Transcript Guidance on International Mass Appraisal and Related Tax

Guidance on International
Mass Appraisal and Related Tax Policy
Prepared by
Alan S. Dornfest, AAS
Property Tax Policy Bureau Chief
Idaho State Tax Commission
August 26, 2013
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Background
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IAAO provides guidance on mass appraisal
o Standards
o Textbooks
o Educational offerings
o Member networking and expertise
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IAAO studies property tax assessment and mass appraisal
operations and outcomes in the United States and Canada
through periodic surveys
o Both countries have federal government structures with sharing of
powers between levels of government
o Most nations have unitary structures with regional government
power derived from national government
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Approaches to Mass Appraisal
for Property Tax
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Responsibilities decentralized in United States
o 12,724 assessment districts (year 2000)
o Often state has oversight role and may appraise certain properties
such as public utilities and railroads
 No state oversight in Hawaii and Delaware; limited in Connecticut
 State fully responsible in Montana and Maryland
o Local assessors may be appointed or elected
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Approaches to Mass Appraisal
for Property Tax
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Responsibilities in Canadian provinces more likely to be
centralized (at provincial level)
o But, may involve quasi-governmental entities that work with
provincial governments
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Guiding Precepts of IAAO―
Beyond National Borders
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Mission is to promote innovation and excellence in:
o Property appraisal
o Property tax policy
o Assessment administration
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Precepts embodied in Standards
o Do not prevail over state/provincial laws
o Carry a disclaimer―advisory in nature
o Cover a broad range of topics
o Represent current consensus of assessment professionals on
given topics
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Significance of IAAO Standards
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Provide broadly agreed upon goals and underlying basis for:
o Valuation system―mass appraisal; automated valuation models
(AVMs)
 Special situations or property types:
– Contaminated property
– Mapping
– Markets driven by foreclosures
– Lack of sufficient sales data
o Equalization system
o Taxation system (tax reform)
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Assessing officers encouraged to use and promote
Policy makers―standards provide independent, largely
objective back up
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IAAO Mass Appraisal Standard
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Current version January, 2012
Major Sections:
o Collecting and Maintaining Property Data
o Valuation
 Models
 Frequency of reappraisals
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Managerial considerations
o Staffing
o Data processing―hardware and software
o Benefit-cost considerations
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IAAO Mass Appraisal Standard
Introduction
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Market value for assessment purposes is generally
determined through the application of mass appraisal
techniques.
o value as of given date
o Uses common data and standardized methods
o Statistical testing
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…results in valuation system characterized by accuracy,
uniformity, equity, reliability, and low per-parcel costs
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IAAO Mass Appraisal Standard
Maintenance and Inspection
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Periodic field inspections―ensure complete and accurate
property characteristics data
Identify new construction activity through building permits
Physical review every 4–6 years
o On-site verification
o Partial re-measurement
o May supplement with digital imaging technology
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IAAO Mass Appraisal Standard
Valuation Models
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Represent the market for a specific type of property in a
specified area
Specification
o Identification of variables that influence value
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Calibration
o Determination of adjustments or coefficients that represent value
contributions of variables chosen
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Stratification
o Geographic
o Property type
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IAAO Mass Appraisal Standard
Reappraisal Frequency
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Reappraise every 4–6 years
o Establish periodic intervals
o Set up cycle—i.e., 25 percent of all property reappraised each year
o Establish priority system based on ratio studies
 Identify areas or types of property with equity concerns
 Target these areas or types for more frequent reappraisal
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Keeping the base for a recurrent tax current
o Annual reassessment—may not require annual reappraisal
 Trending factors derived from ratio studies and market analysis
 Effective in maintaining equity between strata when appraisals uniform in
each stratum
 Cannot correct uniformity within stratum.
