VOL. 128 | NO. 207 | Wednesday, October 23, 2013
Section 42 Housing Could Cost Counties Millions
JACK ELLIOTT JR. | Associated Press
JACKSON, Miss. (AP) — A lawmaker has criticized a state Supreme Court decision that will force local governments across Mississippi to refund millions of dollars in property taxes to developers of affordable housing.
The court ruled Thursday that Humphreys County used the wrong method to determine property taxes on so-called Section 42 housing for low-income residents and ordered the county to reimburse taxes collected since 2006. The ruling applies statewide.
A law enacted in 2005 to encourage development of affordable housing requires tax assessors to use the state Department of Revenue's "actual net operating income" appraisal method to determine the true value of low income rental housing, the court said. Developers are assessed by the income generated from the rental units rather than the cost of the real property.
But local officials argue the tax break leads counties and cities to assess other taxpayers at higher rates to make up the difference.
"The homeowners — the hard-working people — are going to foot these bills. Homeowners are going to have to pay these taxes. The constitution says taxation should be uniform and equal. This is not equal at all," said Willie Bailey, a state lawmaker and attorney for Humphreys County.
Bailey also said county had not determined how much it would have to repay because it anticipated winning the case. Tax assessors in Mississippi's coastal counties of Harrison and Jackson have estimated they would have to repay $4.5 million and $1.5 million respectively.
"Humphreys County has been fighting this thing since 2005 and it's taken a heavy toll. We'll look at our options which are limited at this time," Bailey said Tuesday.
Humphreys County had unsuccessfully argued that the Revenue Department's tax method was not authorized anywhere in the 2005 law and that it had the right to tax Section 42 property as it wished. The county also argued that the Legislature never intended for the income method to be the only way to assess the value of affordable housing.
But Justice Josiah D. Coleman, writing in the unanimous decision, said the Supreme Court found nothing ambiguous about the law.
"It has a different financing scheme, a restricted clientele, minimal liquidity, and very few financing avenues. The Legislature, apparently having taken note of the unique position of such properties and of their value to the low-income families of the state, purposefully decided to limit the methodology of valuation," Coleman wrote.
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