Article 2 Legislative
Department Section 28 of TN constitution. Taxable
property - Valuation - Rates.
In accordance with the following provisions, all
property real, personal or mixed, shall be subject to
taxation, but the Legislature may except such as may
be held by the State, by Counties, Cities or Towns,
and used exclusively for public or corporation
purposes, and such as may be held and used for
purposes purely religious, charitable, scientific,
literary or educational, and shall except the direct
product of the soil in the hands of the producer,
and his immediate vendee, and the entire amount of
money deposited in an individual's personal or
family checking or savings accounts. For purposes of
taxation, property shall be classified into three
classes, to wit: Real Property, Tangible Personal
Property, and Intangible Personal Property.
Real Property shall be classified into four (4)
sub-classifications and assessed as follows:
(a) Public Utility Property, to be assessed at
fifty-five (55%) percent of its value;
(b) Industrial and Commercial Property, to be
assessed at forty (40%) percent of its value;
(c) Residential Property, to be assessed at
twenty-five (25%) percent of its value, provided
that residential property containing two (2) or more
rental units is hereby defined as industrial and
commercial property; and
(d) Farm Property, to be assessed at twenty-five
(25%) percent of its value.
House trailers, mobile homes, and all other
similar movable structures used for commercial,
industrial, or residential purposes shall be
assessed as Real Property, i.e. an improvement to the
land where it is located.
The Legislature shall provide, in such manner as
it deems appropriate, tax relief to elderly
low-income taxpayers through payments by the State
to reimburse all or part of the taxes paid by such
persons on owner-occupied residential property, but
such reimbursement shall not be an obligation
imposed, directly or indirectly, upon Counties,
Cities, or Towns.
By general law, the Legislature may authorize the
following program of tax relief:
(a) The legislative body of any county or
municipality may provide by resolution or ordinance
that:
(1) Any taxpayer who is sixty-five (65) years of
age or older and who owns residential property as
the taxpayer's principal place of residence shall
pay taxes on such property in an amount not to
exceed the maximum amount of tax on such property
imposed at the time the ordinance or resolution is
adopted;
(2) Any taxpayer who reaches the age of
sixty-five (65) after the time the ordinance or
resolution is adopted, who owns residential property
as the taxpayer's principal place of residence shall
thereafter pay taxes on such property in an amount
not to exceed the maximum amount of tax on such
property imposed in the tax year in which the
taxpayer reaches age sixty-five (65); and
(3) Any taxpayer who is sixty-five (65) years of
age or older who purchases residential property as
the taxpayer's principal place of residence after
the taxpayer's sixty-fifth (65th) birthday shall pay taxes
in an amount not to exceed the maximum amount of tax
imposed on such property in the tax year in which
such property is purchased.
(b) Whenever the full market value of such
property is increased as a result of improvements to
such property after the time the ordinance or
resolution is adopted, then the assessed value of
such property shall be adjusted to include such
increased value and the taxes shall also be
increased proportionally with the value.
(c) Any taxpayer or taxpayers who own residential
property as their principal place of residence whose
total or combined annual income, or wealth exceeds
an amount to be determined by the general assembly
shall not be eligible to receive the tax relief
provided in subsection (a) or (b).
The Legislature may provide tax relief to home
owners totally and permanently disabled,
irrespective of age, as provided herein for the
elderly.
Tangible Personal Property shall be classified
into three (3) sub-classifications and assessed as
follows:
(a) Public Utility Property, to be assessed at
fifty-five (55%) percent of its value;
(b) Industrial and Commercial Property, to be
assessed at thirty (30%) percent of its value; and
(c) All other Tangible Personal Property, to be
assessed at five (5%) percent of its value;
provided, however, that the Legislature shall exempt
Seven Thousand Five Hundred ($7,500) Dollars worth
of such Tangible Personal Property which shall cover
personal household goods and furnishings, wearing
apparel, and other such tangible property in the
hands of a taxpayer.
