Tennessee Law about Appraisal
Article 2 Legislative Department Section 28 of TN constitution.
Taxable property - Valuation - Rates.
In accordance with the following provisions, all property real, personal or mixed shall be subject to taxation, but the Legislature may except such as may be held by the State, by Counties, Cities or Towns, and used exclusively for public or corporation purposes, and such as may be held and used for purposes purely religious, charitable, scientific, literary or educational, and shall except the direct product of the soil in the hands of the producer, and his immediate vendee, and the entire amount of money deposited in an individual's personal or family checking or savings accounts. For purposes of taxation, property shall be classified into three classes, to wit: Real Property, Tangible Personal Property and Intangible Personal Property.
Real Property shall be classified into four (4) sub-classifications and assessed as follows:
(a) Public Utility Property, to be assessed at fifty-five (55%) percent of its value;
(b) Industrial and Commercial Property, to be assessed at forty (40%) percent of its value;
(c) Residential Property, to be assessed at twenty-five (25%) percent of its value, provided that residential property containing two (2) or more rental units is hereby defined as industrial and commercial property; and
(d) Farm Property, to be assessed at twenty-five (25%) percent of its value.
House trailers, mobile homes, and all other similar movable structures used for commercial, industrial, or residential purposes shall be assessed as Real Property as an improvement to the land where located.
The Legislature shall provide, in such manner as it deems appropriate, tax relief to elderly low-income taxpayers through payments by the State to reimburse all or part of the taxes paid by such persons on owner-occupied residential property, but such reimbursement shall not be an obligation imposed, directly or indirectly, upon Counties, Cities, or Towns.
By general law, the Legislature may authorize the following program of tax relief:
(a) The legislative body of any county or municipality may provide by resolution or ordinance that:
(1) Any taxpayer who is sixty-five (65) years of age or older and who owns residential property as the taxpayer's principal place of residence shall pay taxes on such property in an amount not to exceed the maximum amount of tax on such property imposed at the time the ordinance or resolution is adopted;
(2) Any taxpayer who reaches the age of sixty-five (65) after the time the ordinance or resolution is adopted, who owns residential property as the taxpayer's principal place of residence shall thereafter pay taxes on such property in an amount not to exceed the maximum amount of tax on such property imposed in the tax year in which such taxpayer reaches age sixty-five (65); and
(3) Any taxpayer who is sixty-five (65) years of age or older who purchases residential property as the taxpayer's principal place of residence after the taxpayer's sixty-fifth birthday shall pay taxes in an amount not to exceed the maximum amount of tax imposed on such property in the tax year in which such property is purchased.
(b) Whenever the full market value of such property is increased as a result of improvements to such property after the time the ordinance or resolution is adopted, then the assessed value of such property shall be adjusted to include such increased value and the taxes shall also be increased proportionally with the value.
(c) Any taxpayer or taxpayers who own residential property as their principal place of residence whose total or combined annual income, or wealth exceeds an amount to be determined by the general assembly shall not be eligible to receive the tax relief provided in subsection (a) or (b).
The Legislature may provide tax relief to home owners totally and permanently disabled, irrespective of age, as provided herein for the elderly.
Tangible Personal Property shall be classified into three (3) sub-classifications and assessed as follows:
(a) Public Utility Property, to be assessed at fifty-five (55%) percent of its value;
(b) Industrial and Commercial Property, to be assessed at thirty (30%) percent of its value; and
(c) All other Tangible Personal Property, to be assessed at five (5%) percent of its value; provided, however, that the Legislature shall exempt Seven Thousand Five Hundred ($7,500) Dollars worth of such Tangible Personal Property which shall cover personal household goods and furnishings, wearing apparel and other such tangible property in the hands of a taxpayer.
