Act 73 adds a third education property class and calls for Department of Taxes report

Julia Richter, Joint Fiscal Office staff, walked the committee through Act 73’s property-classification and tax-calculation changes. Under current law there are two education property classes (homestead and non-homestead); Act 73 establishes a third class by splitting non-homestead into non-homestead residential (intended to capture short-term rentals and similar uses) and non-homestead nonresidential (all other taxable property).

Richter said Act 73 also replaces the current dual-rate structure with a single uniform statewide education property tax rate that is then adjusted by classification-specific factors. Initially those factors are set to 1 for all classes, but the Department of Taxes was directed to produce a report with options and estimates so policymakers can consider setting different factors by property class.

Committee members raised definitional questions: how to identify second homes versus short-term rentals or hunting camps in grand-list data, and whether units such as apartments or home-based businesses would be classified as non-homestead residential or nonresidential. Richter noted the Department of Taxes’ report and said the State Board of Education and Agency of Education will have roles in defining terms like "small by necessity" and "sparse by necessity." Examples offered in discussion included parking lots, mom-and-pop shops and larger retailers.

Why this matters: changing class definitions and moving to a uniform rate with adjustable factors affects who bears education property-tax burdens and how revenue is distributed across homestead and non-homestead property owners. Several implementation and definitional choices remain to be resolved by the Department of Taxes and AOE before the law’s contingent effective date.