As tax gap widens, Idaho 1 of 10 states with no obligation to disclose property’s sale price

Much has been said about the widening disparity between commercial and residential property taxes and what may be causing the burden of increasing cost to residential homeowners, but one potential cause not often discussed is the effect of Idaho’s non-disclosure laws surrounding real estate transactions.

Idaho is one of 10 states where there is no legal obligation to publicly disclose the sale price of a property, regardless of its type. The disclosures that are made are strictly voluntary or available to the assessor’s office through the Intermountain Multiple Listing Service. The assessor’s office also sends out a voluntary sales disclosure form to a homebuyer when the owner files for a homeowner’s exemption. 

Ada County Assessor Bob McQuade said the office sends a form to homeowners who apply for the homestead exemption asking for the address of the home and details of the parcel number, with a separate section for purchase and sales prices. But since that portion is voluntary, a little more than half of the people filling out the form include that information. 

Very few commercial properties provide sales data, assessor’s office says

Brad Smith, chief deputy assessor for Ada County, said the assessment process for appraisals partially relies on sales data for accuracy, and since Ada County has so many residential property sales, there is plenty of data available on the residential side.

Out of about 160,000 properties tracked by the assessor’s office, the data for approximately 13,000 sales is available, or about 8%. The more sales data that is available, the more confident an assessor can be with property appraisal.

The commercial side is a different story, however.

“On the commercial side, we have about 10,000 properties and 150 sales,” Smith said, which works out to 1.5%. “So a lot of the commercial property owners are not disclosing their sales. Buyers and sellers really don’t want people to know the sales price. But from an appraiser standpoint, it makes it very difficult when we don’t have that sales data since statute says we have to be at market value.”

Instead, assessors have to rely on data from prior years and comparable data in other counties and states to reach an assessment. An unintended consequence of using different sets of data for residential versus commercial, Smith said, is that the gap between the two can begin to widen.

“Having disclosure could be an easy fix to help get that trend going back the other way,” Smith said.

Has Idaho considered a real estate disclosure law before?

There have been efforts in the past to create a disclosure law in Idaho. One bipartisan effort in 2008 was a bill cosponsored by Sen. Shawn Keough, who represented Sandpoint at the time as a Republican, and Wendy Jaquet, a Democrat who represented Ketchum. The bill would have mandated the disclosure of sales prices on residential real estate, partially to help assessors in small counties who don’t have as many sales per year as Ada County. The measure passed the Idaho Senate in a 19-15 vote, but it never made it out of the House Revenue and Taxation Committee.

But that bill still excluded commercial properties from disclosure. Smith said he’s unaware of any serious pushes for the idea since 2008.

One important organization that opposes the idea of disclosure is the Idaho Association of Realtors. Max Pond, the association’s government affairs director, said in an email there are agreements in place with every county and its assessor to disclose certain information for assessment and valuation purposes, but the information is not public. Pond said there are a couple of reasons for that.

“Above all else, the Idaho Association of Realtors respects and values client privacy in the largest investment and purchase of their entire lives,” Pond wrote as one reason. And, “In nearly all states that have enacted mandatory sales price disclosure a real estate transfer tax soon follows. This tax only adds significant cost to the transaction and zero value to the buyer.”

Real estate transfer taxes are one-time taxes or fees levied by a state or local jurisdiction when a piece of real property is sold. The association is strongly opposed to implementing transfer taxes for affordable housing projects as well.

That opposition is part of why McQuade thinks disclosure is unlikely to be mandated in Idaho anytime soon.

“Disclosure would be nice, but I just don’t see it happening,” McQuade said. “… It would help, but it’s not feasible. I don’t see it as feasible right now anyway, that’s for sure.”

McQuade said one argument he’s heard for not requiring disclosure that is inaccurate is that if a property was assessed at a certain amount and the buyer paid more than that, the assessment would go up to the purchase cost. He said some assessors have done that in the past, which is why it’s a commonly held belief, but it is not how he runs his office.

“We have tests that we perform on an individual appraiser’s work where we can test whether they’ve been doing that or not, and if they have, they are counseled to stop. And if they don’t, then they are terminated,” McQuade said.

Legislator says his solution will help in lieu of disclosure

A new idea to address the widening gap between commercial and residential property taxes was discussed on Friday at the Idaho Legislature during a meeting of the Property Taxes and Revenue Expenditures Study Committee, a joint committee co-chaired by Sen. Jim Rice, R-Caldwell, and Rep. Jim Addis, R-Coeur d’Alene.

Rice said he and Addis collaborated to come up with an idea for a new exemption based on a county-specific formula that would be based on percentages of increase in property values. It would act as a stabilizing force between the two markets.

Rice told the Idaho Capital Sun his solution would make non-disclosure of commercial property sales less of an issue in terms of the disparity between residential and commercial taxes.

“One of the challenges with disclosure is you get all sorts of extra backlash if you try to change that,” Rice said. “If you’re evening out the rate of change (per year) … it tends to lessen the impact onto other taxpayers.” 

McQuade said Rice’s idea isn’t necessarily better than requiring price disclosure, but it’s much more feasible. The stabilization exemption would help close some of the gap, but McQuade said it’s important to remember in the current market, there would still be a heavier burden on residential owners.

“The tax burden will continue to be upon the residential property just by the fact that we have a lot more homes being built than businesses, and we’ve had a lot more appreciation than residential,” McQuade said.

But regardless, McQuade said he’s happy to see legislators and city and county officials beginning to collaborate to address the issue.

“I’m so excited about this group coming together to discuss what we can do,” he said. “We’ll have a better understanding of problems the Legislature has, and the problems we have in the cities and counties, and maybe we can just kind of mold something that will really benefit the taxpayers.”