Georgia Department of Revenue House Bill 386 Tax Reform Legislation

Georgia Department of Revenue
House Bill 386
Tax Reform Legislation
Title Ad Valorem Tax
Georgia Department of Revenue
Session 1
Review of legislation
Distribution of TAVT
Appeals
Impact on County TC Offices
Georgia Department of Revenue
House Bill 386
• Tax Reform Legislative
Title Ad Valorem Tax (TAVT) part of a larger
initiative to spur economic growth
Sales tax
Income tax
Georgia Department of Revenue
Definitions
• “Motor Vehicle” means every vehicle
which is self-propelled other than an
electric personal assistive mobility device
(EPAMD).
• O.C.G.A. § 40-1-1(33)
– Titled Vehicles
Georgia Department of Revenue
Definition of Fair Market Value
(A) The average of the current fair market value for a vehicle
listed in the current motor vehicle ad valorem assessment
manual utilized by the state revenue commissioner in
determining taxable value of a motor vehicle
- 100% value of the value listed in the “Motor Vehicle Assessment
Manual”
(B) Used motor vehicle not listed in the current motor vehicle ad
valorem assessment manual:
- Higher of the bill of sale or value from a reputable used car market
guide designated by the commissioner
(C) New motor vehicle not listed in the current motor vehicle ad
valorem assessment manual (not a demonstrator and has never
been the subject of a sale at retail to the general public)
- Bill of sale less any rebate and before reduction for the tradein value of another motor vehicle.
Georgia Department of Revenue
Definitions
• Trade in Value
– Value of the motor vehicle as stated in the bill
of sale for a vehicle which has been traded in
to the dealer when purchasing another vehicle
from the dealer
Georgia Department of Revenue
What happens March 1, 2013
Titled motor vehicle purchased on or after March 1, 2013:
– Exempt from sales and use tax
– Exempt from annual ad valorem tax (birthday tax) in Chapter
5 of Title 48
– Titled as required in Title 40
• Subject to title & registration fees in Title 40
– $18.00 title fee
– $20.00 registration fee
– Subject to a title ad valorem tax (TAVT)
• Alternative ad valorem tax
Georgia Department of Revenue
Overview
Title work must be presented in county of
owner’s residence
county is collector of TAVT
Payment of TAVT + title application fee
must be paid at time of applying for title
All changes in ownership trigger payment of
TAVT
Georgia Department of Revenue
How is TAVT Calculated?
-
FMV of vehicle
Trade In Value
Taxable Value
Taxable Value * rate = Tax Due
Georgia Department of Revenue
Comparison
Current
New
$35,000 sale price
- $15,000 trade in allowance
$20,000 taxable value
$35,000 sale price
- $15,000 trade in allowance
$20,000 taxable value
7.0% Sales Tax = $1,400
Title Ad Valorem Tax Due =
$1,300.00
Ad valorem based on 25 mills =
$350 ($35,000 * .40 * 25 mills)
Year 1 taxpayer pays $1,750
$450 savings in year 1
+ annual ad valorem tax in future
years
Georgia Department of Revenue
Non-dealer (casual) transactions
Current
$35,000 value
$350 annual ad valorem tax
(25 mills * $14,000 assessed value)
+
$18.00 Title Application Fee
+
$20.00 Registration Fee
New
$35,000 value
- No allowance for trade in
$35,000 taxable value
Title Ad Valorem Tax Due =
$2,275
+
$18.00 Title Application Fee
+
$20.00 Registration Fee
Georgia Department of Revenue
Revenue & Distribution
• Local Base amount = $1 billion
– Average 2007 and 2008
• Local current collection amount
– Amount of ad valorem taxes collected in prior year
• Local target collection amount
– Local base amount added to the product of 2% of the local base
amount multiplied by the number of years since 2012 with a
maximum amount of $1.2 billion
• 2014 - $1,020,000,000
• 2015 - $1,040,000,000
Georgia Department of Revenue
Revenue & Distribution
• State base amount = $535 M
• State current collection amount
– Total amount of ad valorem taxes collected for the tax year prior
to the year title ad valorem tax rate is reviewed for adjustment
• 2014 collections adjusted for 2015 to equal amount that 7%
would have generated
• State target collection amount
– Amount = to the state base amount added to the product of 2% of
the state base amount multiplied by the number of years since
2012
• 2014 - $545,700,000
• 2015 - $556,400,000
Georgia Department of Revenue
2 separate Target amounts
• State Target amount
– Adjusts the overall rate
• Local Target amount
– Adjusts how the split is calculated
Revenue
Local
43%
State
57%
Georgia Department of Revenue
State & Local Title Ad Valorem Tax
Tax Year
Tax Rate
State %
Local %
2013
6.5%
57%
43%
2014
6.75
55%
45%
2015
7%
55%
45%
2016*
7%
53.5%
46.5%
2017*
7%
44%
56%
2018*
7%
40%
60%
2019*
7%
36%
64%
2020*
7%
34%
66%
2021*
7%
30%
70%
2022 – forward*
7%
28%
72%
Georgia Department of Revenue
*Except….
