Opinion ID: 2377818
Heading Depth: 3
Heading Rank: 3

Heading: Alaska Property Tax Framework For LIHTC Properties

Text: Alaska Statute 29.45.110(a) requires that property be assessed at its full and true value, defined there as the estimated price that the property would bring in an open market and under the then prevailing market conditions in a sale between a willing seller and a willing buyer both conversant with the property and with prevailing general price levels. In Dash v. State [25] we recognized appraisers' three usual approaches to valuing real property: They are the cost approach, the market data approach, and the income approach. The cost approach, which arrives at value by determining the current cost of reproducing a property less depreciation, is used only when the property is improved. The market data approach measures value by comparison to recent sales of similar property. The income approach, which is concerned with the present worth of future benefits from the property, arrives at present value by discounting or `capitalizing' the future income which could be derived from the property. The income capitalization method involves three steps: (1) an estimate of the income which the property is capable of producing, including both periodic income and the income to be derived from future sale of the property; (2) an estimate of the rate of return (capitalization rate) an investor would require in order to induce him to make an investment with the risk and lack of liquidity of an equity interest in the particular property; (3) an application of this capitalization rate to the estimated income to derive the present value of the estimated income.[ [26] ] In 2000 the Alaska legislature added a new subsection to AS 29.45.110. [27] The bill's initial draft mandated valuing all LIHTC properties based on rental restrictions without adjustment for tax credits. [28] The bill's proponents explained in committee that the bill was prompted by a change in the Municipality of Anchorage's interpretation of full and true value for LIHTC properties. [29] Although the Municipality had for years valued LIHTC properties based on rent-restricted income, it had stopped doing so, thereby imposing higher property tax burdens. [30] But legislative committees also heard concerns that the proposed bill would give LIHTC properties an unfair competitive advantage over other housing [31] and reduce tax revenue to municipalities. [32] The final version of the bill created AS 29.45.110(d). [33] Subsection (d)(1) provides that when calculating the full and true value of a property qualifying for the LIHTC program before January 1, 2001, an assessor shall base assessment . . . on the actual income derived from the property and may not adjust it based on the amount of any federal income tax credit given for the property. [34] For properties qualifying for the LIHTC program on or after January 1, 2001, subsection (d)(2) directs local governments to determine by ordinance whether to follow subsection (d)(1) or to generally exempt these properties from subsection (d)(1)'s mandatory income approach and determine parcel-by-parcel whether to require use of that appraisal method. [35]