Legislation that would raise the homestead property tax credit from $375 to $425 for each parcel zipped through the Arkansas Senate on Thursday.
The Senate voted 33-0 to send House Bill 1032 by state Rep. Lanny Fite, R-Benton, to the governor.
Gov. Sarah Huckabee Sanders "was glad to work with Rep. Lanny Fite on the House Revenue and Taxation Committee to get as much relief as possible for Arkansas homeowners who are struggling because of President Biden's disastrous economic policies that have caused record inflation and placed a burden on Arkansans," Sanders spokeswoman Alexa Henning said afterward in a written statement.
The bill would be effective for assessment years beginning on or after Jan. 1, 2023, and grant the third increase in the homestead property tax credit since the credit was created more than 20 years ago.
The homestead property tax credit reduces the amount of real property taxes due on a property owner's qualified homestead for each assessment year, the state Department of Finance and Administration said in its impact statement on HB1032.
To claim the credit, a property owner registers with the county assessor and provides proof of eligibility for the credit.
The increased tax credit under the bill would cost $34 million in calendar year 2024 and $34.8 million in calendar year 2025, the finance department estimated.
A total of 711,334 homestead property tax credits were granted in calendar year 2022, said Scott Hardin, a spokesman for the finance department.
In the 2000 general election, voters approved Amendment 79 to the Arkansas Constitution to create the homestead property tax credit. In response, the Legislature enacted a half-cent sales tax, effective Jan. 1, 2001, and the revenue is credited to the property tax relief trust fund.
The Legislature established the initial homestead property tax credit at $300 per parcel before voting in 2007 to increase it to $350 and then voting in 2019 to increase it to $375. The 2019 law also allows the transfer of excess funds in the property tax relief trust fund to the state's now-catastrophic reserve fund, which was formerly known as the long-term reserve fund.
The half-cent sales tax raised $355 million in calendar year 2022 and $247 million was spent on homestead property tax credits, Hardin said.
A total of $225 million has been transferred from the property tax relief trust fund to the long term/catastrophic reserve fund, he said.