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New exemption to benefit property owners in Oklahoma

Attorney Stephen Schuller, of GableGotwals discusses new property tax exemption for expenditures for repairs of damage from storms, tornadoes, fires and other disasters.
Oklahoman Published: August 14, 2014

Q&A with Stephen A. Schuller

New exemption will benefit property owners in Oklahoma

Q: On the last day of this year’s legislative session, the Legislature passed House Bill 3188 that provides a significant tax benefit to Oklahoma property owners, and which carves out a property tax exemption for expenditures for repairs of damage from storms, tornadoes, fires and other disasters. How does HB 3188 change the law?

A: Under the Oklahoma Constitution, property that is subject to ad valorem taxes is assessed at a percentage of its fair market value as determined by the county assessor. But because of a 2012 constitutional amendment, that valuation may increase by no more than 5 percent each year or 3 percent for agricultural lands and properties qualifying for the homestead exemption. The 5 percent cap does not apply if, during the previous year, the property is sold or transferred to another owner or if improvements are made to the property. House Bill 3188 changes the definition of “improvements” to specifically exclude repairing damage to a structure caused by weather (rain, winds, tornadoes, hail), fire or any other “natural disaster” or event (earthquakes come to mind nowadays), even if the repairs were funded by insurance proceeds. This means “improvements” of that nature can’t be used to exceed the 5 percent cap.

Q: What constitutes an improvement and how does that change under this new law?

A: An improvement is defined by statute as a “valuable addition” that’s more than simply normal repairs, replacements, maintenance or upkeep. Before HB 3188, that meant essentially that any changes or “improvements” to the property that added to its value are considered in the county assessor’s valuation for property tax purposes. The new law carves out a specific exception for repairs of damage from storms, tornadoes, fires and other disasters unless new square footage is added.

Q: Does HB 3188 apply to commercial properties or only residential properties?

A: The new law applies to all real property — business and residential.

Q: How does this new law benefit a business that suffers facility damage?

A: If a building or other structure is damaged by any of the events previously discussed, the property can be repaired without risking a property tax increase that would result from the repairs’ constituting an “improvement” of the property. Under prior law such “improvements” would have allowed the valuation increase for property tax purposes to exceed the 5 percent cap.

Q: If a business adds additional space during the rebuild, how is that new space assessed?

A: If the square footage of the structure is increased, then the county assessor is authorized to take the additional square footage into account in determining the increase in the value of the property. But the county assessor has to consider the additional square footage separately from the rest of the structure; the rest of the structure is still limited to the 5 percent valuation increase mandated by the constitutional amendment.


by Paula Burkes
A 1981 journalism graduate of Oklahoma State University, Paula Burkes has more than 30 years experience writing and editing award-winning material for newspapers and healthcare, educational and telecommunications institutions in Tulsa, Oklahoma...
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