A bill designed to give Kentucky taxpayers a break on their motor vehicle taxes was approved by the full House on Wednesday. The bill also includes granting tax refunds for overpayments this year. Though the tax rate didn’t actually increase this year, state officials previously said the “dramatic change” in the used vehicle market has caused the value of some vehicles to increase — as much as 40%.
The House Appropriations and Revenue on Tuesday approved House Bill 6, which would require that property valuation administrators tax vehicle owners the same as they did in 2021. The full House approval came Wednesday. It will now go to the Senate for approval.
Beginning in 2023, HB 6 would require the “average trade-in” value to be used as the standard value of a motor vehicle for property tax purposes instead of the “rough trade-in” or “clean trade-in” value.
HB 6 would apply to motor vehicles assessed on or after Jan. 1, 2022, and it contains an emergency clause meaning it would go into effect immediately upon becoming law. The bill would also provide a way for Kentuckians to receive a refund if they’ve overpaid their taxes for this year.
“House Bill 6 follows concerns from my constituents regarding a letter that they received from the executive branch stating that their motor vehicle [appraisal] values would be increasing by 40% in 2022 compared to 2021,” said Rep. Sal Santoro, R-Union, the primary sponsor of the bill.
The state’s Finance Cabinet and Administration Cabinet sent out a letter in January regarding the vehicle valuation increase. The new assessments were compiled by JD Power and “reflect the unprecedented rising value of most motor vehicles.”
Jill Midkiff, Director of Communications for the state’s Finance and Public Administration Cabinet, stressed in an email in January that while people may owe more on their taxes, the tax rate has not increased.
“Typically, vehicle values go down over time, but the current limited supply and high demand has caused the value of some vehicles to increase,” Midkiff said. “This is happening across the nation, not solely in Kentucky. The dramatic change in the used vehicle market due to the pandemic has been widely reported in both the state and national news since 2020.”
Midkiff said the percentage increase for 2022 reflects the overall total valuation compared to the 2021 overall total valuation, and that not all vehicle values will see a 40% increase compared to last year.
Midkiff said the Kentucky Department of Revenue administers the state’s tax laws as they exist. Only the General Assembly has the constitutional authority to enact or amend law.
Daviess County PVA Rachel Pence Foster previously said the Department of Revenue puts values on vehicles at a state level using National Automotive Dealers Association (NADA) “clean trade-in,” though her office can override those valuations by doing an assessment of the vehicle.
Santoro said the executive branch adopted a policy in 2009 that allowed the “clean trade-in” to be used in assessing motor vehicle property taxes. The proposed legislation would no longer allow that, instead requiring “average trade-in” values to be used.
