Senator Jani Iwamoto proposes the following substitute bill:


1     
AFFORDABLE HOUSING TAX AMENDMENTS

2     
2022 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Jani Iwamoto

5     
House Sponsor: Steve Waldrip

6     

7     LONG TITLE
8     General Description:
9          This bill modifies provisions related to the assessment of real property subject to a
10     low-income housing covenant.
11     Highlighted Provisions:
12          This bill:
13          ▸     defines terms;
14          ▸     prescribes a valuation method for determining the fair market value of real property
15     subject to a low-income housing covenant;
16          ▸     requires a county assessor to send a form approved by the State Tax Commission to
17     each owner of real property subject to a low-income housing covenant; and
18          ▸     makes technical and conforming changes.
19     Money Appropriated in this Bill:
20          None
21     Other Special Clauses:
22          This bill provides a special effective date.
23     Utah Code Sections Affected:
24     AMENDS:
25          59-2-301.3, as last amended by Laws of Utah 2012, Chapter 31
26     

27     Be it enacted by the Legislature of the state of Utah:
28          Section 1. Section 59-2-301.3 is amended to read:
29          59-2-301.3. Definitions -- Assessment of real property subject to a low-income
30     housing covenant.
31          (1) As used in this section:
32          (a) ["low-income] "Lease up period" means the period that begins the day on which
33     residential housing located on real property subject to a low-income housing covenant is
34     available for occupancy and ends the day on which the residential housing achieves 90%
35     occupancy for a continuous three-month period.
36          (b) "Low-income housing covenant" means an agreement:
37          (i) between:
38          (A) the Utah Housing Corporation or a government entity; and
39          (B) an owner of real property upon which residential rental housing is located; [and]
40          (ii) in which the owner described in Subsection [(1)(a)(i)(B)] (1)(b)(i)(B) agrees to
41     limit the amount of rent that a renter may be charged for the residential rental housing; and
42          (iii) that is filed with the county recorder in the county in which the real property is
43     located.
44          [(b) "residential] (c) "Residential rental housing" means housing that:
45          (i) is used:
46          (A) for residential purposes; and
47          (B) as a primary residence; and
48          (ii) is rental property.
49          (2) (a) A county assessor shall, in determining the fair market value of real property
50     subject to a low-income housing covenant[,]:
51          (i) use the income capitalization approach, if the county assessor finds that the income
52     capitalization approach is a valid indicator of the property's fair market value;
53          (ii) in using the income capitalization approach:
54          (A) calculate the property's net operating income using the reduced rent amounts that
55     result from the low-income housing covenant; and
56          (B) during the lease up period, account for rent loss due to vacancy and lease up costs;
57     and
58          (iii) take into account all other relevant factors that affect the fair market value of the
59     property, including[:] the information provided in accordance with Subsection (3).
60          [(a) the information provided in Subsection (3); and]
61          [(b) any effects the low-income housing covenant may have on the fair market value of
62     the real property.]
63          [(3) (a) Except as provided in Subsection (3)(b), to have a county assessor take into
64     account a low-income housing covenant under Subsection (2), the owner of a property subject
65     to a low-income housing covenant shall, by April 30 of each year, provide to the county
66     assessor:]
67          (b) (i) Subject to Subsection (2)(b)(ii), Subsection (2)(a) applies regardless of whether
68     the property is complete or under construction.
69          (ii) For a property under construction, when determining fair market value under this
70     section, the county assessor shall take into account the impact of the low-income housing
71     covenant on the fair market value of the property.
72          (3) (a) On or before April 30 of each year, an owner of real property subject to a
73     low-income housing covenant shall provide to the county assessor the following on a form
74     approved by the commission:
75          (i) a signed statement from the property owner that the project continues to meet the
76     requirements of the low-income housing covenant;
77          (ii) a certified financial operating statement for the property for the prior year;
78          (iii) rent rolls for the property for the prior year; [and]
79          (iv) federal and commercial financing terms and agreements for the property[.]; and
80          (v) for a property under construction, actual construction costs incurred as of the lien
81     date.
82          (b) If the April 30 described in Subsection (3)(a) [falls within the first 12 months after
83     a low-income housing operation begins on the property, a] occurs before occupancy of the
84     property or before the end of the lease up period, the property owner shall provide estimates of
85     the information required by Subsections (3)(a)(ii) [through (iv)] and (iii).
86          (c) On or before March 31 each year, the county assessor shall send a copy of the form
87     described in Subsection (3)(a) to each owner of real property subject to a low-income housing
88     covenant located in the county.
89          (4) If [the] an owner of [a] real property subject to a low-income housing covenant fails
90     to meet the requirements of Subsection (3):
91          (a) the assessor shall:
92          (i) make a record of the failure to meet the requirements of Subsection (3); and
93          (ii) make an estimate of the fair market value of the property in accordance with
94     Subsection (2) based on information available to the assessor; and
95          (b) subject to Subsection (5), the owner shall pay a penalty equal to the greater of:
96          (i) $250; or
97          (ii) 5% of the tax due on the property for that year.
98          (5) (a) Only one penalty per year may be imposed per housing project subject to a
99     low-income housing covenant.
100          (b) Upon making a record of the action, and upon reasonable cause shown, an assessor
101     may waive, reduce, or compromise the penalty imposed under Subsection (4)(b).
102          (c) An owner is not subject to a penalty under Subsection (4) for a year in which the
103     county assessor failed to timely comply with Subsection (3)(c).
104          Section 2. Effective date.
105          This bill takes effect on January 1, 2023.