42-13603. Valuation; income method; requirements; confidentiality; definitions
A. Subject to section 42-13604, this article allows the owner of low-income multifamily residential rental property to elect a statutory income method for valuing the low-income multifamily residential rental property.
B. On timely election by the owner of a low-income multifamily residential rental property, the county assessor shall value property under this article based on the income method to value using the actual annual income and actual annual expenses of the property and using a capitalization rate that is based on the prevailing capitalization rate for a conventional multifamily property in the same geographic area adjusted to account for the differences between low-income multifamily residential rental properties and conventional multifamily properties, including the additional risk that the recorded affirmative land use restrictive covenants agreement places on the net operating income from the property, the restriction to the use of the property for affordable housing, the time period that the income and use restrictions remain in effect on the property and the illiquidity caused by the reduced pool of qualified potential buyers. After the capitalization rate is determined, the county assessor shall add the capitalization rate to the effective tax rate before calculating the full cash value.
C. The owner of a low-income multifamily residential rental property may elect to have the valuation of the property determined by the income method to value by submitting the three most current annual audited financial statements required by the Arizona department of housing to the county assessor before September 1 of the year immediately preceding the year for which the property will be valued. If the owner does not yet have three annual audited financial statements because the property is too new to the low-income housing tax credit program to have three years of audited data, the owner may submit and the county assessor shall use for valuation purposes the available audited financial statements and the pro forma income and expense data that was provided to the Arizona department of housing at the time the low-income housing tax credit application was submitted to the Arizona department of housing.
D. The department shall prescribe a form for an owner of a low-income multifamily residential housing tax credit project to elect to value the property pursuant to this article.
E. All information a taxpayer submits to the county assessor pursuant to this article is confidential pursuant to chapter 2, article 1 of this title.
F. If a property previously qualified for valuation under this article but has been fully transitioned to current use as a conventional multifamily property in compliance with 26 United States Code section 42(h)(6)(E), the property shall no longer be valued under this article and the property's limited value shall be calculated pursuant to section 42-13302.
G. For the purposes of this section:
1. " Actual annual expenses" means all operating expenses, as reflected in the annual income and expense documentation submitted pursuant to subsection C of this section, including the following:
(a) Maintenance and repair costs.
(b) Supplies.
(c) Service contracts.
(d) Utilities.
(e) Tenant internet service and other services required by the Arizona department of housing.
(f) Administrative costs, including costs for the following:
(i) Accounting and auditing.
(ii) Office supplies.
(iii) Compliance and asset management.
(iv) Monitoring imposed by the Arizona department of housing.
(v) Attorney fees.
(vi) Payroll and payroll taxes.
(vii) Employee benefits.
(viii) Security.
(ix) Supportive and any other services stipulated by the affirmative land use restrictive covenants agreement.
(x) Marketing, leasing, advertising and promotion.
(g) Property management fees.
(h) Ground and land lease costs.
(i) Property and liability insurance.
(j) Taxes, except property taxes determined pursuant to subsection B of this section.
(k) Required replacement and operating reserves.
(l) For properties for which the tenants pay their own utility costs, utility costs for common areas and vacant units.
(m) Any other costs imposed pursuant to the affirmative land use restrictive covenants agreement.
2. " Actual annual income" :
(a) Means all operating income generated from the rental of real property, including rents, application and late fees and forfeited security deposits.
(b) Does not include the federal income tax credits or investment proceeds resulting from the federal income tax credits that are allocated to the owner.