The Legislature shall have power to classify Intangible Personal Property into sub-classifications and to establish a ratio of assessment to value in each class or subclass, and shall provide fair and equitable methods of apportionment of the value of same to this State for purposes of taxation. Banks, Insurance Companies, Loan and Investment Companies, Savings and Loan Associations, and all similar financial institutions, shall be assessed and taxed in such manner as the Legislature shall direct; provided that for the year 1973, or until such time as the Legislature may provide otherwise, the ratio of assessment to value of property presently taxed shall remain the same as provided by law for the year 1972; provided further that the taxes imposed upon such financial institutions, and paid by them, shall be in lieu of all taxes on the redeemable or cash value of all of their outstanding shares of capital stock, policies of insurance, customer savings and checking accounts, certificates of deposit, and certificates of investment, by whatever name called, including other intangible corporate property of such financial institutions.
The ratio of assessment to value of property in each class or subclass shall be equal and uniform throughout the State, the value and definition of property in each class or subclass to be ascertained in such manner as the Legislature shall direct. Each respective taxing authority shall apply the same tax rate to all property within its jurisdiction.
The Legislature shall have power to tax merchants, peddlers, and privileges, in such manner as they may from time to time direct, and the Legislature may levy a gross receipts tax on merchants and businesses in lieu of ad valorem taxes on the inventories of merchandise held by such merchants and businesses for sale or exchange. The portion of a Merchant's Capital used in the purpose of merchandise sold by him to non-residents and sent beyond the State, shall not be taxed at a rate higher than the ad valorem tax on property. The Legislature shall have power to levy a tax upon incomes derived from stocks and bonds that are not taxed ad valorem.
This amendment shall take effect on the first day of January, 1973. [As amended: Adopted in Convention September 14, 1971, Approved at general election August 3, 1972; As Amended: Proposed by 1979 SJR 31, 91st General Assembly, Adopted May 16, 1979, Concurred in by 1981 SJR 44, 92d General Assembly, Adopted May 5, 1981, Approved at general election, November 2, 1982; As amended: Proposed by 2004 SJR 71, 103d General Assembly, Adopted May 19, 2004, Concurred in by 2006 SJR 1, 104th General Assembly, Adopted April 6, 2006, Approved at general election November 7, 2006.
67-5-601. General policy - Legislative findings
(a) The value of all property shall be ascertained from the evidence of its sound, intrinsic and immediate value, for purposes of sale between a willing seller and a willing buyer without consideration of speculative values, and when appropriate, subject to the provisions of the Agricultural, Forest and Open Space Land Act of 1976, codified in part 10 of this chapter.
(b) It is the legislative intent that no appraisal under this part shall be influenced by inflated values resulting from speculative purchases in particular areas in anticipation of uncertain future real estate markets; but all property of every kind shall be appraised according to its sound, intrinsic and immediate economic value, which shall be ascertained in accordance with such official assessment manuals as may be promulgated and issued by the state division of property assessments and approved by the state board of equalization pursuant to law.
(c) (1) The general assembly finds that the increased market value of certain residential property zoned for commercial use has caused an increase in taxes to the extent that citizens are faced with the necessity of selling dwelling houses in which they have lived for many years. The general assembly finds that present use valuation has been extended to others, and is warranted under certain circumstances to relieve the burden of increased taxation to residential owners.
(2) It is the policy of this state that the owners of residential property who have lived on that property for a significant period of time should be allowed to continue to live on that property without a disproportionate increase in taxes due to the property being zoned for commercial use.
(3) For the purposes of this subsection (c):
(A) “Dwelling house” means a residence occupied by the owner of an estate in that property, with such residence being zoned for commercial use, used solely for residential purposes, and occupied by that owner or a person to whom the current owner is a lineal descendant for a period of twenty-five (25) years or more, together with the real estate upon which it is situated up to a maximum five (5) acres; and
(B) “Owner” means a citizen and resident of Tennessee who occupies the citizen's or resident's dwelling house, as opposed to occupying any other residence, for at least nine (9) months out of each calendar year.
