Bill Summary – FastDemocracy

HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #:     CS/HB 7019       PCB WMC 24-03 Exemption of Homesteads
SPONSOR(S): State Affairs Committee, Ways & Means Committee, Buchanan
TIED BILLS: CS/HJR 7017 IDEN./SIM. BILLS:
    REFERENCE                                                   ACTION                  ANALYST            STAFF DIRECTOR or
                                                                                                           BUDGET/POLICY CHIEF
    Orig. Comm.: Ways & Means Committee                         16 Y, 8 N               Rexford            Aldridge
    1) State Affairs Committee                                  15 Y, 6 N, As CS        Burgess            Williamson
                                               SUMMARY ANALYSIS
The Florida Constitution requires all property to be assessed at just value (fair market value) as of January 1 of
each year for purposes of ad valorem taxation. Ad valorem assessments are used to calculate property taxes
that fund counties, municipalities, district school boards, and special districts. The taxable value against which
local governments levy tax rates each year reflects the just value as reduced by any applicable exemptions
allowed by the Florida Constitution. One such exemption is on the assessed value between $50,000 and
$75,000, which is exempt from all taxes other than school district taxes.
Fiscally constrained counties are counties entirely within a rural area of opportunity or where a 1 mill levy
would raise no more than $5 million in annual tax revenue. The Legislature annually appropriates money to
fiscally constrained counties to offset ad valorem tax revenue reductions caused by various amendments to the
Florida Constitution provided certain requirements are met. Florida’s fiscally constrained counties are Baker,
Bradford, Calhoun, Columbia, Desoto, Dixie, Franklin, Gadsden, Gilchrist, Glades, Gulf, Hamilton, Hardee,
Hendry, Highlands, Holmes, Jackson, Jefferson, Lafayette, Levy, Liberty, Madison, Okeechobee, Putnam,
Suwannee, Taylor, Union, Wakulla, and Washington.
The bill implements an amendment to Article VII, Section 6 of the Florida Constitution proposed by HJR 7017
(2024) by making conforming statutory changes. If HJR 7017 is approved by the voters, this bill amends
current law to add an annual positive inflation adjustment to the current exemption on the assessed value for
all levies, other than school district levies, of $50,000 up to $75,000. The inflation adjustment will begin on
January 1, 2025.
The bill also directs the Legislature to appropriate funds to offset reductions in ad valorem tax revenue
experienced by fiscally constrained counties as a result of the annual positive inflation adjustment. To receive
the offset, a qualifying county must annually apply to the Department of Revenue and provide certain
documentation.
The Revenue Estimating Conference (REC) estimated the state expenditures necessary to fully offset the
revenue losses for fiscally constrained counties resulting from the inflation adjustment provision would be $0.7
million in Fiscal Year (FY) 2025-26, growing to approximately $4.3 million in FY 2028-29. The REC also
estimated that the bill has no impact on local government revenues because the constitutional amendment that
the bill implements is self-executing. Therefore, revenue impacts would result from approval of the
constitutional amendment, not the implementing legislation.
This bill takes effect on January 1, 2025, if the amendment to the State Constitution proposed by HJR 7017 is
approved by the voters at the 2024 general election or at an earlier special election.
This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives .
STORAGE NAME: h7019a.SAC
DATE: 1/23/2024
                                                       FULL ANALYSIS
                                                I. SUBSTANTIVE ANALYSIS
    A. EFFECT OF PROPOSED CHANGES:
         Present Situation
         Ad Valorem Taxes
         The Florida Constitution reserves ad valorem taxation to local governments and prohibits the state from
         levying ad valorem taxes on real and tangible personal property. 1 Ad valorem taxes are annual taxes
         levied by counties, municipalities, school districts, and certain special districts. These taxes are based
         on the just value (fair market value) of real and tangible property as determined by county property
         appraisers on January 1 of each year.2 The just value may be subject to limitations, such as the “Save
         Our Homes” limitation on homestead property assessment increases.3 The value arrived at after
         accounting for applicable limitations is known as the assessed value. Property appraisers then
         calculate the taxable value by reducing the assessed value in accordance with any applicable
         exemptions, such as the exemptions for homestead property. 4 Each year, local governing boards levy
         millage rates (i.e. tax rates) on the taxable value to generate the property tax revenue contemplated in
         their annual budgets.
