PROPOSITION 117 EFFECTS ON YOUR PROPERTY TAXES
Starting in calendar year 2014 for the 2015 tax year, the voter approved amendment to the
state constitution known as Prop 117 will change how Arizona property taxes are calculated
and will impact the manner in which your property’s valuation should be reviewed.
Although properties will continue to receive a noticed market valuation (Full Cash Value or
FCV), the FCV will no longer be used to calculate your property taxes. As explained below, the
FCV will continue to be important to review and appeal as appropriate.
Beginning with your 2015 property tax bill, your property taxes will be calculated solely on the
Limited Property Value (LPV). The LPV is a statutory valuation; meaning the value is set by
statute and not by market conditions and is not appealable. The LPV is limited to a 5% increase
each year, never to exceed the FCV (market value). This limitation does not apply for new
construction or parcel splits.
Even though the LPV “taxable” value is limited to a 5% increase each year, it does not
necessarily mean that your taxes are limited to a 5% increase. The taxing districts can set
higher tax rates each year based on their budgets and voter approved bonds and over-rides.
The LPV “taxable” value each year cannot exceed the FCV (market value). Therefore, a
thorough review of the FCV (market value) each year will ensure the FCV is fair and appropriate.
In addition, an appeal of the FCV (market value) that results in a reduction to the FCV may limit
the increase of the FCV (market value) for the following year and as a result limit property tax
increases.
An appeal and reduction to the FCV (market value) may not only limit the LPV “taxable” value
for the year appealed, but may also limit its increase for the following tax year and as a result,
limit your property taxes due. In some cases, there may be no change to the LPV “taxable”
value in the first year. The benefit may come in the cap to the LPV “taxable” value growth only
in the following year.
On the reverse side of this page is an example showing the tax calculation comparisons as a
result of these changes.
As noted above, the changes due to the new Proposition 117 are complicated. Therefore, a
thorough review of your specific property’s valuation is highly recommended to understand
how this Proposition and the new valuation system will impact your current and future tax bills.
PARADIGM TAX GROUP
PROPOSITION 117 - TAX CALCULATION COMPARISONS
Example 1 - Appealed and Reduced from $5,000,000 to $4,600,000
2015 Tax Estimate - PRE - Prop 117
Before Appeal
2015 FCV
Assessment Ratio
Secondary Tax Rate
2015 LPV
Assessment Ratio
Primary Tax Rate
Total Taxes
2015 Tax Estimate - POST Prop 117
After Appeal
Before Appeal
2016 Tax Estimates - POST Prop 117
After Appeal
If Not Appealed
LPV = 5% Growth
From 2015 Appeal
LPV = Capped @ FCV
5,000,000
18.50%
925,000
3.9699
36,721.58
4,600,000
18.50%
851,000
3.9699
33,783.85
FCV
5,000,000
4,600,000
5,000,000
4,600,000
4,500,000
18.50%
832,500
6.2192
51,774.84
4,500,000
18.50%
832,500
6.2192
51,774.84
LPV
4,500,000
18.50%
832,500
10.1891
84,824.26
4,500,000
18.50%
832,500
10.1891
84,824.26
4,725,000
18.00%
850,500
10.1891
86,658.30
4,600,000
18.00%
828,000
10.1891
84,365.75
$88,496.42
$85,558.69
Total Taxes
$84,824.26
$84,824.26
$86,658.30
$84,365.75
$2,937.73
Savings
Savings
Total Tax Rate
$0.00
$2,292.55
Example 2 - Appealed and Reduced from $5,000,000 to $4,400,000
2015 Tax Estimate - PRE - Prop 117
Before Appeal
2015 FCV
Assessment Ratio
Secondary Tax Rate
2015 LPV
Assessment Ratio
Primary Tax Rate
Total Taxes
Savings
2015 Tax Estimate - POST Prop 117
Before Appeal
After Appeal
After Appeal
2016 Tax Estimates - POST Prop 117
If Not Appealed
LPV = 5% Growth
From 2015 Appeal
LPV = Capped @ FCV
5,000,000
18.50%
925,000
3.9699
36,721.58
4,400,000
18.50%
814,000
3.9699
32,314.99
FCV
5,000,000
4,400,000
5,000,000
4,400,000
4,500,000
18.50%
832,500
6.2192
51,774.84
4,400,000
18.50%
814,000
6.2192
50,624.29
LPV
4,500,000
18.50%
832,500
10.1891
84,824.26
4,400,000
18.50%
814,000
10.1891
82,939.27
4,725,000
18.00%
850,500
10.1891
86,658.30
4,400,000
18.00%
792,000
10.1891
80,697.67
$88,496.42
$82,939.27
Total Taxes
$84,824.26
$82,939.27
$86,658.30
$80,697.67
$5,557.14
Savings
Total Tax Rate
$1,884.98
$5,960.62