Although the ACIR made no specific recommendations in its 1963 Report concerning the use of classification systems for property tax assessment, it did note that such systems are "potentially useful legal devices for making property tax systems more readily administrable *** Classification, by removing inequities that generate evasion, can give the assessor more confidence in the justice of strict enforcement." (p. 35)

(a) Of the 49 States and the District of Columbia responding to question 10, 26 do not have a classification system of any kind, and 15 have only a partial system. Included in this latter category are provisions for special farmland assessments which in six States represent the only special property classification. In Oklahoma, the voters have recently approved classification, and action is expected during the coming legislative session.

Provisions of the classification systems in the eight States which do have them (Alabama, Arizona, Hawaii, Louisiana, Minnesota, Montana, Tennessee, and West Virginia) vary considerably from State to State. Generally, classification distinguishes the following different types of property: Utility, agricultural land, commercial and industrial, residential, livestock, railroads, mining property, gas and oil properties, and merchandise inventories.

(b) Few States provided information concerning recent amendments to their classification systems. The one amendment most frequently cited was the enactment of "greenbelt" laws providing special assessment for farm, timber and open space land. In four StatesAlabama, Maryland, Illinois and Tennessee-recent amendments to the State constitution have permitted the creation of complete classification systems.

Thirty-one States presently have the constitutional authority to classify property.

I. REAL PROPERTY EXEMPTION: ASSESSMENT AND PUBLICITY

Question No. 11. Does your State exempt any real property from ad valorem taxation? If so, please give details of the kinds of property exempted. Also, does your State make and publish any regular assessment of the value of such tax-exempt property?

(a) The 1963 ACIR Report did not make any specific recommendations regarding the number of real property exemptions from ad valorem taxation, although it did comment:

The utilization of exemption from property taxes without regard for the secondary effects thereof has advanced so far in redistributing the property tax burden that a reexamination of this device is needed.

All 49 States and the District of Columbia responding to this question do exempt certain types of real property from ad valorem taxaation (in Delaware the authority to grant such exemptions rests with the counties and municipalities). Though specific exemptions vary from State to State, most States do exempt many of the same types of property, including: all property owned by any level of government and used for public purposes; real property owned by nonprofit religious, charitable, educational, benevolent and scientific organizations and used for such purposes only; cemeteries; public

housing authorities; art galleries (public); public airports; etc. A large number of States provide partial exemptions for real property owned by veterans or their widows, blind persons, and the disabled. Some States provide a limited homestead exemption for all taxpayers. An examination of the lists of exemptions allowed in these States indicates that in the majority of States, the tax exemption is used quite widely as a means of providing relief to a broad range of interest groups and public services.

(b)

ACIR RECOMMENDATION NO. 8

In order that the taxpayers may be kept informed, each State should require the regular assessment of all such taxexempt property, compilation of the totals for each type of exemption by taxing districts, computation of the percentages of the assessed valuation thus exempt in each taxing district and publication of the findings.

Of the 39 responding to the second part of question 11 (including the District of Columbia) 24 reported that the State does not make or publish assessments of the value of real property exempted from ad valorem taxation on any regular basis. (In five of these StatesAlaska, Arkansas, Maine, Oklahoma, and Virginia-there is some effort to record the value of such exempted property at the county level.) Only 15 States reported making and publishing such assessments regularly. The District of Columbia, Georgia, Indiana, Maryland, New Jersey, Ohio, and Oregon noted making and publishing such assessments annually. In New York, and Rhode Island, these assessments are required by the State to be submitted annually by the municipalities. Both Iowa and Wisconsin are in the process of making the first such assessment at the present time.

In Utah, exempted property is listed but not appraised.

(c) On the whole, very little progress has been made in the direction of reevaluating the use of property tax exemptions and their impact on the overall tax situation in the respective States.

J. TAXATION RELATED TO USE: PROTECTING FARMLAND AND OPEN SPACE

Question No. 12. Does your State have any provision-Greenbelt laws, restrictive agreements, etc.-to assure that land taxed as farmland is withheld from other forms of development and/or taxed retroactively when its use changes? If so, please provide details of the system used.