         Homestead Exemptions
         Certain homestead exemptions are specified in Article VII, Section 6 of the Florida Constitution, which
         provides that every person who holds legal or equitable title to real estate and uses said real estate as
         a permanent residence for themselves, or a legal or natural dependent, is entitled to an exemption from
         taxes on the first $25,000 in assessed value.5 In 2008, Florida voters amended this provision to include
         an additional $25,000 exemption from all taxes other than school district taxes on the assessed value
         greater than $50,000.6 The constitution also vests the legislature with authority to enact general law
         establishing the manner in which individuals qualify for an exemption. Accordingly, s. 196.031(1)(b),
         F.S., automatically grants the additional, non-school homestead exemption, on the assessed value
         greater than $50,000 to every individual who qualifies for the initial homestead exemption on the first
         $25,000 of the assessed value.
         Fiscally Constrained Counties
         Fiscally constrained counties are counties entirely within a rural area of opportunity or where a 1 mill
         levy would raise no more than $5 million in annual tax revenue. 7 A “rural area of opportunity” is a rural
         community or a region, as designated by the Governor, that has been adversely affected by an
         extraordinary economic event, a severe or chronic distress, or a natural disaster or that presents a
         unique economic development opportunity of regional impact.8
         Florida’s fiscally constrained counties are Baker, Bradford, Calhoun, Columbia, Desoto, Dixie, Franklin,
         Gadsden, Gilchrist, Glades, Gulf, Hamilton, Hardee, Hendry, Highlands, Holmes, Jackson, Jefferson,
         Lafayette, Levy, Liberty, Madison, Okeechobee, Putnam, Suwannee, Taylor, Union, Wakulla, and
         Washington.9
1 Art. VII, s. 1(a)., Fla. Const.
2 Art. VII, s. 4., Fla. Const.
3 See generally s. 193.155, F.S.
4 S. 196.031, F.S.
5 Art. VII s. 6., Fla. Const.
6 Id.
7 S. 218.67(1), F.S.
8 S. 288.0656, F.S.
9 Florida Department of Revenue, Fiscally Constrained Counties, available at:
https://www.floridarevenue.com/property/Documents/fcc_map.pdf (last visited Jan. 23, 2024).
STORAGE NAME: h7019a.SAC                                                                                      PAGE: 2
DATE: 1/23/2024
            The Legislature annually appropriates money to fiscally constrained counties to offset ad valorem tax
            revenue reductions caused by various amendments to the Florida Constitution. 10 In order to receive an
            offset distribution, fiscally constrained counties must annually provide the Department of Revenue with
            an estimate of the expected reduction in ad valorem tax revenues that are directly attributable to
            specified revisions of Article VII of the Florida Constitution. 11 This prevents such amendments related to
            property tax from negatively affecting fiscally constrained county tax revenues.
            HJR 7017 (2024)
            HJR 7017 proposes an amendment to the Florida Constitution requiring the existing $25,000 assessed
            value amount, which is exempt from all ad valorem taxes other than school district taxes, be adjusted
            annually for positive inflation growth. This inflation adjustment would also apply to any future
            homestead exemption applying only to ad valorem taxes, other than school district taxes, if approved
            by the voters, and would begin on January 1, 2025.
            Effect of Proposed Changes
            This bill implements an amendment to Article VII, Section 6 of the Florida Constitution proposed in HJR
            7017 by making conforming statutory changes. If HJR 7017 is approved by the voters, this bill amends
            s. 196.031, F.S., to add an annual positive inflation adjustment to the current exemption on the
            assessed value for all levies, other than school district levies, of $50,000 up to $75,000. The inflation
            adjustment will begin on January 1, 2025.
            The bill creates s. 218.136, F.S., requiring the Legislature to appropriate funds to offset reductions in ad
            valorem tax revenue experienced by fiscally constrained counties as a result of the annual positive
            inflation adjustment. To receive the offset, a qualifying county must annually apply to the Department of
            Revenue and provide documentation regarding the county’s estimated reduction in ad valorem tax
            revenue. If a fiscally constrained county fails to apply for the distribution, its share reverts to the fund
            from which the appropriation was made.