The Legislature shall have power to classify
Intangible Personal Property into
sub-classifications and to establish a ratio of
assessment to value in each class or subclass, and
shall provide fair and equitable methods of
apportionment of the value of same to this State for
purposes of taxation. Banks, Insurance Companies,
Loan and Investment Companies, Savings and Loan
Associations, and all similar financial
institutions, shall be assessed and taxed in such
manner as the Legislature shall direct; provided
that for the year 1973, or until such time as the
Legislature may provide otherwise, the ratio of
assessment to value of property presently taxed
shall remain the same as provided by law for the
year 1972; provided further that the taxes imposed
upon such financial institutions, and paid by them,
shall be in lieu of all taxes on the redeemable or
cash value of all of their outstanding shares of
capital stock, policies of insurance, customer
savings and checking accounts, certificates of
deposit, and certificates of investment, by whatever
name called, including other intangible corporate
property of such financial institutions.
The ratio of assessment to value of property in
each class or subclass shall be equal and uniform
throughout the State, the value and definition of
property in each class or subclass to be ascertained
in such manner as the Legislature shall direct. Each
respective taxing authority shall apply the same tax
rate to all property within its jurisdiction.
The Legislature shall have power to tax
merchants, peddlers, and privileges, in such manner
as they may from time to time direct, and the
Legislature may levy a gross receipts tax on
merchants and businesses in lieu of ad valorem taxes
on the inventories of merchandise held by such
merchants and businesses for sale or exchange. The
portion of a Merchant's Capital used in the purpose
of merchandise sold by him to non-residents and sent
beyond the State, shall not be taxed at a rate
higher than the ad valorem tax on property. The
Legislature shall have power to levy a tax upon
incomes derived from stocks and bonds that are not
taxed ad valorem.
This amendment shall take effect on the first day
of January, 1973. [As amended: Adopted in Convention
September 14, 1971, Approved at general election
August 3, 1972; As amended: Proposed by 1979 SJR 31,
91st General Assembly, Adopted May 16, 1979,
Concurred in by 1981 SJR 44, 92d General Assembly,
Adopted May 5, 1981, Approved at general election,
November 2, 1982; As amended: Proposed by 2004 SJR
71, 103d General Assembly, Adopted May 19, 2004,
Concurred in by 2006 SJR 1, 104th General Assembly,
Adopted April 6, 2006, Approved at general election
November 7, 2006.
67-5-601. General
policy - Legislative findings.
(a) The value of all property shall be
ascertained from the evidence of its sound,
intrinsic and immediate value, for purposes of sale
between a willing seller and a willing buyer without
consideration of speculative values, and when
appropriate, subject to the provisions of the
Agricultural, Forest and Open Space Land Act of
1976, codified in part 10 of this chapter.
(b) It is the legislative intent that no
appraisal under this part shall be influenced by
inflated values resulting from speculative purchases
in particular areas in anticipation of uncertain
future real estate markets; but all property of
every kind shall be appraised according to its
sound, intrinsic and immediate economic value, which
shall be ascertained in accordance with such
official assessment manuals as may be promulgated
and issued by the state division of property
assessments and approved by the state board of
equalization pursuant to law.
(c) (1) The general assembly finds that the
increased market value of certain residential
property zoned for commercial use has caused an
increase in taxes to the extent that citizens are
faced with the necessity of selling dwelling houses
in which they have lived for many years. The general
assembly finds that present use valuation has been
extended to others, and is warranted under certain
circumstances to relieve the burden of increased
taxation to residential owners.
(2) It is the policy of this state that the
owners of residential property who have lived on
that property for a significant period of time
should be allowed to continue to live on that
property without a disproportionate increase in
taxes due to the property being zoned for commercial
use.
(3) For the purposes of this subsection (c):
(A) “Dwelling house” means a residence occupied
by the owner of an estate in that property, with
such residence being zoned for commercial use, used
solely for residential purposes, and occupied by
that owner or a person to whom the current owner is
a lineal descendant for a period of twenty-five (25)
years or more, together with the real estate upon
which it is situated up to a maximum five (5) acres;
and
(B) “Owner” means a citizen and resident of
Tennessee who occupies the citizen's or resident's
dwelling house, as opposed to occupying any other
residence, for at least nine (9) months out of each
calendar year.
(4) Any owner of a dwelling house may make
application to the assessor of property of the
county in which the property is located for its
classification under this subsection (c). Property
that has been determined by the assessor of property
to qualify under this subsection (c) shall be valued
for ad valorem tax purposes at its market value for
residential purposes. The assessment on such
property shall include the entire year in which the
land is classified under this subsection (c). Any
person who is denied such classification shall have
the same rights and remedies for appeal and relief
as are provided taxpayers for any action of
assessors of property.