• For 2016
– Annual review & rate set by Commissioner
• No later than January 15th Commission to
determine
– local target collection amount (LTCA) and local current
collection amount (LCCA)
» If LCCA = or within 1% of LTCA, rate as set in
statute
» If LCCA exceeds by more than 1% the LTCA the
rate is adjusted downward to generate no more
than LTCA – state rate increased
» If LCCA is more than 1% less of the LTCA, the rate
is adjusted upward – state rate decreased
Georgia Department of Revenue
Annual Notification
– January 15th date for commissioner to make
determination of the rate (split)
– January 31st notification due to county tax
commissioners of the adjusted rate (split)
– The effective date of such adjusted rate
amounts shall be January 1 of such tax year
• 1st distributions cannot be made until notification from
DOR of the adjusted rate
Georgia Department of Revenue
Other Adjustments
• 2015, 2018, 2022
– July 1 the Revenue Commissioner determines state
target collection amount (STCA) and the state current
collection amount (SCCA)
• If the SCCA is within 1% of the STCA – no change in rate
• If the SCCA is more than 1% less of the STCA tax rate may
be increased to equal STCA & the LTCA that should have
been collected and the increase is given to the state
• Notification to county no later than August 31 to be effective
January 1 of next calendar/tax year
• Rate cannot exceed 9%
Georgia Department of Revenue
Distributions
• Proceeds collected from:
•
•
•
•
•
Title Ad Valorem Tax
State salvage title ad valorem tax fees
Administrative fees
Penalties
Interest
• Disbursed within 30 days following the end
of each calendar month
Georgia Department of Revenue
Distribution to State
Ad valorem tax Distributed to:
& fees
State title ad
valorem tax,
fees, salvage,
penalties,
interest,
administrative
fees
State
(deposited in
General
Treasury)
Deductions
1%
Administrative
Fee (to be
remitted to the
collecting
county’s
general fund)
Penalty
Failure to remit
within the 30
day period
results in
forfeiture of
administration
fee plus interest
at the rate of
1% per month
Georgia Department of Revenue
Money Flow
Georgia Department of Revenue
Distribution of Local Title Ad Valorem Tax
• Within 30 days following the end of each
calendar month allocate and distribute in an
amount to offset any reduction in ad valorem
tax on motor vehicles collected under Chapter 5
of Title 48:
–
–
–
–
County governing authority
Municipal governing authorities
Board of education of county schools
Board of education of municipal schools
Georgia Department of Revenue
County Budgets
• Current process
– Ad valorem taxes paid weekly or every two weeks
• New Process
– Ad valorem taxes paid weekly or every two weeks
– TAVT cannot be distributed until end of month and ad
valorem tax shortfall determined and paid
• TC has 30 days from the end of the month to make
distributions
Georgia Department of Revenue
“Old” Ad Valorem Tax
• Titled vehicles with no ownership change
• Non-titled vehicles
– 1985 or older vehicles are not required to be
titled
– Trailers
– Campers
Georgia Department of Revenue
How to Calculate Ad Valorem True-Up
• Subtract the amount of ad valorem tax on motor
vehicles (old method) collected in the same
month of 2012
District
County
School
Special Districts
Municipalities
Amount Collected
March 2012
Amount Collected
March 2013
Difference
Georgia Department of Revenue
Levy Type
District
&
Name
Net Annual
Ad Valorem
Tax Before
True-up
TAVT
True-up
Net Annual
Ad Valorem
Tax after TrueUp
(= Same Month/2012)
County M & O
School
Municipalities
TOTALS
Unincorporated
$ 34,521.23.
$ 1,726.06
$ 36,247.29
Incorporated
$ 70,144.52
$ 3,507.23
$ 73,651.75
County M & O
$222,751.00
$11,137.55
$233,888.60
City 1 School
$ 8,652.31
$ 432.62
$ 9,084.93
City 2 School
$ 7,562.23
$ 378.11
$ 7,940.34
City 1
$ 11,235.12
$ 561.76
$ 11,796.88
City 2
$ 1,985.47
$
$ 2,084.74
$322,330.65
99.27
$ 16,116.54
$338,447.24
Georgia Department of Revenue
Shortfall
• What happens when there is insufficient
funds to make up the difference in ad
valorem tax?
