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For many taxpayers, understanding how their total property tax bill is determined can be confusing. When property owners receive notice that the assessed value of their property has been increased by the county assessor, sometimes substantially, they are understandably concerned. In most cases, the valuation increase means a tax increase.
Your property tax bill is determined by two factors: the assessed valuation of your property and the total tax levy rate set by the local political subdivisions in which you live. Neither of these numbers remain constant over time. Local political subdivisions establish a budget based on their spending plan. They then look at the total assessed value of property within their taxing district. The levy rate is set, within the bounds of levy limits, to generate the amount of revenue to pay for the predetermined budget.
Your property tax bill may go up, but the levy rate may stay the same or even decrease. If this occurs, the assessed valuation on your property has been increased. For many property owners, increases in the assessed valuation of their property has driven a significant rise in their property tax bill. For agriculture land owners, rapid valuation increases have created a dramatic and unprecedented shift in the total property tax distribution. That shift has most notably impacted the school equalization aid formula, TEEOSA, resulting in the majority of rural school districts in Nebraska receiving no state equalization aid.
The Nebraska Constitution requires property to be valued uniformly and proportionately. The value is determined based on an assessment of the market price of the property, or an estimation of what the property would be sold for if offered for sale in the open market between a willing buyer and a willing seller. Equalization is the process by which the assessed value of your property is adjusted to reflect the market value of similar properties for the purposes of determining your property tax.
When property owners feel the value placed upon their property for the purpose of taxation is in excess of market value, they can file an official protest with the county clerk using Form 422A. They then must appear before the County Board of Equalization or their assigned agent to demonstrate why their valuation is not accurate.
Protesting your property valuation is a time consuming process. For many taxpayers, it means time away from work and family obligations to prepare for and attend the hearing. The standards for the information a taxpayer needs to provide to support their claim are unclear and vary from county to county. Taxpayers are often only given a few minutes to make a case that can have a significant impact on their family budget. For many the protest process is intimidating. Even after the protest hearing is complete, there is no consistent standard by which the Board of Equalization has to accept or reject the valuation.
When the county increases the valuation of your property for the purposes of taxation, it represents an increase in taxes. The burden for justifying the increase should lie solely with the government entity. It should not be the responsibility of the taxpayer to prove the value of their property.
Buffalo County provides an excellent example of the burden placed on property owners by the current system. Last year 1,972 valuation protests were filed with the County Clerk. That is an amazing investment of time and productivity by taxpayers to defend the valuation of their property, and it is down from an all-time record high of 2,566 in 2016. The result of those protests was a total decrease of $66.92 million in assessed property value, out of the original $283.69 million proposed. That amounts to 23.5% of the total valuation increase that was reversed following taxpayer protests.
Taxpayers should never be left wondering “why” their valuation increased, nor should they bear the burden of disproving a positive claim made by the government. In response to this need, I have introduced LB 905, which would require that at any hearing of the county board of equalization on a protest regarding real property, the burden of proof is on the county assessor to show that his or her assessed value is equitable and in accordance with the law.
I encourage county officials to proactively communicate with taxpayers, in detail, about why their property values increased. Every valuation increase should be made with understanding it is the responsibility of the county, not the taxpayer, to defend the increase. Clear, consistent, and objective standards of evidence should be available to taxpayers who wish to protest their valuation. The burden of proof for any government action, including taxation, lies with the government, not the citizen.