(5) Should the use or ownership of the property
change so that it no longer qualifies under this
subsection (c), then the property owner shall have
the duty of informing the assessor of property. Upon
discovering that a property no longer qualifies for
classification under this subsection (c), the
assessor of property shall reclassify the property
and shall value the property according to its
current market value for subsequent tax years. In
the event such change in use or ownership does not
timely come to the attention of the assessor of
property, and upon the assessor discovering that the
property no longer qualifies, such reclassification
shall affect each year that the property has failed
to qualify, and the taxpayer shall be liable for the
difference in taxes, including penalty and interest.
(6) It is the legislative intent that the
twenty-five-year (25) time period is an integral part of
this subsection (c). If this provision is held by a
court of competent jurisdiction to be an
unreasonable classification or otherwise declared
unconstitutional, then this entire subsection (c)
shall be null and void.
(d) The general assembly finds that due to the
abundance of limestone, sand and gravel in this
state and the difficulty in valuing the contributory
interest in limestone, sand and gravel that such
contributory interest in limestone, sand and gravel
shall be deemed to have no value for property tax
purposes. This does not affect the commercial
classification of real property used for quarry
purposes.
(e) The general assembly finds that any public
utility property or commercial and industrial
property that generates electricity using wind as
its energy source is generally capable of only
generating approximately one-third (1/3) of the
electricity that competing generation properties are
capable of producing using coal or other
conventional energy sources and that the
commercially competitive disadvantage of such
generation property due to its dependence on the
intermittent nature of wind as an energy source
similarly evidences that its sound, intrinsic, and
immediate economic value for all purposes under this
chapter should not initially exceed one-third (1/3)
of its total installed costs. The general assembly
further finds that, unless the findings are
considered in the determination of the sound,
intrinsic, and immediate economic value of such
property for all purposes under this chapter,
investment in property to generate electricity using
wind as its energy source will be unreasonably
discouraged, denying the citizens of this state the
environmental benefits associated with the greater
use of wind, as a renewable energy source, for
electric power generation. The assessor of property,
in assessing any such commercial and industrial
property, or the comptroller, in assessing any such
public utility property, that generates electricity
using wind as its energy source, shall take these
findings by the general assembly into account in
determining the sound, intrinsic, and immediate
economic value of such property, when the property
is initially appraised and each time the property is
reappraised.
67-5-602. Assessment
guided by manuals - Factors for consideration.
(a) Except as provided in §67-5-601(c), in
determining the value of all property of every kind,
the assessor shall be guided by, and follow the
instructions of, the appropriate assessment manuals
issued by the division of property assessments and
approved by the state board of equalization. In the
preparation of the manual, the division of property
assessments and the state board of equalization
shall consult with the United States forest service
and the state forester in establishing the
guidelines to be used in determining the value of
forestland.
(b) For determining the value of real property,
such manuals shall provide for consideration of the
following factors:
(1) Location;
(2) Current use;
(3) Whether income bearing or non-income bearing;
(4) Zoning restrictions on use;
(5) Legal restrictions on use;
(6) Availability of water, electricity, gas,
sewers, street lighting, and other municipal
services;
(7) Inundated wetlands;
(8) Natural productivity of the soil, except that
the value of growing crops shall not be added to the
value of the land. As used in this subdivision
(b)(8), “crops” includes trees; and
(9) All other factors and evidence of value
generally recognized by appraisers as bearing on the
sound, intrinsic and immediate economic value at the
time of assessment.
(c) (1) For determining the value of industrial,
commercial, farm machinery and other personal
property, such manuals shall provide for
consideration of the following factors:
(A) Current use;
(B) Depreciated value;
(C) Actual value after allowance for
obsolescence; and
(D) All other factors and evidence of value
generally recognized by appraisers as bearing on the
sound, intrinsic and immediate economic value at the
time of assessment.
