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Setting New Taxes

Setting New Taxes. Extension District Boards meet as soon as tax rates are received to recommend Extension Tax Rates. These rates will be used to develop a budget for the following fiscal year to begin July 1. Setting New Tax Rates. Compensating Rate. What is the compensating rate?

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Setting New Taxes

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  1. Setting New Taxes • Extension District Boards meet as soon as tax rates are received to recommend Extension Tax Rates. • These rates will be used to develop a budget for the following fiscal year to begin July 1.

  2. Setting New Tax Rates • Compensating Rate. • What is the compensating rate? • What factors/components contribute to calculating the compensating rate?

  3. Compensating Rate • "Compensating tax rate" means that rate which, rounded to the next higher one-tenth of one cent ($0.001) per one hundred dollars ($100) of assessed value and applied to the current year's assessment of the property subject to taxation by a taxing district, excluding new property and personal property, produces an amount of revenue approximately equal to that produced in the preceding year from real property.

  4. New Property "New property" means the net difference in taxable value between real property additions and deletions to the property tax roll for the current year.

  5. "Real property additions" shall mean: (a) Property annexed or incorporated by a municipal corporation (b) Property, the ownership of which has been transferred from a tax-exempt entity to a non tax-exempt entity; (c) The value of improvements to existing nonresidential property; (d) The value of new residential improvements to property; (e) The value of improvements to existing residential property when the improvement increases the assessed value of the property by fifty percent (50%) or more; (f) Property created by the subdivision of unimproved property; Entire detailed list can be found in EDB Handbook

  6. Calculating the Compensating Rate • Kentucky Department of Local Government generates formulas for calculating compensating rates. • Different input is used to generate compensating rates for real and personal property.

  7. EXAMPLE WORKSHEET

  8. Compensating Rate Plus 4% • Public hearing must be held but is not subject to recall. This is a 4% revenue increase. EXAMPLE Real Property Compensating: Assessment Compensating Tax Rate Revenue Produced $1,000,000,000 1.000% $100,000 Real Property Compensating Plus 4%: Assessment Rate Allowing 4% Revenue Produced $1,000,000,000 1.040% $104,000

  9. Public hearing must be held AND IS subject to recall for any rate higher than the compensating rate plus 4%. • GUIDELINES FOR CONDUCTING HEARINGS TO ESTABLISH EXTENSION DISTRICT BOARD TAX RATES – Refer to 4.6.0 in Extension District Board Handbook

  10. MOTOR VEHICLE TAX RATES • MOTOR VEHICLE TAX RATES ARE NOT dependent upon compensating rates or the 4% limitations set forth in House Bill 44 or House Bill 19. Instead, all local taxing districts that propose to tax motor vehicles can levy a rate on motor vehicles that does “not exceed the rate that could have been levied on motor vehicles by the district on January 1, 1983 assessments of motor vehicles.” Thus, a local district may levy a rate up to the maximum available 1983 tax rate for motor vehicles and generally do not change.

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