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Surveys in United States and Canada Provide
Data on Structure and Typical Practices
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Valuation authority―state/province, alternate level of government
Valuation assistance―services and support state/province provides
Education and certification requirements for appraisers
Commonly used and legally required reappraisal cycles
Enforcement and oversight of locally determined assessments
Inspection practices
Regulation of locally used software by state agencies
Enforcement actions related to non-compliance with reappraisal requirements,
including equalization of property values
Frequency and major uses of ratio studies
Statistical standards for evaluating mass appraisal quality
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Providing Mass Appraisal Guidance to
the Broader International Community
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Project development
o International Valuation Standards Council (IVSC)
 Revised Standards in 2011 to eliminate their Guidance note on Mass
Appraisal for Property Taxation
 Created a gap with respect to the international mass appraisal
community
o Representatives from the Netherlands asked IAAO to develop a
Standard to fill this gap
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International Guidance (continued)
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Technical Standards Committee
o Began working on this project in November, 2011
o With considerable input from Netherlands representatives,
developed draft in early 2012
o Sent to larger international community for comments
o Follow up with focus group at 2012 IAAO Conference
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International Guidance (continued)
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Concerns and Issues
o Needs to be broader than current Standard on Mass Appraisal
 Cannot assume well established markets, data bases, legislation
 Difficult to engage some countries in mass appraisal techniques because
of limited revenue from property tax
o Need to support transparency and uniformity as justification
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International Guidance (continued)
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Document expanded to include discussions of
o Appeals
o Non-market bases
o Tax policy (e.g., levy v. rate driven systems)
o Public relations and transparency
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Because of the diversity of needs and issues, the Committee is
reluctant to deem the document a “standard” so has chosen
the more generic “Guidance…”
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Plans for Completion
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Additional drafts have been prepared and distributed to
international community and the IAAO International Special
Committee
Additional opportunities for input during current conference,
including an international panel discussion
Final (hopefully) review and revisions by committee in its Fall,
2013 meeting
Submittal to Board for review and approval early in 2014
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Substance of Latest Draft
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Scope
o The primary focus is on mass appraisal for value-based property
taxes (also known as “rates on property.”)
o mass appraisal can be successfully implemented even if some
recommendations are not implemented.
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Substance of Latest Draft (continued)
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Scope
o An effective market value-based property tax system requires the
following components:
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supportive underlying legal and administrative framework
accurate property characteristics and market data
skilled valuers
effective valuation models
quality assurance
effective management
sufficient resources
appeals mechanisms
transparency
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Substance of Latest Draft (continued)
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Introduction
o Importance of complete and correct data
o Value and non-value base orientation
 Advantages/disadvantages
 Applicability of mass appraisal to both
o Liability for property tax―person v. property
o Valuation principles
 Transparency
 Relation to taxation
 Cost/benefit (frequency of reappraisal)
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Substance of Latest Draft (continued)
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Supportive legal framework
o Common law v. civil law
o Sales and ownership data
o Reappraisal cycle
o Oversight and enforcement
o Notice and appeals
o Tax relief
o Title registration
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Maps and property records
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Substance of Latest Draft (continued)
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Market data
o Sales
o Income and expense
o Cost and depreciation
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Property characteristics data
o Residential and commercial examples
o Data collection and accuracy (quality control)
o Maintenance
o Inspections and alternatives
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Substance of Latest Draft (continued)
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Mass Appraisal Modeling for Market Value
o Valuation models (general)
o Application in the three approaches to value
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Quality Assurance
o Model diagnostics
o Ratio Studies (including description of methods, standards, and
statistical examples)
o Holdout samples
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Substance of Latest Draft (continued)
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Appeals
o Importance for open and transparent process
o Value defense; timing and notification
o System examples
o Hearings and public relations
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Transparency and public relations (in general)
o Importance
o Documentation of valuation procedures
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Management and resources
o Funding
o Training
o Hardware and software
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Join in the Development!
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Review the current draft
Explain needs that may be unfulfilled
Provide additional perspective
Do it now!
o The IAAO Technical Standards Committee
has one more planned meeting before
submitting the document to the
IAAO Board for approval (November, 2013)
o We need your comments and feedback prior to that meeting
Join in the Development!
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