(4) Any owner of a dwelling house may make application to the assessor of property of the county in which the property is located for its classification under this subsection (c). Property that has been determined by the assessor of property to qualify under this subsection (c) shall be valued for ad valorem tax purposes at its market value for residential purposes. The assessment on such property shall include the entire year in which the land is classified under this subsection (c). Any person who is denied such classification shall have the same rights and remedies for appeal and relief as are provided taxpayers for any action of assessors of property.
(5) Should the use or ownership of the property change so that it no longer qualifies under this subsection (c), then the property owner shall have the duty of informing the assessor of property. Upon discovering that a property no longer qualifies for classification under this subsection (c), the assessor of property shall reclassify the property and shall value the property according to its current market value for subsequent tax years. In the event such change in use or ownership does not timely come to the attention of the assessor of property, and upon the assessor discovering that the property no longer qualifies, such reclassification shall affect each year that the property has failed to qualify, and the taxpayer shall be liable for the difference in taxes, including penalty and interest.
(6) It is the legislative intent that the twenty-five-year time period is an integral part of this subsection (c). If this provision is held by a court of competent jurisdiction to be an unreasonable classification or otherwise declared unconstitutional, then this entire subsection (c) shall be null and void.
(d) The general assembly finds that due to the abundance of limestone, sand and gravel in this state and the difficulty in valuing the contributory interest in limestone, sand and gravel that such contributory interest in limestone, sand and gravel shall be deemed to have no value for property tax purposes. This does not affect the commercial classification of real property used for quarry purposes.
(e) The general assembly finds that any public utility property or commercial and industrial property that generates electricity using wind as its energy source is generally capable of only generating approximately one-third (1/3) of the electricity that competing generation properties are capable of producing using coal or other conventional energy sources and that the commercially competitive disadvantage of such generation property due to its dependence on the intermittent nature of wind as an energy source similarly evidences that its sound, intrinsic, and immediate economic value for all purposes under this chapter should not initially exceed one-third (1/3) of its total installed costs. The general assembly further finds that, unless the findings are considered in the determination of the sound, intrinsic, and immediate economic value of such property for all purposes under this chapter, investment in property to generate electricity using wind as its energy source will be unreasonably discouraged, denying the citizens of this state the environmental benefits associated with the greater use of wind, as a renewable energy source, for electric power generation. The assessor of property, in assessing any such commercial and industrial property, or the comptroller, in assessing any such public utility property, that generates electricity using wind as its energy source, shall take these findings by the general assembly into account in determining the sound, intrinsic, and immediate economic value of such property, when the property is initially appraised and each time the property is reappraised.
67-5-602. Assessment guided by manuals - Factors for consideration
(a) Except as provided in §67-5-601(c), in determining the value of all property of every kind, the assessor shall be guided by, and follow the instructions of, the appropriate assessment manuals issued by the division of property assessments and approved by the state board of equalization. In the preparation of the manual, the division of property assessments and the state board of equalization shall consult with the United States forest service and the state forester in establishing the guidelines to be used in determining the value of forestland.
(b) For determining the value of real property, such manuals shall provide for consideration of the following factors:
(2) Current use;
(3) Whether income bearing or non-income bearing;
(4) Zoning restrictions on use;
(5) Legal restrictions on use;
(6) Availability of water, electricity, gas, sewers, street lighting, and other municipal services;
(7) Inundated wetlands;
(8) Natural productivity of the soil, except that the value of growing crops shall not be added to the value of the land. As used in this subdivision (b)(8), “crops” includes trees; and
(9) All other factors and evidence of value generally recognized by appraisers as bearing on the sound, intrinsic and immediate economic value at the time of assessment.
(c) (1) For determining the value of industrial, commercial, farm machinery and other personal property, such manuals shall provide for consideration of the following factors:
(A) Current use;
(B) Depreciated value;
(C) Actual value after allowance for obsolescence; and
(D) All other factors and evidence of value generally recognized by appraisers as bearing on the sound, intrinsic and immediate economic value at the time of assessment.
