State House approves measure addressing car tag taxes

Some of the rhetoric is off base; taxes aren't the issue, values are

FRANKFORT, Ky. (WTVQ) – Legislation sponsored by Representative Sal Santoro to limit motor vehicle taxes passed unanimously on the House floor. HB 6 would require Property Value Administrators (PVAs) under the Kentucky Department of Revenue to use the average trade-in value as the standard measure for assessing a vehicle’s value for tax purposes—not the higher “clean” trade-in value currently used.

But that is what basically already is in place.

“This measure has remained a top priority since the beginning of the session, and the unanimous support shown both in committee and on the House floor, I believe, speaks to the weight of this issue,” Santoro said. “Many Kentuckians are already facing rising costs on groceries and other necessities. The last thing our state needs to do is get greedy and take advantage of the supply shortage to jack up their motor vehicle taxes.”

The state Revenue Department is reviewing the legislation as well as a senate measure that would require the governor to order changes to the valuation process.

“Contrary to statements made on social media and elsewhere, vehicle tax rates have not increased. The state rate has remained the same as previous years. However, the value of some vehicles has increased causing the taxes owed by some to go up. The Kentucky Department of Revenue administers the state’s tax laws as they exist. Only the General Assembly has the constitutional authority to enact or amend law,” the Revenue Department said in a statement.

“Typically, vehicle values go down over time, but the current limited supply and high demand has caused the value of some vehicles to increase. This is happening across the nation, not solely in Kentucky. The dramatic change in the used vehicle market due to the pandemic has been widely reported in both the state and national news since 2020. The percentage increase for 2022 reflects the overall total valuation compared to the 2021 overall total valuation. Not all vehicle values will see a 40% increase compared to last year,” the department continued.

“While vehicle tax rates have not been raised, this unprecedented increase in the value of some vehicles does unfortunately impact the amount of taxes owed by the vehicle owner. However, should a vehicle owner choose to sell, this increased value will likely bring a much higher resale price.

“Under state law, the standard value of motor vehicles is the average trade-in value prescribed by the valuation manual unless information is available that affects the value of the vehicle, such as physical damage, high mileage or excessive wear and tear. If a vehicle owner believes the value of their vehicle is less than the estimated fair cash value due to documented damage or excessive mileage, they can appeal their assessment to their local PVA,” the Revenue Department’s statement continued.

Each year, the Kentucky Department of Revenue conducts a mass appraisal, which compares Vehicle Identification Numbers (VIN) for cars, trucks and motorcycles, and compares that appraisal to data provided by the National Automotive Dealers Association (NADA). This is used to obtain the estimated fair cash valuation from the trade-in valuation. The tax on motor vehicles is a property tax, and Section 172 of the KY Constitution states in part: All property, not exempted from taxation by this Constitution, shall be assessed for taxation at its fair cash value, estimated at the price it would bring at a fair voluntary sale.

Further, KRS 132.485 states: The standard value of motor vehicles shall be the average trade-in value prescribed by the valuation manual unless information is available that warrants any deviation from the standard value. Only the Kentucky General Assembly has the Constitutional authority to exempt all, or any portion of the property tax applied to motor vehicles.

Earlier this year, the Office of Property Valuation issued a memorandum detailing that 2022 motor vehicle tax valuation increased an unprecedented 40 percent compared to 2021. Aside from market fluctuations, there is another determinate of these rates—the standard value used by PVAs to assess vehicles. Under current law, PVAs must use a standardized measure when assessing the value of motor vehicles for tax purposes, defined by statute as the “average trade-in value.” However, since 2009, the Department of Revenue has defined “average trade-in” to mean a higher valuation of “clean trade-in.”

“We aren’t changing the statute here. The requirement for the standard value has stayed the same—average trade-in value,” Santoro added. “Yet over a decade ago, the Department of Revenue assigned a different, higher value as the standard. What this bill really does is correct the record and return that standard to what is already written in the law.”

HB 6 would clarify that only the average trade-in value, not the clean or rough trade-in, can be used to assess vehicle valuation beginning in 2023. Should a different value be used to assess a vehicle, the PVA must have appropriate documentation from the vehicle registrant showing the vehicle does not fit the standard definition. The bill as passed allows taxpayers to pay the 2021 amount in 2022, rather than the increased amount, and also requires refunds to be issued for anyone who overpaid in 2022 due to the use of the clean trade-in value.

Primary co-sponsor Representative Patrick Flannery originally filed the bill earlier this session. “This is an issue that has been on my radar since I filed a similar bill in my first session as a legislator. I appreciate Rep. Santoro taking the lead pushing this bill through the House, and I’m grateful that my colleagues have shown unanimous support so far.”

HB 6 moves to the Senate for consideration. For more information on the measure, visit legislature.ky.gov or click here.

Categories: Local News, News, State News

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