Assembly passes property tax code changes

Editor’s note: This story has been updated to correct the date of the Oct. 4 municipal regular election.

The Kenai Peninsula Borough Assembly passed an ordinance amending the property tax code and is reviewing another ordinance with changes to the sales tax code.

Borough Mayor Mike Navarre’s administration has been reviewing the sales and property tax codes for about a year. After reviewing the code and pulling out specific changes, the mayor introduced four ordinances addressing tax administration in the borough. Three have been approved and one is awaiting discussion.

The two biggest changes — gradually phasing out the borough’s optional portion of the senior property tax exemption and raising the borough’s sales tax cap from $500 to $1,000 — were introduced and passed as ordinances of their own. Both will appear as ballot propositions in the Oct. 4 municipal regular election.

The third ordinance instituted a variety of more minor changes to the property tax code. Included are administrative and language changes like allowing the borough clerk to communicate electronically, expanding the alternate pool for the Board of Equalization, requiring that any property tax exemption for a property for “community purposes” have to be approved by the assessor by March 31 of the tax year and defining what a “community purpose” is.

Two other changes require that a property owner be at least two years behind or $200 behind on property taxes before the property could be subject to foreclosure, updating the amount from $20 and disqualify anyone from obtaining either a senior citizen or disabled veteran property tax exemption or the $50,000 residential property tax exemption if they have claimed one in another jurisdiction outside the borough.

“What this does is try to provide for a more equitable and efficient administration of borough property tax code,” Navarre said at the assembly’s Tuesday meeting.

The borough assembly passed it in its proposed form after an amendment proposed by assembly member Gary Knopp to remove a requirement to report property sales failed to pass.

Knopp proposed the amendment because the reporting requirement would cause more compliance issues than it was worth, he said.

Navarre said the borough staff has to have the bill of sale anyway, and the reporting requirement would save staff members from having to hunt it down when they need it.

“What this is attempting to do is to make it mandatory,” Navarre said at the meeting. “There’s no penalty associated with it, and so it may or may not push the envelope a little bit, but if it’s mandatory maybe we’ll get better compliance, and it’ll save staff time and anxiety for both the sellers of the property and the buyers of the property in the long term.”

The fourth ordinance, which was introduced at the Aug. 9 meeting, addressed changes in the sales tax code. Like the property tax code revisions, some are language or administrative changes, while others change the rules for charging, collecting and remitting sales taxes on goods and services.

For example, businesses that report less than $2,500 in sales annually would be exempt from collecting sales tax under the revision. The small businesses would still be required to register with the borough and random checks to make sure they stayed under the $2,500 limit could be conducted, but the change would save the businesses time and paperwork, according to a memo to the assembly from Larry Persily, special assistant to the mayor.

“Eliminating borough sales tax collections for the fewer than 800 businesses that report under $2,500 a year in sales would cost the borough less than $20,000 a year in revenues, but would save the businesses and the borough far more than that in time and administrative chores,” Persily wrote in the memo.

Other changes would give the borough leeway to exempt certain businesses from filing tax returns if sellers are exempt from collecting sales tax; make flightseeing tours subject to sales tax the same way bus tours and charter boats are as long as they take off and land at the same airport on the same day; remove the exemption for nonprofits that operate at an ongoing location to make competition more fair; explicitly making the sale of pull-tabs, bingo cards and raffle tickets by charitable organizations exempt from sales tax; and clarify that as much as possible, out-of-borough and out-of-state businesses must collect and remit sales tax on goods and services delivered within the borough. The ordinance includes 12 other changes as well.

Two additional changes would make additional goods or services taxable. One would require the collection of sales tax year-round on food sold in stores that do not sell enough food to be eligible for food stamps.

The change is targeted at snack foods like candy and chips sold in hardware stores, out of vending machines or package liquor stores.

“The food sales affected by this amendment are far outside the realm of essential groceries,” Persily wrote in the memo.

Another would remove the tax exemption for moving freight.

“The borough collects sales tax on moving people in taxis and chartered buses, and there is no public policy justification to treat the moving of goods differently than moving people,” Persily wrote.

The property and sales tax code changes don’t need a public vote, only assembly approval. If approved, both code changes will go into effect on Jan. 1, 2017.

 

Reach Elizabeth Earl at elizabeth.earl@peninsulaclarion.com.

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