2021 New Mexico Statutes
Chapter 7 - Taxation
Article 36 - Valuation of Property
Section 7-36-21.2 - Limitation on increases in valuation of residential property.
A. Residential property shall be valued at its current and correct value in accordance with the provisions of the Property Tax Code; provided that for the 2001 and subsequent tax years, the value of a property in any tax year shall not exceed the higher of one hundred three percent of the value in the tax year prior to the tax year in which the property is being valued or one hundred six and one-tenth percent of the value in the tax year two years prior to the tax year in which the property is being valued. This limitation on increases in value does not apply to:
(1) a residential property in the first tax year that it is valued for property taxation purposes;
(2) any physical improvements, except for solar energy system installations, made to the property during the year immediately prior to the tax year or omitted in a prior tax year; or
(3) valuation of a residential property in any tax year in which:
(a) a change of ownership of the property occurred in the year immediately prior to the tax year for which the value of the property for property taxation purposes is being determined; or
(b) the use or zoning of the property has changed in the year prior to the tax year.
B. If a change of ownership of residential property occurred in the year immediately prior to the tax year for which the value of the property for property taxation purposes is being determined, the value of the property shall be its current and correct value as determined pursuant to the general valuation provisions of the Property Tax Code.
C. To assure that the values of residential property for property taxation purposes are at current and correct values in all counties prior to application of the limitation in Subsection A of this section, the department shall determine for the 2000 tax year the sales ratio pursuant to Section 7-36-18 NMSA 1978 or, if a sales ratio cannot be determined pursuant to that section, conduct a sales-ratio analysis using both independent appraisals by the department and sales. If the sales ratio for a county for the 2000 tax year is less than eighty-five, as measured by the median ratio of value for property taxation purposes to sales price or independent appraisal by the department, the county shall not be subject to the limitations of Subsection A of this section and shall conduct a reassessment of residential property in the county so that by the 2003 tax year, the sales ratio is at least eighty-five. After such reassessment, the limitation on increases in valuation in this section shall apply in those counties in the earlier of the 2004 tax year or the first tax year following the tax year that the county has a sales ratio of eighty-five or higher, as measured by the median ratio of value for property taxation purposes to sales value or independent appraisal by the department. Thereafter, the limitation on increases in valuation of residential property for property taxation purposes in this section shall apply to subsequent tax years in all counties.
D. The provisions of this section do not apply to residential property for any tax year in which the property is subject to the valuation limitation in Section 7-36-21.3 NMSA 1978.
E. As used in this section, "change of ownership" means a transfer to a transferee by a transferor of all or any part of the transferor's legal or equitable ownership interest in residential property except for a transfer:
(1) to a trustee for the beneficial use of the spouse of the transferor or the surviving spouse of a deceased transferor;
(2) to the spouse of the transferor that takes effect upon the death of the transferor;
(3) that creates, transfers or terminates, solely between spouses, any co-owner's interest;
(4) to a child of the transferor, who occupies the property as that person's principal residence at the time of transfer; provided that the first subsequent tax year in which that person does not qualify for the head of household exemption on that property, a change of ownership shall be deemed to have occurred;
(5) that confirms or corrects a previous transfer made by a document that was recorded in the real estate records of the county in which the real property is located;
(6) for the purpose of quieting the title to real property or resolving a disputed location of a real property boundary;
(7) to a revocable trust by the transferor with the transferor, the transferor's spouse or a child of the transferor as beneficiary; or
(8) from a revocable trust described in Paragraph (7) of this subsection back to the settlor or trustor or to the beneficiaries of the trust.
F. As used in this section, "solar energy system installation" means an installation that is used to provide space heat, hot water or electricity to the property in which it is installed and is:
(1) an installation that uses solar panels that are not also windows;
(2) a dark-colored water tank exposed to sunlight; or
(3) a non-vented trombe wall.
History: Laws 2000, ch. 10, § 2; 2001, ch. 321, § 1; 2003, ch. 118, § 1; 2010, ch. 30, § 1.
ANNOTATIONSThe 2010 amendment, effective May 19, 2010, in Subsection A(2), added "except for solar energy system installations,"; in Subsection E(4), after "who occupies the property as", changed "his" to "that person's"; and added Subsection F.
Applicability. — Laws 2010, ch. 30, § 1 provided that the provisions of Laws 2010, ch. 30, § 1 are applicable to property tax years beginning on or after January 1, 2010.
The 2003 amendment, effective June 20, 2003, deleted former Paragraphs (2) and (3) from Subsection E, defining "net new value" and "prior year value", and redesignated the remaining Paragraphs of Subsection E.