– Allocate a proportionate amount of available
proceeds to each governing authority & school
boards
– Any remaining funds to be paid will be paid
from next month’s proceeds
Georgia Department of Revenue
Distribution of TAVT (3 Thirds)
1st
Third
County
&
Independent
School Systems
2nd Third
Local
Governments
or
Schools
3rd Third
Local
Governments
Georgia Department of Revenue
Sales Tax
• LOST- Local Option Sales Tax
– County/Municipality based on negotiation & Certificate filed
with Commissioner
• ELOST – Education Local Option Sales Tax
• SPLOST (county & school)
– County/Municipalities by Intergovernmental Agreement
• HOST – Homestead Option Sales Tax
• MARTA – Metropolitan Atlanta Rapid Transit Authority
Georgia Department of Revenue
T-SPLOST Regions
Georgia Department of Revenue
Central Savannah River Area-Region 7
•
•
•
•
•
•
Burke
Columbia
Glascock
Hancock
Jefferson
Jenkins
•
•
•
•
•
•
•
Lincoln
McDuffie
Richmond
Taliaferro
Warren
Washington
Wilkes
Georgia Department of Revenue
River Valley-Region 8
•
•
•
•
•
•
•
•
Chattahoochee
Crisp
Clay
Dooly
Harris
Muscogee
Macon
Marion
•
•
•
•
•
•
•
•
Quitman
Randolph
Schley
Stewart
Sumter
Talbot
Taylor
Webster
Georgia Department of Revenue
Heart of Georgia-Altamaha-Region 9
•
•
•
•
•
•
•
•
Appling
Bleckley
Candler
Dodge
Emanuel
Evans
Jeff Davis
Johnson
•
•
•
•
•
•
•
•
•
Laurens
Montgomery
Tattnall
Telfair
Toombs
Treutlen
Wayne
Wheeler
Wilcox
Georgia Department of Revenue
Distribution of 1st Third
IF……
The county has no independent
school districts
The county has one or more
independent school districts
THEN…..
100% of the first third goes to the
county school board
Example: Rockdale County
The first third is shared among the
county and the independent school
districts based on ratio of students
in each school system –or agreement
Example: Carroll County
Georgia Department of Revenue
Distribution of 2nd Third
IF
The county has LOST…
The county does not have LOST …
The county has ELOST but does not have
LOST…
The county has HOST …
Then
Distributed to the county authority and each
qualified municipality in the county according
to the county’s LOST distribution certificate.
Example: Pike County
Distributed on a pro rata basis “according to
the ratio that each such municipality bears to
the population of the entire county.”
Example: Cherokee County
Distributed to the county school boards and
the municipal school boards “in the same
manner as required under the local
constitutional amendment.”
Example: Bulloch County
Distributed to the county authority and each
qualified municipality in the county according
to O.C.G.A. 48-8-104.
Example: DeKalb County
Georgia Department of Revenue
Distribution of 3rd Third
If …
The county has SPLOST …
Then …
Distributed to the county authority and each qualified
municipality in the county according to the
intergovernmental agreement or as otherwise required
under the SPLOST that is in effect at the time.
Example: Cobb County
Distributed to the county authority and each qualified
municipality according to these rules:
- If the SPLOST has expired within 12 months,
distributed to the county authority and each qualified
municipality in the county according to the
intergovernmental agreement or as otherwise required
under the SPLOST that was previously in effect.
The county has an expired SPLOST …
- If the SPLOST has expired over 12 months ago, then
▪ If there is a LOST in effect, distributed to the
county authority and each qualified municipality in the
county according to the county’s distribution certificate
▪ If there is no LOST in effect, distributed
“according to the ratio that each such municipality bears
to the population of the entire county.”
Georgia Department of Revenue
Distribution of 3rd Third (cont’d)
IF …
Then …
The final third is distributed to the “governing body of the
County does not have SPLOST but does have MARTA authority created by local Act to operate such metropolitan
tax….
area system of public transportation.”
The county has never had a SPLOST …
If there is a LOST in effect, the final third is distributed to
the county authority and each qualified municipality in the
county according to the county’s distribution certificate
Georgia Department of Revenue
Appeals
• Vehicle values are appealable per O.C.G.A. § 48-5-450
– Filing affidavit of illegality
• Requires filing a bond
• Trial in superior court
– Appeal to Board of Tax Assessors as provided in
O.C.G.A. § 48-5-311
• Board of Equalization and Superior Court
- or • Binding Arbitration
Georgia Department of Revenue
Appeals Process for Vehicle Valuation
Customer Wins !
Customer Pays
100% of TAVT to
Register Vehicle
Appeal
Resolved !
Customer Gets
REFUND + Interest
pa
id
Customer Appeals
Vehicle Valuation
Ap
pe
a
l<
85
%
Post Bond
Customer Pays $0 of
TAVT to Register
Vehicle
Bond
Ap
pe
a
Appeal
Resolved !
