SALYERSVILLE – A memo from the state’s Office of Property Valuation has been making the rounds online, announcing motor vehicle valuation increases may mean higher property tax bills unless something is changed during the ongoing legislative session.
The memorandum, addressed to Kentucky Property Valuation Administrators and Kentucky county clerks, states that the annual motor vehicle year-end valuation was conducted on December 30, 2021, for the assessment date of January 1, 2022. The new assessments, as compiled by the vendor JD Power, reflect “unprecedented rising value of most motor vehicles,” citing that vehicle values have jumped on average 40% from 2021 to 2022.
Division of State Valuation Director Cathy Thompson, who wrote the memo, attributed the sudden increase in motor vehicle costs to new vehicle production and inventory constraints, elevated new vehicle transaction prices, ongoing limited supply of used vehicle, and increased dealer interest in used vehicle operations.
Section 172 of the Kentucky Constitution requires all property to be listed at its fair cash value, estimated at the price it would bring at a voluntary sale, and Thompson wrote that the new values represents the Department of Revenue’s effort to uphold that standard.
So, what does this mean, exactly? Well, there’s a few things it can mean.
State Representative John Blanton told the Independent the House is looking at the tax rate to see if they can rework the rate temporarily to try to balance the tax bills to be roughly what they were last year.
“The first question I asked was if we could use the values from the previous year, but according to the state constitution, it has to be the current fair market value,” Blanton said. “We are committed to finding a fix for this and before the end of this session, we will find something to alleviate this. We’re aware of the problem and we’re not happy with it, but we’re trying to find a fix for this.”
Pending nothing changing via the legislative session, which seems unlikely, the Independent reached out to Magoffin County PVA Becky Allen to explain what the reported 40% increase in motor vehicle values translates to locally.
“With the supply of new vehicles down, it has increased the fair market value of used vehicles,” Allen said. “Going by the NADA guidelines, this has raised all used vehicles’ value, but it depends on the vehicle. Foreign-made vehicles are more likely to increase at a higher rate than locally-made vehicles.”
Allen explained that no local offices have any control over these values and changes to the motor vehicle tax bills will not be due to changes in locally-set tax rates.
“We have no control over it, and it’s all issued by the state,” Allen said.
Just for a frame of reference, Allen used their state-issued software to show examples of what to expect on tax bills.
When looking at a 2012 Kia Sportage, in 2021 it was valued at $7,075, with a tax bill of $116.22. In 2022, that same car is now valued at $8,875, which bumps the taxes due up to $119.16.
“It’s not a 40% increase to your tax bill, and most people will probably see a $10 to $15 increase from the previous year.
On a 2019 Ford Explorer with a salvaged title, in 2020 the vehicle was valued at $21,195, with a tax bill of $324.93. In 2022, the same vehicle is valued at $24,930, with a tax bill of $334.70. With a rebuilt vehicle, the value increased less than the average rate, with the bill only around $10 more.
Allen also ran a 2010 Hyundai Sonata, which in 2021 was valued at $2,725, with a tax bill of $36.59. In 2022, that same vehicle is now valued at $3,800, with a tax bill of $51.02.
In comparison, a 2019 Ford Expedition, valued at $45,900 in 2021, with a tax bill of $616.21, jumped in value by close to $15,000, now at $60,775 and a tax bill of $815.91, nearly $200 more than the previous year for the same vehicle.
“The demand for new used vehicles is higher since there are fewer new cars to purchase,” Allen explained.
Newer used vehicles in high demand, such as trucks and SUVs, increased in value at higher rates, which can translate to higher tax bills.
“This is handed straight from the state, this is just a byproduct of the lack of new inventory and construction constraints,” Allen said. “Worst-case scenario, if you have a vehicle that has severely very high mileage, stop by the PVA office. We’ll have to have a picture of the odometer, but the value can be reduced based on the mileage and condition of the vehicle.”
Magoffin County Judge/Executive Matt Wireman also noted that the motor vehicle tax rate for the county hasn’t changed since 1983.
“We’re just looking at an artificially high market right now, and this needs to be addressed because that’s not fair to the taxpayers,” Wireman said. “It can’t go on.”
Two bills were filed earlier this week in attempt to mitigate the issue. House Bill 6 reportedly would give the Department of Revenue more latitude in how the office determines vehicle values and Senate Bill 75 would use last year’s motor vehicle values for property taxes in 2022 and 2023.
Until then, we have to wait and see what happens at the state level.