The 2001 amendment, effective April 5, 2001, inserted "or omitted in a prior tax year" in Paragraph A(2); In Subsection C, substituted the language beginning "the department shall determine for the 2000 tax year" to the end of the subsection for that former language that provided for the method of determination if a county was not subject to the limitation in Subsection A; added Subsection D; and redesignated Subsection D as E.
Constitutional valuation limitations. — Article VIII, Section 1 of the New Mexico Constitution limits the legislature's existing plenary authority to impose valuation limitations based on taxpayer characteristics to the three enumerated characteristics of age, income, and owner-occupancy. It does not impose any restrictions on the legislature's authority to impose limitations in valuation increases based on its classification of residential property. Zhao v. Montoya, 2014-NMSC-025, aff'g in part, rev'g in part 2012-NMCA-056, 280 P.3d 918.
Statute does not violate the New Mexico Constitution. — Section 7-36-21.2 NMSA 1978 does not violate the New Mexico Constitution because it creates an authorized class based on the nature of the property and not on the taxpayer and it does not violate the equal and uniform clause of Article VIII, Section 1 of the New Mexico Constitution because it furthers the legitimate state interest of fostering neighborhood preservation and stability by permitting older owners to pay progressively less taxes than new owners. Zhao v. Montoya, 2014-NMSC-025, aff'g in part, rev'g in part 2012-NMCA-056, 280 P.3d 918.
Where a property owner purchased a residential property in 2007 that had been assessed and valued at $243,786; in 2008 the property was valued at $362,600; another property owner purchased a new home "around the corner" from the owner's old home; in 2009, the old home was valued at $553,700 and the new home was valued at $902,500; and the owners claimed that they were entitled to the three percent limitation on increase in valuation that applied to other properties in the area that had not changed ownership, that 7-36-21.2 NMSA 1978 was unconstitutional because it created an unauthorized class of residential property taxpayers based solely upon the time of acquisition, not on the constitutionally permissible classifications of owner-occupancy, age or income, and violated the equal and uniform clause of Article VIII, Section 1 of the New Mexico Constitution, 7-36-21.2 NMSA 1978 was not unconstitutional because it created an authorized class based on the nature of property and not the taxpayer and because it furthered the legitimate state interest of fostering neighborhood preservation and stability by permitting older owners to pay progressively less taxes than new owners. Zhao v. Montoya, 2014-NMSC-025, aff'g in part, rev'g in part 2012-NMCA-056, 280 P.3d 918.
Valuation methods did not create a new class of taxpayers. — The different valuation methods under 7-36-21.2 NMSA 1978 for newly sold residential property and residential property owned more than a year do not create a new class of taxpayer in violation of Paragraph B of Article VIII, Section 1 of the constitution of New Mexico because 7-36-21.2 NMSA 1978 limits revaluation for taxation purposes based on owner-occupant status. Zhao v. Montoya, 2012-NMCA-056, 280 P.3d 918, aff'd in part, rev'd in part, 2014-NMSC-025.
Where homeowners bought and occupied new homes and in the year following their purchase, the county valued their property at significantly greater amounts for tax purposes than the county had valued the property for the previous owners; as a result of the revaluation, the property tax assessment for the property significantly increased; and the homeowners claimed that 7-36-21.2 NMSA 1978 was unconstitutional because it created a new class of taxpayer based on the time of acquisition of property, 7-36-21.2 NMSA 1978 did not create a new class of taxpayer because the homeowners did not obtain the benefit of the limitation of increases in assessed value until they purchased the property, at which time, the homeowners became members of the class of owner-occupants to whom the limitation applies. Zhao v. Montoya, 2012-NMCA-056, 280 P.3d 918, aff'd in part, rev'd in part, 2014-NMSC-025.
Change of ownership. — Where respondents made property transfers between individuals or their trusts and wholly-owned limited liability companies (LLC), the Bernalillo county valuation protest board erred in determining that the transfers did not constitute a change of ownership on the grounds that the property had the same ultimate owner owning the property, because this section expressly carves out eight exceptions to the definition of "change of ownership," none of which includes transfers between individuals or their trusts and LLCs formed to hold title to their properties. A transfer of residential property between an LLC's members and the LLC itself constitutes a change of ownership, subjecting the property to a valuation based upon its current and correct value, regardless of whether the proportional beneficial interests remain intact. Giddings v. SRT-Mountain Vista, LLC, 2019-NMCA-025.