(2) Notwithstanding the foregoing, all farm
personal property and also all household and kitchen
furniture, tableware, musical instruments, wearing
apparel, private passenger motor vehicles, jewelry
and other personal property of similar character
used in the taxpayer's own household, together with
all intangible property, including bank accounts, of
the taxpayer, may be assumed prima facie by the
assessor of property to be of a value not in excess
of seven thousand five hundred dollars ($7,500) per
individual and fifteen thousand dollars ($15,000)
for jointly owned property held by husband and wife
in the absence of any tax return or schedule to the
contrary.
67-5-1601.
General provisions - Administration - Costs -
Penalty for failure to comply.
(a) (1) Reappraisal shall be accomplished in each
county by a continuous six-year cycle (6) comprised of
an on-site review of each parcel of real property
over a five-year period (5), or, upon approval of the
state board of equalization, by a continuous
four-year cycle (4) comprised of an on-site review of
each parcel of real property over a three-year
period (3), followed by revaluation of all such property
in the year following completion of the review
period. Alternatively, if approved by the assessor
and adopted by a majority vote of the county
legislative body, the reappraisal program may be
completed by a continuous five-year cycle (5) comprised
of an on-site review of each parcel of real property
over a four-year (4) period followed by revaluation of
all such property in the year following completion
of the review period. The board may consider a plan
submitted by an assessor which would have the effect
of maintaining real property values at full value as
defined by law on a schedule at least as frequent as
outlined in this section. In counties which have
adopted a four-year (4) or five-year (5) reappraisal cycle,
there shall be no updating or indexing of values as
there is in counties with a six-year cycle (6).
(2) In the third (3rd) year of the review cycle, there
shall be an updating of all real property values if
the overall level of appraisal for the jurisdiction
is less than ninety percent (90%) of fair market
value. If the overall level of appraisal for the
jurisdiction is greater than or equal to ninety
percent (90%) of fair market value, any subclass of
property not having a level of appraisal within ten
percent (10%) of the overall level of appraisal for
the jurisdiction shall be updated to the overall
level of appraisal. Further, any group of property
within a subclass not having a level of appraisal
within ten percent (10%) of the level of appraisal
for that subclass shall be updated to the level of
appraisal for that subclass. If land market values
of farm property in the county are not updated, land
use values for land classified as agricultural,
forest and open space pursuant to §§ 67-5-1001 -
67-5-1050 will not be updated. When values are
updated, the factors or appraisal table changes used
to effect the update shall be as determined by the
state board of equalization.
(3) Reappraisal shall be accomplished in each
county on a four-year cycle (4), comprised of an on-site
review of each parcel of real property over a
three-year (3) period, followed by revaluation of all
such property in the year following completion of
the review period. The board shall consider a plan
submitted by an assessor which would have the effect
of maintaining real property values at full value as
defined by law on a schedule at least as frequent as
outlined in this subsection, and if the board finds
the plan would achieve this effect, the plan shall
be implemented in lieu of indexing. During the
review cycle between revaluations, new improvements
discovered by on-site review or otherwise shall be
valued on the same basis as similar improvements
were valued during the last revaluation or otherwise
as necessary to achieve equalization of such values,
subject to application of periodic value indexes
established by the board.
(4) The assessor of property shall maintain a
program of real property sales verification in
accordance with procedures and rules established by
the state board of equalization. The assessor of
property shall maintain documentation of the reason
for rejection of any sale rejected by the assessor
for use in analyzing appraisals.
(b) Any city lying in more than one (1) county
shall be reappraised under a separate plan of
reappraisal on a cycle determined by the board. The
reappraisal shall be accomplished under contract
with the state division of property assessments
unless the city has established an assessment office
separate from the county in which it lies.
(c) (1) (A) Subject to funding, the state shall
pay a per-parcel grant to local governments to
assist in the cost of reappraisal. The grant shall
be determined by the division of property
assessments and approved by the board. Such funds
shall be expended solely for the purpose for which
the grant was made.
(B) The state grant for any county in a four-year
(4) or five-year (5) reappraisal program shall be limited to
the amount, as determined by the division of
property assessments, which would have been paid to
the county had it remained on a six-year (6) reappraisal
program.
(2) In the absence of any agreement between the
county and the cities thereof imposing a property
tax, local costs of reappraisal of properties within
a city shall be paid one-half (½) by the county and
one-half (½) by the city. Any city paying one-half
(½) of local costs of reappraisal pursuant to this
section shall pay those costs directly to the county
government with jurisdiction over the property being
reappraised, and shall pay those costs during the
fiscal year in which the reappraisal is finalized.