Within the past decade increasing attention has been focused on the need to preserve "open space" land both as a vanishing natural resource and as a key element in any overall strategy to control urban sprawl and develop comprehensive land use plans, particularly in metropolitan areas.

Nevertheless, only 17 of the 49 States responding to this question (not applicable to the District of Columbia) have developed "greenbelt" or other similiar laws designed to encourage preservation of open space land: Alaska, California, Hawaii, Kentucky, Maine, Maryland,

Minnesota, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Texas, Utah, Virginia, and Washington. In these States, provisions of the law include special tax assessment rates for land used exclusively for agricultural purposes (several States include timberland and general open space land as well), and the imposition of rollback taxes on the land when it is converted to another use.

In four States surveyed-Alabama, Massachusetts, Nebraska and Nevada-constitutional amendments have recently been approved which would permit special assessment of farm land (in Nevada the constitutional amendment is still pending in the legislature, having been passed by only one house). In four States-Michigan, North Carolina, Ohio and Wisconsin-where constitutional amendments are not necessary, the issue is expected to come before the next session of the legislature.

Finally, four States-Arkansas, Delaware, Vermont and West Virginia have limited provisions designed to discourage the conversion of agricultural and open space lands to other uses. Arkansas, Deleware, and West Virginia have provisions for special assessment of agricultural land but no provision for rollback taxes upon conversion of the land to other uses. In Vermont, a 1969 law allows the owner of any real property to sell or donate his property to a municipality or State agency. If this land is later returned to private ownership, its use shall not be changed without consent of the legislative body of the municipality. (To date, this law has not been used.)

It should be noted that in those States where greenbelt laws do exist, there are mixed feelings as to their success. For example, in New Jersey, the statutory definition of agricultural use is such that it is possible for land speculators to devote minimal effort to farming the land while still qualifying for the special assessment rate. The Rhode Island response to this question included the observation that the State's greenbelt law is largely ineffective in preserving open spaces, but very effective as a tax shelter for land speculators.

K. RELIEVING PROPERTY TAXES: HOW MUCH AND TO WHOM?

Question No. 13. What provisions, if any, does your State make for relief of property taxes and to whom is such relief given? How many people received such relief in fiscal year 1972 and how much money was distributed to them?

In a 1967 report, the ACIR recommended that the States take steps to shield basic family income from undue burdens imposed by the property tax. The recommendation was made on the basis of findings which showed that the property tax burden fell disproportionately on low-income groups, in particular the elderly. In a report issued in January 1973, the ACIR reaffirmed this recommendation, noting that while many States have adopted "circuit breaker" provisions for property tax relief, primarily for the elderly, there is still much to be done in the way of providing relief for all low-income groups.

(a) Within the past few years there has been considerable progress at the State level toward providing property tax relief for elderly homeowners. Forty-four States now have adopted specific provisions for such relief. In 23 of these States, the entire program is State-financed;

in 15 States, the program is State-mandated but locally financed; and in the remaining six States, the program is State-authorized and locally financed. Of these same 44 States, 38 have adopted or broadened their program within the past 3 years, while another 20 States are presently considering an expansion of their existing system.

Many of these programs are, of course, limited. For example, income ceilings for eligibility vary a great deal from State to State, and some are quite low-$3,000 in Delaware and North Carolina, $3,500 in North Dakota, and $2,400 (single) or $3,700 (married) in Colorado.

Progress toward alleviating the property tax burden for all lowincome groups has been much more limited, however. For example, only nine States have provisions for relief to elderly renters-California (all renters), Colorado, Illinois, Maine, Michigan (all renters), Minnesota, New York, Vermont, West Virginia, and Wisconsin.

And only three States-New Mexico, Oregon, and Utah-have circuitbreaker provisions for tax relief to low-income persons of all ages. Beginning last year, New Mexico provides an income-dependent tax credit to all persons under an income ceiling of $6,000 per year, based on all State-local taxes paid by the individual. Oregon provides a tax credit for all homeowners on a sliding scale, with an implicit income ceiling of $8,000 per year. The Utah system provides relief to "indigent" homeowners under an income ceiling of $2.500 for single persons, $3,000 for married persons. Although the word "indigent" is presently interpreted to mean only those persons 65 and older, there is no explicit age limit in the law.

