ND lawmakers exploring property tax credits

State lawmakers are exploring whether to give most North Dakota homeowners the benefit of a property tax credit normally reserved for seniors and people with disabilities.

One potential goal is to limit homeowners' property tax bills to 1.5 percent of the market value of their homes, Sen. Dwight Cook, R-Mandan, said Thursday. The current statewide average for residential property is about 1.9 percent.

Cook is chairman of the Legislature's interim Taxation Committee, which is studying ways to provide state support for reducing the property tax bills assessed by cities, counties, school districts and other local governments. The panel will compile a report for the 2011 Legislature.

North Dakota's homestead tax credit is now available for any homeowner who is permanently and totally disabled, or for North Dakota residents 65 years old or older who make less than $26,000 annually.

The benefit depends on a person's income. Someone who earns $18,000 or less can qualify for state aid to cover his or her entire property tax bill, while someone making between $24,000 and $26,000 would be eligible for a 20 percent reduction.

Lawmakers do not yet have any estimates of the cost of expanding the tax credit, Cook said Thursday.

"We've got to find out what that dollar amount is ... and start weighing the political willingness to pass it," he said.

Most North Dakota property is taxed according to whether it is residential, commercial or agricultural land. Each category of property is taxed differently.

"When you look at our different classifications of property and the way they are all taxed, the biggest burden seems to be on individual homes," Cook said. Expanding the homestead tax credit, he said, would be "a nice way to reduce that tax burden to a specific class of property owners."

Lawmakers have used hefty state budget surpluses in the previous three years to tinker with ways to promote local property tax cuts.

In 2007 and 2008, North Dakota landowners were able to claim state income tax credits of up to $500 each to offset property tax bills.

This year, the Legislature took a different tack, approving a $295 million infusion of school aid over two years that school boards were required to use to cut local property tax rates. The reductions will first begin appearing on homeowners' tax bills early next year.

John Walstad, an attorney for the Legislative Council, which is the Legislature's research arm, estimated the extra school aid would provide property tax reductions of 15 percent to 19 percent. The size of the cuts will depend on what other local governments do, he said.

Sen. Tracy Potter, D-Bismarck, said he favored bringing back the strategy of offering state income tax credits to offset local property tax bills. "That is still a good vehicle," he said.

Rep. Jim Kasper, R-Fargo, said a legislative property tax reform package also should include spending limits on local governments.

North Dakota seniors, people with disabilities and veterans should be offered a more generous homestead tax credit than property owners who are younger than 65, Kasper said.