(3) The assessor of property shall submit such
plans and reports for reappraisal as the board shall
require. The board, with the assistance of the
division of property assessments, has the power to
approve, modify or disapprove any proposed plan
submitted by the assessor of property, including the
power to specify or approve any proposed computer
assisted appraisal system pursuant to minimum
standards which the board shall adopt in considering
a proposed system. All work is subject to the
supervision and approval of the director of property
assessments. The division shall supervise and direct
all reappraisals and revaluation programs, to the
cost of which the state of Tennessee contributes.
(4) Where the on-site review is undertaken by the
county assessor of property and the county
assessor's staff or a professional firm is employed
to carry out this work, the division shall monitor
the on-site review conducted by the county or the
professional firm.
(d) (1) The assessor of property of each county
shall prepare a plan for carrying out the
requirements of this section and §§ 67-5-1602 -
67-5-1604, in the assessor's taxing jurisdiction,
such plan to be submitted to the county mayor and
the county legislative body for review in such form,
manner and time as shall be determined by the board.
(2) At such time as shall be determined by the
board, the assessor shall submit the plan and any
pertinent resolution of the county legislative body
stating its approval or disapproval to the board for
the board's approval or other action.
(3) Prior to the execution of any contract for
reappraisal, the county legislative body shall make
appropriate arrangements to finance such contract.
(e) Whenever the classification or assessed value
of property is changed as a result of reappraisal,
the property owner shall be entitled to notice of
such change as otherwise provided by law at least
ten (10) calendar days before the local board of
equalization commences its annual session and, in
addition, shall be given the opportunity to appear
at an informal hearing on a day or days scheduled
for such hearings. Written notice of any action
taken as a result of such hearings shall be sent at
least ten (10) days prior to the county board
adjournment.
(f) Upon a finding by the division that the
assessor of property or the county is unable or
unwilling to comply with the requirements under this
part, including submission of any necessary plan of
compliance required by the board, the director of
the division shall report such finding to the board.
The board shall notify the assessor of property and
the county mayor of the nature of the noncompliance
and shall indicate the action required to correct
such noncompliance. Failure on the part of the
assessor or the county to comply within forty-five
(45) days of such notification shall result in the
withholding of any or all of the state grant for
reappraisal scheduled to be received by the county
according to the provisions of this part until such
deficiency is corrected. If satisfactory action is
not taken by the assessor or the county to correct
the noncompliance within forty-five (45) days from
the date that funds are withheld, the board shall
direct the division, and the division shall
thereupon be authorized to take such steps as are
necessary to ensure compliance with the requirements
of this part, and the county found in noncompliance
shall reimburse the state for all costs incurred by
the state pursuant to this action. If such costs are
not reimbursed to the state within ninety (90) days
of the date of an invoice for such costs, the state
may recover its costs through the deduction of such
costs from any state-shared taxes as identified in
§4-31-105, otherwise due the county.
(g) The initial schedule of review and
revaluation under this section shall be as
determined by the board. The board may specify a
four- (4), five- (5), or six-year (6) cycle for the initial
scheduling of review and revaluation under this
section; provided, that approval of the county
legislative body shall be required to move a
mid-cycle updating of values from an existing
reappraisal plan, and any revised plan longer than
five (5) years shall include a mid-cycle updating of
values pursuant to subsection (b).
(h) (1) There shall also be an updating of the
localized and non-operating real property of public
utilities in each county, and such shall be
accomplished in the same year as other locally
assessed properties.
(2) All assessing and updating of operating
properties of public utility companies shall be done
by the comptroller of the treasury in accordance
with part 13 of this chapter.
(3) All expenses for assessing and updating
operating properties of public utilities shall be
paid by the comptroller of the treasury.
(i) As part of any reappraisal program conducted
pursuant to the provisions of this part, the
assessor of property of each county shall identify
all cemeteries having historic value as determined
by the county historian and the cemetery advisory
committee. Every cemetery having one (1) or more
tombstones shall be indicated on the tax maps by an
appropriate symbol prescribed by the state board of
equalization. Any cemetery which is not less than
one fourth (¼) of an acre shall be identified as a
separate parcel and contain the appropriate symbol
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