            The bill provides emergency rulemaking authority to the Department of Revenue to administer the
            provisions of the act.
       B. SECTION DIRECTORY:
           Section 1: Amends s. 196.031, F.S., requiring an annual positive inflation adjustment on the assessed
           valuation greater than $50,000 for all levies other than school district levies.
           Section 2: Creates s. 218.136, F.S., requiring funds to be appropriated to offset reductions in ad
           valorem tax revenue experienced by fiscally constrained counties, and specifying requirements for
           fiscally constrained counties to apply for the distribution.
           Section 3: Authorizes the Department of Revenue to adopt emergency rules to administer the act.
           Section 4: Provides for applicability.
           Section 5: Provides a contingent effective date.
10   See ss. 218.12, 218.125, and 218.135, F.S.
11   Ss. 218.12(2), 218.125(2), and 218.135(2), F.S.
STORAGE NAME: h7019a.SAC                                                                                         PAGE: 3
DATE: 1/23/2024
                           II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
   A. FISCAL IMPACT ON STATE GOVERNMENT:
       1. Revenues:
           None.
       2. Expenditures:
           If the bill becomes effective and the Legislature makes appropriations as contemplated by the bill,
           the Revenue Estimating Conference (REC) estimates the state expenditures necessary to fully
           offset the revenue losses for fiscally constrained counties resulting from the inflation adjustment
           provision would be $0.7 million in Fiscal Year (FY) 2025-26, growing to approximately $4.3 million
           in FY 2028-29.
   B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
       1. Revenues:
           The REC estimated that the bill has no impact on local government revenues because the
           constitutional amendment that the bill implements is self-executing. Therefore, revenue impacts
           would result from approval of the constitutional amendment, not the implementing legislation.
       2. Expenditures:
           None.
   C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
       None. The economic impact on the private sector would result from approval by the voters of the
       constitutional amendment proposed by HJR 7017, not the implementing legislation.
   D. FISCAL COMMENTS:
       None.
                                               III. COMMENTS
   A. CONSTITUTIONAL ISSUES:
       1. Applicability of Municipality/County Mandates Provision:
          Not applicable. This bill does not appear to require counties or municipalities to spend funds or take
          action requiring the expenditures of funds; reduce the authority that counties or municipalities have
          to raise revenues in the aggregate; or reduce the percentage of state tax shared with counties or
          municipalities.
       2. Other:
          None.
   B. RULE-MAKING AUTHORITY:
       This bill authorizes the Florida Department of Revenue to adopt emergency rules to administer the act.
STORAGE NAME: h7019a.SAC                                                                                  PAGE: 4
DATE: 1/23/2024
   C. DRAFTING ISSUES OR OTHER COMMENTS:
       None.
                           IV. AMENDMENTS/COMMITTEE SUBSTITUTE CHANGES
On January 23, 2024, the State Affairs Committee adopted a strike-all amendment and reported the bill
favorably as a committee substitute. The strike-all amendment:
     Removed provisions implementing HJR 7015, pertaining to a $50,000 increase on the assessed value
       exemption for all levies, other than school district levies.
     Removed provisions implementing both HJR 7015 and HJR 7017.
     Clarified that the annual inflation adjustment to the exemption on assessed value for all levies , other
       than school district levies, and any future, similar exemptions added to the constitution, must be
       adjusted only when the inflation growth is positive.
     Added a requirement that the Legislature appropriate funds to offset reductions in ad valorem tax
       revenue experienced by fiscally constrained counties as a result of the annual positive inflation
       adjustment.
     Provided emergency rulemaking authority to the Department of Revenue to implement the provisions of
       the act.
The analysis is drafted to the committee substitute as passed by the State Affairs Committee.
STORAGE NAME: h7019a.SAC                                                                               PAGE: 5
DATE: 1/23/2024
Statutes affected: 
H 7019 Filed: 196.031
H 7019 c1: 196.031
H 7019 er: 196.031