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Legislative update: House puts brakes on motor vehicle tax assessment increase

By CHAD MCCOY
50th District State Representative

Saturday, Feb. 13, 2022 — As a legislator, I receive hundreds of phone calls, emails, letters, and social media messages each week. This session, the one issue that I hear the most about is the motor vehicle tax assessment.

REP. CHAD MCCOY

You may have already seen news reports about a notice issued by the Department of Revenue in January that advised county Property Valuation Administrators (PVAs) of an increase in the value of motor vehicles. This week, the House acted to prevent that increase from happening, and I am hopeful the bill will clear the remaining hurdles to become law soon.

The news is unprecedented since cars, trucks, and other vehicles rarely increase in value over time. After all, we have all heard the old saying about how cars depreciate the moment you drive them off the lot. However, the increase was even more unusual because it was estimated to be an astonishing 40 percent over last year’s assessment value.

This increase is the result of a decision made years ago by the state that did not become evident until the pandemic-related supply shortages led to increased vehicle costs. Vehicles are assessed based on a couple of factors. The first is, of course, what it is worth on the market. However, there is another determinate of these rates—the standard value.

Under current law, PVAs must use a standardized measure when assessing the value of motor vehicles for tax purposes, defined by statute as the “average trade-in value.” However, since 2009, the Department of Revenue has defined “average trade-in” to mean a higher valuation of “clean trade-in.” In simple terms, you might be driving a car in decent condition, but they are taxing you for a vehicle in far better shape.

As I mentioned, this is particularly troubling because we are all aware that the cost of vehicles has increased dramatically over the past year. In fact, economists cite it as one of the leading factors in the inflation we face today.

The bill we approved on Wednesday of this week, HB 6, allows taxpayers to pay the 2021 amount in 2022, rather than the increased amount levied by the administration. The measure also requires that the difference between the two amounts be refunded to anyone who already paid motor vehicle tax this year. HB 6 would also require Property Valuation Administrators (PVAs) under the Kentucky Department of Revenue to use the average trade-in value as the standard measure for assessing a vehicle’s value for tax purposes. This is a common sense change that simply ensures the administration follows the intent of existing law.

HB 6 would clarify that the PVA must have appropriate documentation from the vehicle registrant showing the vehicle does not fit the standard definition if a different value is used to assess a vehicle, for example, when improvements or special features have been added that increase value.

Many Kentuckians are already facing rising costs on groceries and other necessities. The last thing they need is for their own state government to get greedy and take advantage of the supply shortage to collect more taxes. HB 6 is now in the Senate awaiting their consideration. I would like to see it move to the Governor’s desk quickly to avoid further overpayments by Kentuckians.

As always, I can be reached here at home anytime, or through the toll-free message line in Frankfort at 1-800-372-7181. Feel free to contact me via email at Chad.McCoy@lrc.ky.gov. If you would like more information, please visit the LRC website www.legislature.ky.gov.

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