There are presently nine States with no program of property tax relief to either the elderly or to all low-income taxpayers-Arizona, District of Columbia, Louisiana, Mississippi, Missouri, Nevada, Oklahoma, and Wyoming. In Missouri the constitution has recently been amended to allow for an exemption for homeowners 65 and older. Enabling legislation is expected during this session of the legislature. Circuitbreaker legislation is presently being proposed to Congress for the District of Columbia.

In both Oklahoma and Nebraska the issue of property tax relief for senior citizens is expected to come up during the 1973 legislative

sessions.

(b) Only 16 States provided figures as to the amount of relief distributed under State circuit breaker provisions. These amounts ranged from a high of over $33 million in Massachusetts to a low of $337,000 in Colorado. Under the Massachusetts system, 72,753 persons received relief in 1971. In Colorado, 12,402 received relief (an estimated 50 to 60 percent of those eligible).

L. CONSTITUTIONAL OBSTACLES TO REFORM

Question No. 14. Please list and explain any provisions of your State constitution that make specific reference to the system of property taxation.

Noting that "in some States the modernization of property tax systems and their administration is hampered by constitutional provisions that are archaic, confusing, or cluttered with details of a statutory nature and are often difficult to amend" the ACIR made the following recommendation (No. 2) in its 1963 report: “To give legis

latures and Governors flexibility and responsibility for producing and maintaining equitable, productive, administrable property tax systems, constitutions should be divested of all details that obstruct sound utilization and administration of the property tax."

(a) Of the 49 States responding to question 14 (not applicable to the District of Columbia), only one, Hawaii, noted that its State constitution contains no reference to a system of property taxation. In all the remaining States, constitutional references to the property tax do exist, though there is a great deal of variation from State to State.

In general, most State constitutions include similar basic references; for example, a listing of general categories of property which may or shall be exempted from property taxation, some provision for a classification system (or prohibition of same), and a broad authorization for the State legislature to tax within the guidelines set out in the constitution. In addition, many State constitutions require uniformity of assessment unless otherwise noted.

Other types of provisions which appear less frequently in State constitutions include: A maximum rate of taxation which can be applied to a given class of property; provision for amending this rate through a referendum process; the requirement that revenues from motor vehicle and motor fuel excise taxes be used for the upkeep of highways, roads, et cetera; provisions regarding the rights of municipalities to tax and go into debt; and provisions for homestead exemptions, often with dollar amounts specified.

The majority of State constitutions in these 47 States contain references to the system of property taxation which fall within the outline of the general provisions noted above. There are, of course, States at both extremes.

For example, the State of Vermont constitution contains only the most general reference to a system of property taxation, stating the authority of the State to levy taxes and the responsibility of the citizens to share in the burden of maintaining public services. Other States which have only general constitutional references to the property tax are Wisconsin, Maryland, Arizona, New Hampshire, North Dakota, Mississippi, and Delaware.

At the other extreme, the State constitutions of Texas, Tennessee, Oklahoma, New York, Louisiana, Alabama, and Missouri contain much more detailed references to the property tax system. Of these, the Louisiana constitution is by far the most specific. The newly revised Tennessee constitution contains schedules of assessment rates for different classes of real and tangible personal property. The New York, Alabama, and Oklahoma constitutions contain fairly detailed provisions for local use of the property tax.

While relatively few States are encumbered by constitutions which make extremely detailed and therefore restricting reference to a property tax system, many States must still cope with overly general constitutional references which are limiting in their vagueness. The ACIR saw a need for change in both instances, but to date there appears to have been very little comprehensive reevaluation of such constitutional provisions by the States.

The lone exception to this rule is the State of Montana, whose constitution has been substantially revamped to strengthen property tax administration, and whose legislature is now moving rapidly to act on these reforms.