(2) Notwithstanding the foregoing, all farm personal property and also all household and kitchen furniture, tableware, musical instruments, wearing apparel, private passenger motor vehicles, jewelry and other personal property of similar character used in the taxpayer's own household, together with all intangible property, including bank accounts, of the taxpayer, may be assumed prima facie by the assessor of property to be of a value not in excess of seven thousand five hundred dollars ($7,500) per individual and fifteen thousand dollars ($15,000) for jointly owned property held by husband and wife in the absence of any tax return or schedule to the contrary.
67-5-1601. General provisions - Administration - Costs - Penalty for failure to comply
(a) (1) Reappraisal shall be accomplished in each county by a continuous six-year cycle comprised of an on-site review of each parcel of real property over a five-year period, or, upon approval of the state board of equalization, by a continuous four-year cycle comprised of an on-site review of each parcel of real property over a three-year period, followed by revaluation of all such property in the year following completion of the review period. Alternatively, if approved by the assessor and adopted by a majority vote of the county legislative body, the reappraisal program may be completed by a continuous five-year cycle comprised of an on-site review of each parcel of real property over a four-year period followed by revaluation of all such property in the year following completion of the review period. The board may consider a plan submitted by an assessor which would have the effect of maintaining real property values at full value as defined by law on a schedule at least as frequent as outlined in this section. In counties which have adopted a four-year or five-year reappraisal cycle, there shall be no updating or indexing of values as there is in counties with a six-year cycle.
(2) In the third year of the review cycle, there shall be an updating of all real property values if the overall level of appraisal for the jurisdiction is less than ninety percent (90%) of fair market value. If the overall level of appraisal for the jurisdiction is greater than or equal to ninety percent (90%) of fair market value, any subclass of property not having a level of appraisal within ten percent (10%) of the overall level of appraisal for the jurisdiction shall be updated to the overall level of appraisal. Further, any group of property within a subclass not having a level of appraisal within ten percent (10%) of the level of appraisal for that subclass shall be updated to the level of appraisal for that subclass. If land market values of farm property in the county are not updated, land use values for land classified as agricultural, forest and open space pursuant to §§ 67-5-1001 - 67-5-1050 will not be updated. When values are updated, the factors or appraisal table changes used to effect the update shall be as determined by the state board of equalization.
(3) Reappraisal shall be accomplished in each county on a four-year cycle, comprised of an on-site review of each parcel of real property over a three-year period, followed by revaluation of all such property in the year following completion of the review period. The board shall consider a plan submitted by an assessor which would have the effect of maintaining real property values at full value as defined by law on a schedule at least as frequent as outlined in this subsection, and if the board finds the plan would achieve this effect, the plan shall be implemented in lieu of indexing. During the review cycle between revaluations, new improvements discovered by on-site review or otherwise shall be valued on the same basis as similar improvements were valued during the last revaluation or otherwise as necessary to achieve equalization of such values, subject to application of periodic value indexes established by the board.
(4) The assessor of property shall maintain a program of real property sales verification in accordance with procedures and rules established by the state board of equalization. The assessor of property shall maintain documentation of the reason for rejection of any sale rejected by the assessor for use in analyzing appraisals.
(b) Any city lying in more than one (1) county shall be reappraised under a separate plan of reappraisal on a cycle determined by the board. The reappraisal shall be accomplished under contract with the state division of property assessments unless the city has established an assessment office separate from the county in which it lies.
(c) (1) (A) Subject to funding, the state shall pay a per-parcel grant to local governments to assist in the cost of reappraisal. The grant shall be determined by the division of property assessments and approved by the board. Such funds shall be expended solely for the purpose for which the grant was made.
(B) The state grant for any county in a four-year or five-year reappraisal program shall be limited to the amount, as determined by the division of property assessments, which would have been paid to the county had it remained on a six-year reappraisal program.
(2) In the absence of any agreement between the county and the cities thereof imposing a property tax, local costs of reappraisal of properties within a city shall be paid one-half (½) by the county and one-half (½) by the city. Any city paying one-half (½) of local costs of reappraisal pursuant to this section shall pay those costs directly to the county government with jurisdiction over the property being reappraised, and shall pay those costs during the fiscal year in which the reappraisal is finalized.
