STATE OF SOUTH DAKOTA
OFFICE OF
THE ATTORNEY GENERAL

July 10, 1972

Lowell Schmidt
Commissioner of Revenue
Pierre, South Dakota

OFFICIAL OPINION NO. 72-33

Interpretation of property tax exemption for elderly citizens, Chapter 69, Laws of 1972

Dear Mr. Schmidt:

Several questions have arisen concerning the proper interpretation of Senate Bill 20, Chapter 69, Laws of 1972, codified as 10-4-24.1 thru 10-4-24.8, relating to an exemption for the elderly provided by the Legislature. Specifically, these questions have to do with the reduction of assessed valuation on property and what constitutes such assessed valuation; what is the effective date of this tax exemption and how should net income be calculated in determining qualifications for the exempt1on.

The Act provides that certain persons, as heads of households, shall be exempt from taxation on the first $1,000 of assessed value on their homes providing they come within certain provisions. From 1919 until 1957 there was only one standard for the assessment of property in South Dakota. This was as found in Section 6700 of the Revised Code of 1919 and SDC 57.0334, which stated in part, "All property shall be assessed at its true and full value in money." "Assessed value," therefore, meant both that valuation as determined by the assessor as the full and true value and also as the taxable value upon which taxes were levied inasmuch as no other criteria for the determination of value was given

In 1957 by Chapter 459, now SDCL 10-6-33, the Legislature decreed:

All property shall be assessed at its true and full value in money but only 60% of such assessed value shall be taken and considered as the taxable value of such property upon which the levy shall be made and applied and the taxes computed . . . .

It can be seen from this that there are two types of value referred to. "Assessed value," that being the "true and full value in money" and "taxable value," the reduced value taken for tax purposes.

It is my opinion, therefore, that the reference in Section 2 of Chapter 69, Laws of 1972, which states, "On the first one thousand dollars (of) assessed valuation on their homes" must be interpreted to apply to the full and true value as determined by the assessors and not the reduced percentage of full and true value taken as the "taxable value."

As to the year in which this tax relief shall become effective, it is noted that this Act was approved by the Governor on February 16, 1972, and not having an emergency clause, does not become law until July 1, 1972. The valuation of property is fixed and determined under SDCL 10-6-2, during the first six months of the year with the value set according to value on the first day of February preceding the assessment. It was held at one time that the value of taxability determined on assessment date pertained, even though the property thereafter, or part of it, might become exempt. However, our Supreme Court in 1957 in the case of McFarland v. Keenan, 77 S. D. 39, 84 N. W. 2d 884, overthrew this theory and held, at page 47, in considering with approval the annotation to Jefferson Post No. 15, American Legion, Department of Kentucky v. City of Louisville, Ky., 280 S.W. 2d 70G, 707, 54 ALR 2d, 992 at page 996:

While there is a divergence of authority on the question, the prevailing view seems to be that the date as of which the lien for taxes of a particular year attaches is controlling as concerns the allowance of an exemption from taxes of that year.

In South Dakota taxes become due on the first day of January of the year following that in which such taxes are assessed and as between vendor and vendee become a lien upon real property on and after such date, SDCL 10-19-1.

It is my opinion, therefore, that although this act becomes effective after the commencement of the process of the valuing of property and the placing of it on the tax rolls in the year 1972, it nevertheless provides, Section 2 (7), that claims for exemption shall be made annually on or before October 1st to the Director of Equalization who thereupon under Section 3 of the Act submits the claim to the board of county commissioners who may approve or disapprove these claims, depending on whether the applicant meets requirements of the Act. This would apply to the 1972 taxes to be paid in 1973. I am aware of the provisions of Chapter 68, Laws of 1970, which relate to the time and determination of an exempt status for property, however, by its terms this concerns only the matter of the disposition or acquisition of property and not the determination of the taxable status of property held by a taxpayer on the assessment date.

On the matter of the method of calculation of income, Chapter 69, in permitting a single person to qualify if he has not more than $2,400 of taxable income or a married couple not more than $4,000 of taxable income, in Section 4 defines taxable income as, "taxable income as defined in United States Internal Revenue Code of 1954 as amended." Taxable income is defined in 26 USCA 63 and is also referred to as net income, being defined for federal income tax purposes as the difference between gross or total income and permissible statutory deductions which may be taken therefrom. Jones v. Whittington, C.A. Okla. 1952, 194 F 2d 812.

In the Internal Revenue Act it is specifically defined as gross or adjusted gross income minus the allowable deductions or the standard deduction and deductions for personal exemptions. In 1972 then, on his claim for exemption, the taxpayer would show his net: or taxable income as reported to the Internal Revenue Service in 1972 for the tax year 1971. That is to say, that if the taxpayer has itemized his deductions on IRS form 1040 for the taxable year 1971, taxable income would be the amount entered on line 50 of page 2'. In the event that the taxpayer elected to use the standard deduction, taxable income would be the amount entered on line 18 of page 1 minus the standard deduction and minus the personal exemptions. (26 USCA 151).

Respectfully submitted,

Gordon Mydland
Attorney General