A bill that would enact Gov. Asa Hutchinson's plan to increase the homestead property tax credit from $350 to $375 per parcel stalled in the Arkansas Senate Revenue and Taxation Committee on Wednesday.
The increase in the homestead property tax credit would become effective for assessment years beginning on or around Jan. 1, 2019, under House Bill 1321 by Rep. Lanny Fite, R-Benton.
The increase allowed in the bill is projected to cost the state $12.5 million in calendar year 2020 and then $12.8 million in calendar year 2021, the state Department of Finance and Administration said in its legislative impact statement on HB1321.
In 2018, 716,525 property owners received tax credits totaling $229.9 million, the department reported. Counties are reimbursed for the credits through a statewide half-percent sales tax deposited into the Property Tax Relief Trust Fund.
After Fite presented the bill to the panel, committee Chairman Sen. Jonathan Dismang, R-Searcy, said he wanted to hold the measure in the committee and "have some discussions on it."
[RELATED: Complete Democrat-Gazette coverage of the Arkansas Legislature]
The committee then took no action on the bill.
Afterward, Dismang said, "I think there is discussion amongst the members, it sounded like to me in that committee, of, is that the best use of those funds at this time to increase that?
"I think there is some confusion about what can those funds even be used for. I think that's really what the delay in my opinion is about," he said in an interview.
Senate President Pro Tempore Jim Hendren, R-Sulphur Springs, said in an interview, "There is always lots of needs toward the end of the session, when you are looking for money, stuff that is not in the governor's budget.
"So the discussion is, before we go and pass another $13 million to $17 million in tax cuts, we might want to see if there is some need for that," he said, noting that the Legislature is considering cutting some individual income taxes by $97 million and that the state's property taxes already are some of the lowest in the nation.
There are several senators who have questioned whether "that particular method of cutting taxes is something that we should speed through, and not just me," Hendren said.
"It was something we talked about on the tax reform task force and was not a recommendation to move forward with further property tax reductions," said Hendren, who is a co-chairman of the task force.
"I am not saying it is not going to happen, but are we going to make certain that that's the best use of those surplus dollars? Yeah, we are," he said. "I think certainly one of the keys is going to be, well, if we don't do that, what would happen to the dollars, so those are the discussions that are happening right now."
Among other things, the Legislature's tax overhaul task force recommended the creation of a nonrefundable income-tax credit equal to the amount of property taxes paid on business inventory with a 10-year carry-forward period. According to the Assessment Coordination Department, Arkansas collected $70.2 million in property taxes on business inventory in 2016.
Hutchinson said Wednesday afternoon in a written statement, "I continue to support the increase in the homestead tax credit.
"Beyond that, we will study future use of the remaining fund balance, but I support the legislation," said the Republican governor, who is Hendren's uncle.
In 2000, voters approved Amendment 79 to the Arkansas Constitution to create the homestead property tax credit. In 2007, then-Gov. Mike Beebe, a Democrat, signed legislation raising the credit by $50 to the current $350. Hutchinson took office in 2015 and was re-elected last year.
During the committee's meeting, Fite said his legislation would authorize an interim study by the House and Senate Revenue and Taxation committees "to see what to do with the fund balance" in the Property Tax Relief Trust Fund, which now totals about $104 million. The study would include looking into a proposed formula that includes a floor and a ceiling "to turn that money back to the people as the money flows in."
Dismang questioned why the bill requires the notification of the executive director of the Association of Arkansas Counties about the number of homesteads eligible for the property tax credit that are certified for the state by Dec. 15 of each year.
"I am just a little bit curious why we would put in statute a recommendation to notify a nongovernmental entity," he said.
Fite said the Assessment Coordination Department "will probably be the one who would do that. They just have to know the numbers of homestead credits."
Dismang said he would like to see the bill amended so the reference to the association is replaced by the Assessment Coordination Department.
A Section on 02/14/2019