Originally appeared in the April 2007 edition of Georgia's Cities.
In 2002, the General Assembly approved legislation to allow city governments that levy a property tax to extend the Homeowners Tax Relief Grant (HTRG) to city residents. State law provides that cities are reimbursed by the state for the amount of the homestead tax credit. In 2007, legislative changes are expected to impact key provisions of the HTRG. Municipal officials should be aware of their responsibilities in implementing the tax credit, and should understand how cities will be impacted by the proposed legislative changes.
What is the Homeowners Tax Relief Grant?
The Homeowners Tax Relief Grant was authorized for the first time by the governor and the General Assembly in 1999 to provide tax relief for property owners in the form of a homestead exemption on state, county and school property taxes. The legislature extended the HTRG to apply to city property taxes in 2002. State law requires that the tax relief provided by the HTRG must be shown on the property tax bill as a credit given to the taxpayer directly from the state on taxes that would have otherwise been due. The credit is deducted from an individual's property tax bill and reimbursed to the county by the state.
Does the amount of the exemption vary each year?
Each year, the General Assembly may appropriate funds for a tax relief credit and in doing so, specifies the eligible assessed value of each qualified homestead receiving one of the normal homestead exemptions. The credit is established annually in the General Appropriations Act, and the amount depends on the availability of state funds. When the legislature initially approved the HTRG, the intent was to increase the amount of the credit by $2,000 a year until the total credit reaches $18,000, presuming state funds were available. However, since its inception, the amount of the exemption has remained at $8,000 in assessed value.
How is the tax savings calculated on a typical tax bill?
Cities that levy property taxes set the millage rate at a level to bring in sufficient revenues to fund city services. Property tax bills are calculated by subtracting local exemptions from the assessed value of the property, and applying the city's millage rate. Below is an example of a tax bill for a $100,000 house in a city with a millage rate of 10 mills and a $10,000 local homestead exemption:
|Assessed value (.40)
|Minus City's homestead exemption
|City Millage Rate
|Amount city expects in tax revenue
With the HTRG, the property owner is eligible to receive an additional $8,000 exemption. In our example above, this would result in a tax savings of $80 for the property owner ($8,000 x 10 mills = $80). The property owner would pay $220 to the city, and through the HTRG, the state would reimburse the city for the $80 tax credit to insure that the city receives the full $300 in property taxes for this tax bill. The reimbursements from the state ensure that the city is able to fund necessary services without increasing the millage rate.
Can the deduction amount for the HTRG exceed the amount owed on the tax bill?
No, the Homeowner's Tax Relief credit cannot exceed the amount that a person owes. For example, in a county where senior citizens do not pay school taxes, they will receive tax relief on county, state and city taxes, but they can not receive additional tax relief for school taxes since they don't pay any school taxes.
What if no funds are available for the HTRG?
Local governments rely on the state to fund the HTRG, and since the program started in 1999, the General Assembly has funded it every year. However, if the state does not have sufficient funds to grant this tax credit, the credit would not appear on property tax bills and property owners would perceive this as a tax increase, through no fault of the local government. Cities would have to decide whether it is worthwhile to cut services to pay for a similar credit locally.
How are cities reimbursed by the state?
The law requires cities to annually submit tax digest information to the Georgia Department of Revenue to identify which properties received the HTRG credit in the previous tax year, and to certify the total amount that is due to the city as a result of the credit. Within 60 days of receiving the certification, the Department of Revenue submits the grant amount directly to the city. In 2006, the state paid over $420 million in HTRG grants to local taxing authorities including cities, counties and school districts.
What legislative changes are being considered relative to the HTRG, and how will these changes affect cities?
The legislature is currently considering HB 354, which would require cities, counties and school districts to notify the Department of Revenue of the homestead tax relief grant due to them within a year of the date that the final installment of taxes was due. Local taxing authorities that fail to submit their information to the DOR within this time frame would forfeit the grant amount due to them for that year. City officials should be aware of the current reporting requirements for the HTRG and submit digest certification to the DOR in a timely fashion. If the legislature approves HB 354, cities that fail to meet the proposed one-year deadline stand to lose HTRG grant funds.
Where can my city obtain assistance in compiling the HTRG certification for DOR?
City officials requiring assistance in gathering and submitting tax digest information to comply with the HTRG requirements are encouraged to contact Sha Hester or Vicki Lambert of the Georgia Department of Revenue's Local Government Services Division at 404-968-0707. DOR staff are available to travel to cities to provide technical assistance for municipal staff and insure cities remain in compliance with the law and receive the correct HTRG credit owed to them.
Where can I find more information about the HTRG?
Complete information on the Homeowners Tax Relief Grant, including forms to file for the HTRG credit, can be found on the Georgia Department of Revenue website.