House moves to close property tax overpayment loophole

The Alaska House of Representatives voted Wednesday to end a practice that allowed taxpayers to deliberately overpay property taxes and collect automatic refunds with 8 percent interest. The change came as part of House Bill 13, which passed 32-7.

The loophole worked simply. Under current law, taxpayers who overpay property taxes automatically receive their money back with 8 percent interest added. Representative Andrew Gray called it a very secure investment. The Senate Community and Regional Affairs Committee added language to eliminate that interest payment when taxpayers overpay due to their own error.

The bill still protects taxpayers who overpay through no fault of their own. For legitimate overpayments caused by municipal error, the bill reduces interest from a flat 8 percent to 3 percentage points above the 12th Federal Reserve District rate in effect on January 2 in the year of payment.

The measure also offers five optional property tax exemptions that municipalities can implement at their discretion. The Senate State Affairs Committee removed the $10,000 cap on property tax exemptions for volunteer firefighters and medical responders. The committee added hazmat volunteers as responders that municipalities may elect to exempt.

Representative Bill Elam said he supported the changes and appreciated the inclusion of language about firefighter exemptions. Gray recommended a yes vote on the changes.

The House initially concurred with the Senate amendments 30-9. Representative Elexie Moore then moved to rescind action on her concurrence vote. The House voted again and approved the measure 32-7.

The title change resolution, Senate Concurrent Resolution 14, had already passed the House earlier in the session and remained in effect.