(3) The assessor of property shall submit such plans and reports for reappraisal as the board shall require. The board, with the assistance of the division of property assessments, has the power to approve, modify or disapprove any proposed plan submitted by the assessor of property, including the power to specify or approve any proposed computer assisted appraisal system pursuant to minimum standards which the board shall adopt in considering a proposed system. All work is subject to the supervision and approval of the director of property assessments. The division shall supervise and direct all reappraisals and revaluation programs, to the cost of which the state of Tennessee contributes.
(4) Where the on-site review is undertaken by the county assessor of property and the county assessor's staff or a professional firm is employed to carry out this work, the division shall monitor the on-site review conducted by the county or the professional firm.
(d) (1) The assessor of property of each county shall prepare a plan for carrying out the requirements of this section and §§ 67-5-1602 - 67-5-1604, in the assessor's taxing jurisdiction, such plan to be submitted to the county mayor and the county legislative body for review in such form, manner and time as shall be determined by the board.
(2) At such time as shall be determined by the board, the assessor shall submit the plan and any pertinent resolution of the county legislative body stating its approval or disapproval to the board for the board's approval or other action.
(3) Prior to the execution of any contract for reappraisal, the county legislative body shall make appropriate arrangements to finance such contract.
(e) Whenever the classification or assessed value of property is changed as a result of reappraisal, the property owner shall be entitled to notice of such change as otherwise provided by law at least ten (10) calendar days before the local board of equalization commences its annual session and, in addition, shall be given the opportunity to appear at an informal hearing on a day or days scheduled for such hearings. Written notice of any action taken as a result of such hearings shall be sent at least ten (10) days prior to the county board adjournment.
(f) Upon a finding by the division that the assessor of property or the county is unable or unwilling to comply with the requirements under this part, including submission of any necessary plan of compliance required by the board, the director of the division shall report such finding to the board. The board shall notify the assessor of property and the county mayor of the nature of the noncompliance and shall indicate the action required to correct such noncompliance. Failure on the part of the assessor or the county to comply within forty-five (45) days of such notification shall result in the withholding of any or all of the state grant for reappraisal scheduled to be received by the county according to the provisions of this part until such deficiency is corrected. If satisfactory action is not taken by the assessor or the county to correct the noncompliance within forty-five (45) days from the date that funds are withheld, the board shall direct the division, and the division shall thereupon be authorized to take such steps as are necessary to ensure compliance with the requirements of this part, and the county found in noncompliance shall reimburse the state for all costs incurred by the state pursuant to this action. If such costs are not reimbursed to the state within ninety (90) days of the date of an invoice for such costs, the state may recover its costs through the deduction of such costs from any state-shared taxes as identified in §4-31-105, otherwise due the county.
(g) The initial schedule of review and revaluation under this section shall be as determined by the board. The board may specify a four-, five- or six-year cycle for the initial scheduling of review and revaluation under this section; provided, that approval of the county legislative body shall be required to move a mid-cycle updating of values from an existing reappraisal plan, and any revised plan longer than five (5) years shall include a mid-cycle updating of values pursuant to subsection (b).
(h) (1) There shall also be an updating of the localized and non-operating real property of public utilities in each county, and such shall be accomplished in the same year as other locally assessed properties.
(2) All assessing and updating of operating properties of public utility companies shall be done by the comptroller of the treasury in accordance with part 13 of this chapter.
(3) All expenses for assessing and updating operating properties of public utilities shall be paid by the comptroller of the treasury.
(i) As part of any reappraisal program conducted pursuant to the provisions of this part, the assessor of property of each county shall identify all cemeteries having historic value as determined by the county historian and the cemetery advisory committee. Every cemetery having one (1) or more tombstones shall be indicated on the tax maps by an appropriate symbol prescribed by the state board of equalization. Any cemetery which is not less than one fourth (¼) of an acre shall be identified as a separate parcel and contain the appropriate symbol.
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