwater River east of Lewiston will drop from $1,000 to $5.14, said county Assessor Dan Anderson.
A bill to phase out the tax break in 14 years passed both houses but was vetoed by Gov. Dirk Kempthorne earlier this year. Kempthorne, who benefits from the loophole on land he owns north of Boise, dumped the bill on arguments it didn’t give landowners enough notice.
Critics of the exemption say it shifts the burden of paying for government to rural landowners who are still paying full taxes.
“The people who want to leave it in place will count each year it’s not changed as a victory,” said Sen. Gary Schroeder, R-Moscow, who voted against the law in 2002.
Sen. Joe Stegner, R-Lewiston, says many legislators during the 2005 session didn’t really understand the failed bill that meant to reverse the 2002 changes for developers. Still, he thinks it’s likely the two houses will pass a consensus bill next year.
“Everyone left Boise with a commitment to get that done,” said Stegner, who backed the break three years ago but has since reconsidered.
A revolt is growing in Idaho against rising taxes on skyrocketing property values. Former Nez Perce County Commissioner Chuck Cline is leading a citizens’ group called Idaho Property Tax Reform that hopes to limit the property tax to 1 percent of the actual market value.
Property value assessments have been climbing rapidly throughout Idaho. In Minidoka County, assessments on some homes went from $15,000 to $50,000 in one year. Assessments increased in Latah County by about 11 percent last year, and Kootenai County faces its largest value increase ever this year, adding about $2.7 billion in property values for a total of $10.3 billion countywide, according to county Assessor Mike McDowell.
A $90,000 lot in Lewiston was recently reassessed for just 0.1 percent of that amount. Landowner and developer Richard Finley Jr. split his two-acre property in half. One acre has his house on it, while the second empty acre is eligible for the loophole.
“I think it’s unfair I pay so much and everybody else in the county with the same services pays so little,” said Finley, claiming that before receiving the break he’d been treated unfairly by the county by being assessed more often than other landowners.
Finley, one of three to apply for and receive the tax break this year through the Nez Perce County Commission, acknowledged he feels a little bad about being the beneficiary of a loophole he believes probably should be closed – though not bad enough to stop applying for it.
“Unless it’s equitable for everybody, I’m going to take any break we can get,” said Finley. “I have a couple neighbors who are planning to do the same thing.”
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