Must Show
Appeal
Documentation
Customer Pays
85% of TAVT to
Register Vehicle
Vehicle
Value is
Recalculated
l>
85
Customer pays
100% of TAVT for
Appeal Value
%
pa
id
Customer Pays
Remaining Balance
of TAVT + Interest
Georgia Department of Revenue
Georgia Department of Revenue
Georgia Department of Revenue
• Taxpayers who wish to appeal the vehicle
value in the Motor Vehicle Assessment
Manual must submit an appeal to the
county board of assessors.
• A copy of such appeal must be given to the
county tax commissioner.
– Title transaction cannot be completed without
full payment of TAVT – UNLESS – appeal filed
• Payment accepted at 85%
Georgia Department of Revenue
Appeals
• Consider allowing taxpayer to complete
appeal form in TC office?
– Send form to BOA for handling appeal
• Why?
– Customer service
– Offices in different locations
Georgia Department of Revenue
Timeline & Business Process
• DOR Regulation 560-11-14
– The time allowed for the filing of a written appeal shall be
forty-five (45) days from the deadline date for the
payment of the tax
• 30 days from date of purchase to pay TAVT (casual)
• 10 day from the date of purchase to pay (dealer)
• 30 days from date of residency
Georgia Department of Revenue
30-Day Letter Notice to Taxpayer
45
Georgia Department of Revenue
Issues not accounted for in
MV Assessment Manual
•
•
•
•
•
High mileage
Rust, dents, dings, water damage
Mechanical issues
Rebuilt
Assembled
While high mileage adjustments are found in most
valuation guides….diminished value for other
reasons may require professional repair estimates
Georgia Department of Revenue
Example: Casual Sale
2003 Toyota Camry (196,000 miles) purchased
on 5/1/2013 for $4000.
MV Assessment Manual =
$ 6,125 (2450)
Taxpayer appeals …value exceeds purchase price …
vehicle has high mileage…
Georgia Department of Revenue
Kelly Bluebook online indicates that a 2003
Camry with 196,000 miles may be worth…
• Trade-in Value
=
• Private Party
=
• Used Car Dealer =
$3000 (good condition)
$4540 (good condition)
$6540 (excellent condition)
This online valuation guide is easy to use and widely
recognized.
Georgia Department of Revenue
For the same 2003 Camry with high miles,
Edmunds online indicated the following…
• Trade-in Value
=
• Private Party
=
• Used Car Dealer =
$3216 (good condition)
$3843 (good condition)
$4710 (good condition)
This valuation guide is also easy to use – it gives a base value for each
category then deducts a specific dollar amount (-$1,274) for high
mileage .
Georgia Department of Revenue
Who is most likely to appeal value?
• Newcomers to Georgia
• Casual Sales
• Any sale where purchase price is
lower than MV Assessment Manual
value.
• Taxpayers currently paying ad valorem
Georgia Department of Revenue
Welcome Newcomer!
• New residents to Georgia at time of titling
vehicle in Georgia and registering are required:
– To pay the state and local title ad valorem tax
• 50% at time of initial registration
• 50% paid within 12 months
Georgia Department of Revenue
Opt In Provisions
• Vehicles purchased in Georgia between January 1, 2012
and February 28, 2013 may opt in prior to January 1, 2014
and after compliance with:
(1) Calculate the amount of state and local title ad valorem tax that
would be due if bought after March 1, 2013 and
(2) Add the amount of sales tax paid plus the amount of ad valorem
taxes paid in 2012 (old) and if applicable ad valorem taxes paid in
2013 (old) and
– If (1) is greater than (2) the owner shall remit difference to tag agent
or
– If 2 is greater than (1) no additional amount is due
Georgia Department of Revenue
TAVT On-Line Calculator
Calculator
“Opt-In Letter” to Eligible Taxpayers
Available for mailing by county
or through World Marketing
Georgia Department of Revenue
What to expect March 1, 2013
• Angry Customers
– Reasons
• Uninformed
• casual sales
• new to Georgia
• Transactions must be completed in
vehicle owner’s county of residence
Georgia Department of Revenue
What to expect March 1, 2013
• Increase in motor vehicle appeals
• Increased transaction time at county tag
agent windows
• Need for increased security in TC offices
– Angry taxpayers
– Cash in office
Georgia Department of Revenue
Educate and Inform your customers
• Press release in local paper
• Brochures
• Inserts
– Tax bills
– Water bills
Georgia Department of Revenue
What DOR is doing to Educate and Inform
stakeholders
• Monthly newsletter to the counties
• Launched a web calculator for estimating TAVT
and annual ad valorem
• Providing FAQs on the DOR-MVD website
• Meeting with stakeholders
–
–
–
–
–
Dealers
Salvage
Leasing companies
Rental car companies
Legislators
Georgia Department of Revenue
What is DOR doing to Educate and Inform
stakeholders (cont)
• Statewide training for counties,
municipalities, boards of education
• Press releases
• Infomercials
• Brochures
Georgia Department of Revenue
Discussion & Questions
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