Valuation Basis
Since 1980, Arizona has calculated 2 separate values for each parcel of property:
FCV for property tax purposes is that value determined as prescribed by statute. If no statutory method is prescribed, full cash value is synonymous with market value which means that estimate of value that is derived annually by the use of standard appraisal methods and techniques. Full cash value shall be used as the basis for the purpose of assessing, fixing, determining and levying secondary property taxes.
Limited Property Value
LPV is a value calculated according to a statutory formula, designed to reduce the effect of inflation on property taxes. Limited property value cannot exceed FCV, and is calculated on an individual basis for each property.
For most personal property, FCV and LPV are the same (mobile homes are the exception). This is also true for most centrally valued properties, with railroads being the only exception.
LPV Formulas
There are 2 formulas for calculating LPV, called Rule A and Rule B. One or the other is used depending on whether the real property has been assessed previously and whether it has changed in use, size, or improvements within the last year.
Rule A
Calculate 10% of last year's LPV.
Compare last year's LPV with this year's FCV.
Calculate 25% of the difference between last year's LPV and this year's FCV.4. Add whichever number is the higher of either step I or step 3 to last year's LPV to arrive at the current year LPV.
Rule B
Identify existing properties of the same use or legal class within the same taxing jurisdiction, and the smallest possible geographic area within the county.
Calculate the ratio of the total FCV to total LPV for all comparable properties.
Apply the resulting ratio to the FCV of the new or modified parcel to obtain the LPV.
Rule A & B Questions
The chart below shows the questions that should be asked when determining which rule (A or B) to apply.
In certain cases an Assessor may exercise discretion in application of rule B, refer to the Assessment Procedures Manual for details.
Examples
A parcel which was on the tax roll last year had no changes to improvements or use or size, and whose LPV last year was $80,000. This year, the economy has picked up and the parcel's current FCV is determined to be $100,000.
Rule A Calculation:
Rule B Calculation:
Two types of tax are calculated with FCV and LPV:
Primary taxes are calculated using LPV, and are used to pay for basic maintenance and operation of a county, city, or school district.
Secondary Taxes
Secondary taxes are calculated using FCV, and are used to pay for bonded indebtedness of a local jurisdiction, voter approved overrides of tax limits, and taxes levied by special taxing districts.
- Full Cash Value (FCV)
- Limited Property Value (LPV)
FCV for property tax purposes is that value determined as prescribed by statute. If no statutory method is prescribed, full cash value is synonymous with market value which means that estimate of value that is derived annually by the use of standard appraisal methods and techniques. Full cash value shall be used as the basis for the purpose of assessing, fixing, determining and levying secondary property taxes.
Limited Property Value
LPV is a value calculated according to a statutory formula, designed to reduce the effect of inflation on property taxes. Limited property value cannot exceed FCV, and is calculated on an individual basis for each property.
For most personal property, FCV and LPV are the same (mobile homes are the exception). This is also true for most centrally valued properties, with railroads being the only exception.
LPV Formulas
There are 2 formulas for calculating LPV, called Rule A and Rule B. One or the other is used depending on whether the real property has been assessed previously and whether it has changed in use, size, or improvements within the last year.
Rule A
Calculate 10% of last year's LPV.
Compare last year's LPV with this year's FCV.
Calculate 25% of the difference between last year's LPV and this year's FCV.4. Add whichever number is the higher of either step I or step 3 to last year's LPV to arrive at the current year LPV.
Rule B
Identify existing properties of the same use or legal class within the same taxing jurisdiction, and the smallest possible geographic area within the county.
Calculate the ratio of the total FCV to total LPV for all comparable properties.
Apply the resulting ratio to the FCV of the new or modified parcel to obtain the LPV.
Rule A & B Questions
The chart below shows the questions that should be asked when determining which rule (A or B) to apply.
| Question | Yes | No |
|---|---|---|
| Did the parcel exist last year for property tax purposes? | Rule A | Rule B |
| Has use of the property changed since last year? | Rule B | Rule A |
| Has property been modified by construction or destruction of land or improvements? | Rule B | Rule A |
| Has parcel size or identification changed because of a split into 2 or more properties, or because several properties have been combined into a single property? | Rule B | Rule A |
In certain cases an Assessor may exercise discretion in application of rule B, refer to the Assessment Procedures Manual for details.
Examples
A parcel which was on the tax roll last year had no changes to improvements or use or size, and whose LPV last year was $80,000. This year, the economy has picked up and the parcel's current FCV is determined to be $100,000.
Rule A Calculation:
- $80,000.00 * 0.10 = $8,000.00
- $100,000.00 - $80,000.00 = $20,000.00
- $20,000.00 * 0.25 = $5,000.00
- $8,000.00 > $5,000.00
- $80,000.00 + $8,000.00 = $88,000.00
- This year's LPV = $88,000.00
Rule B Calculation:
- Similar parcels in the same development have been determined to have a ratio of 0.8 for FCV to LPV.
- Applying the same ratio to the parcel:
- $125,000.00 X 0.80 = $100,000.00
- This year's LPV $100,000.00
Two types of tax are calculated with FCV and LPV:
- Primary property tax
- Secondary property tax
Primary taxes are calculated using LPV, and are used to pay for basic maintenance and operation of a county, city, or school district.
Secondary Taxes
Secondary taxes are calculated using FCV, and are used to pay for bonded indebtedness of a local jurisdiction, voter approved overrides of tax limits, and taxes levied by special taxing districts.