If you’ve read this blog previously, you know that I’ve focused primarily on Philadelphia. I was recently appointed to the Philadelphia Board of Revision of Taxes, so I won’t be blogging much about Philadelphia’s real estate tax situation—at least directly—from now until my term ends. In the meantime, let’s look at something big happening just outside of Philly.
If you have a property in Delaware County, Pennsylvania (in Media, Swarthmore, Upper Darby, etc.), you should prepare to receive a notice very soon that the value assigned to your property for tax purposes has changed. This change will likely be an increase in your assessment that, in turn, increases your real estate tax bill.
Why? The County was court-ordered in 2017 to perform a reassessment of all real property, to be effective beginning January 1, 2021.
When? The County anticipates sending out notices to owners of their new tax assessments between February and March of 2020.
What do I expect? Unless you just built and received an assessment for a newly-constructed property (or as the result of litigation), you should expect your property’s value, or assessment, to increase—perhaps dramatically.
In Pennsylvania, unlike in other states, there is no regular cycle established to revise property tax assessments. This means that, in some counties, there hasn’t been a countywide reassessment of property tax values for decades—as with Delaware County, which hasn’t had a countywide reassessment since the year 2000. Because of this, a court determined that many assessments were so old as to cause the County, overall, to be in violation of the Pennsylvania Constitution, which requires uniformity of taxation across all real property. (Pa. Constitution, art. VIII, §1) In other words, newer homes were much more accurately valued—and therefore bore a more significant tax burden—than did older homes. The countywide reassessment of Delaware County’s 205,000 properties aims to make all properties’ assessments more accurate. And, because the market has appreciated since 2000, most properties’ assessed values will go up for the first time in 20 years.
What can you do now to prepare for the new assessment you are likely to receive pursuant to the Delaware County countywide reassessment?
First, if you think the value of a property you either own or rent has increased since 2000, you may want to consult an attorney to determine your exposure.
Second, calendar the August 1, 2020, deadline to appeal your Delaware County property tax reassessment now.
Third, if you are party to any loan agreement secured by real property, you may want to review how a potential tax increase may affect your standing under the loan, and, if there is some danger of default, address that issue well in advance of 2020.
Fourth, if you are party to a lease on a property you own that may be subject to a value increase, you may want to have an attorney review any and all notice provisions regarding tax assessment appeals to ensure that your interest is adequately protected if a tenant or subtenant appeals. The same goes if you are a tenant that pays only a portion of the real estate tax and want to ensure you aren’t left out of the loop if another tenant, or the owner, appeals.
Fifth, if you are thinking of doing any major improvements to your Delaware County property, using your such property as collateral, or investing in Delaware County real estate, you want to carefully consider all possible consequences of an increased tax assessment to plan and prepare the best strategy to address it.
Despite the imminent increase in Delaware County’s property tax assessments, there is an upside. The statute that governs property tax assessments in Delaware County (and most of Pennsylvania) contains what is colloquially known as an “Anti-Windfall” provision. This requires the taxing authority to reset the tax rate after a countywide reassessment to ensure that the government doesn’t get a windfall of new tax revenue as the result of higher reassessments. (53 Pa. C.S. §8823).
Specifically, the taxing authorities (the county, the local township, and the local school district) must revise their tax rates so that the total amount of revenue they collect on the new assessments does not exceed the total amount collected in the previous year. (53 Pa. C.S. §8823(b)). After this is done, the rate can be revised upward to increase tax revenue—but not more than 10%. (53 Pa. C.S. §8823(c)). However, this does not mean that your individual property tax bill will be limited to an increase of 10%. The Anti-Windfall provision only applies to overall tax revenues, not the affect on individual properties. So, while the overall reassessment may be revenue neutral, the affect on your particular property may be a property tax increase of 5%, 20%, or even 100%.
One final consideration is whether it would be advisable to appeal your property tax assessment now, to be effective for 2021, to take advantage of any potential reduction for the last time before you assessment increases. Although Delaware County properties are supposed to be taxed at 100% of their market values, Pennsylvania’s State Tax Equalization Division issued a “common level ratio” (CLR) of 56.4%, which means that, generally, Delaware County properties are only taxed on 56.4% of actual market values. Accordingly, all property owners are entitled to be taxed on only 56.4% of the total value of their properties.
If you believe your property’s assessed value is currently set at over 60% of its actual market value, then you may want to appeal now, for tax year 2020. Doing so could not only afford you a tax break before values are increased for 2021, but would also allow you to be proactive in the process of re-setting the value of your property, rather than just leaving it to the county’s judgment.
The deadline to appeal for tax year 2020 in Delaware County is August 1, 2019.
DISCLAIMER: Nothing in this blog is intended or should be construed to constitute legal advice, and readers should not rely on it to solve their individual legal issues. No opinion set forth is endorsed by any law firm and is the sole opinion of the author. For help with any present legal issue, please consult a licensed attorney and do not rely merely on anything set forth in this website.