The auditor is the watchdog of the county for property taxes. The auditor receives all tax requests from the various governing boards that can tax real property and ensures the amount being levied follows all laws of the state. They ensure these entities meet the criteria necessary to impose a tax real estate, and also guarantees the amount being levied follows all laws of the state. The auditor is the keeper of county records and acts as a bookkeeper for county business. Records may include documents, books, or minutes from county commission meetings. The auditor is responsible for scheduling county commission meetings, preparing the agenda, following up on commission decisions through letters and memoranda, and preparing the county budget.
To “Opt Out” means the taxing entity needs more monies from property taxes than they are allowed by the limitation. The limitation allows for taxes to increase over taxes payable in the preceding year by the Consumer Price Index (CPI) and growth. The CPI for taxes payable in 2020 has been set at 2.4%. Therefore, total increase allowed through the limitation would be 2.4% plus percent increase due to growth. (ex: If growth is 3.1%….then 2.4% (CPI) + 3.1% (growth) would allow a maximum increase of 5.5% to the previous year’s taxes received).
Note: Official growth numbers are not available from the County Auditor until after the Department of Revenue certifies values, which is at the end of August. Regardless of the percent increase allowed or opt out amount, taxing entities (except school general fund) cannot exceed statute levy limitations.
An Opt Out should not be done until January 1 or after of the year prior to the year the taxes are payable, but must be done on or before July 15 of the year prior to the year the taxes are payable. For example, a taxing jurisdiction has a project for 2024 in which they will need additional funds. The opt out needs to be passed by the governing board between January 1 - July 15, 2023.
If the opt out decision has been referred to a vote and has been defeated, the governing board may opt out again IF done so prior to July 15 of the year prior to the year the taxes are payable. The decision to opt out may be rescinded if done so prior to July 15 of the year prior to the year the taxes are payable. However, if the opt out decision was referred to a vote and withstood the vote (meaning the voters supported the Opt Out) the governing body cannot rescind the Opt Out. They would have the capability to simply not ask for the amount of the Opt Out.
For all entities there are a set of requirements that must be followed with all opt outs:
- Opting out requires a two-thirds vote of the governing body on or before July 15th.
- The opt out resolution to opt out must be published within ten days of decision.
- The decision may be referred by a petition if it is:
- signed by at least five percent of the registered voters in the taxing district; and
- filed with the governing body within twenty days of the first publication.
All taxing entities must send the following to the County Auditor:
- a copy of the opt out resolution
- copies of the minutes of the meeting at which the Opt Out took place
- proof of publication/notification
- the outcome of the election (if Opt Out is referred to a vote)
For additional information on Opt Outs please refer to Tax Limitation and Opt Out Information for All Taxing Districts (PDF) and Tax Limitation and Opt Out Information for School Districts Only (PDF).
Levy / Levy Training Documentation
Property Tax is an ad valorem tax on all property that has been deemed taxable by the South Dakota Legislature. Ad valorem means “according to value.” Under South Dakota law all real property, defined as the land and any improvements on the land, is subject to taxation. Personal property is not taxable. Property tax is the primary source of revenue for local governments. The State does not collect or spend any property tax revenue. In order to determine how much money a governing body may receive the following information is needed:
- What revenues did the governing body receive last year in property taxes?
- Was any of that Opt Out Money?
- What is the current year growth percentage for the governing body?
- What is the current year CPI?
To calculate the growth percentage take the valuation increase due to addition, improvement, or change in use and divide by last year’s final value.
Growth Percentage Example
If the increase due to addition, improvement, or change in use was $675,656
Last year’s final value was $21,051,985
674,565 ÷ 21,051,985 = .0320 = 3.20%
Consumer Price Index (CPI)
The index factor is the annual percentage change in the consumer price index for urban wage earners and clerical workers as computed by the Bureau of Labor Statistics, United States Department of Labor Statistics for the year prior to the year immediately preceding the year in which the taxes are payable. SDCL 10-13-38 It is calculated by South Dakota’s State Economist. CPI is available to all taxing entities and is the same for everyone.
Calculating Tax Request
In this example, a municipality is trying to determine how much can be requested for property taxes for Pay 2020:
Tax Request Example
Amount of Taxes Requested in Pay 2019: $163,237.05
Opt Out Money: None
Current Year Growth Percent: 3.2%
Current Year CPI Percent: 2.4%
Every property owner will have to pay their fair share of the tax requested. This is determined by spreading the same levy across all value in the city as shown here:
163,237.05 x (3.2% + 2.4%) = 9,141 = amount city can increase their tax call
163,237 + 9,141 = 172,378 = maximum amount the city can request.
Tax levies for each taxing jurisdiction are determined by dividing the tax requested by the total taxable value within the taxing jurisdiction and multiple the results by 1000. A County Auditor needs to know the Taxable Value of the taxing entity (from the growth form) and its current Tax Requested:
Request ÷ Value = Tax Rate
Levy Formula Example
In our example the City Tax Request is $172,378 and the City CurrentTaxable Value is 24,299,059. In this example, the levy is calculated against $1,000 dollars of assessed value.
Request ÷ Value = Tax Rate
172,378 ÷ 24,299,059 = .007094
Multiply the Tax Rate x 1000 to determine the Levy
0.007094 x 1000 = 7.094
Calculating Individual Taxes
If a house has a taxable value of $100,000 their city tax levy would be calculated as follows:
Individual Tax Example
(100,000 ÷ 1,000) x 7.094
100 x 7.094 = 709.40 = City Property Tax Liability
Why Taxes Differ
There are a number of factors which may result in differences in each of the governing bodies. It is not uncommon for the property tax of one county to differ from their neighboring counties. Factors may include:
- Property Tax Limitation Act
- Where were their tax requests at the time of the freeze?
- How much value is in the district?
- How quickly is the district growing?
- Opt Outs
- Number of Taxing Districts
- New Authority for Levies
School Capital Outlay Limitations
South Dakota law allows a school district to authorize an annual tax levy up to $3.00 per $1,000 of taxable valuation for capital outlay fund purposes. The levy is the same for all land classes.
Capital Outlay Limitations
Growth + CPI Limitations
Currently, all school districts follow the Growth + CPI (Consumer Price Index) Limitation. The Growth + CPI Limitation states that the total amount of taxes collected from the capital outlay levy cannot increase annually more than the index factor plus growth factor. SDCL 13-16-7
- Index factor is defined as 3% or the CPI factor, whichever is less. SDCL 10-13-38
- Growth factor is defined as any new construction which has occurred in the last year within the school district boundaries.
Alternative Per Student Limitation
Starting with taxes payable in 2021 (2020 assessment year), a secondary limitation possibility will be implemented. The Alternative Per Student Limitation allows a school district to levy up to $2,800 for each enrolled student from the previous school year. The Department is providing a list of each school district, the maximum allowable capital outlay payable 2019, and the estimated 2020 maximum allowable capital outlay. Learn more in the Capital Outlay Tax Fact (PDF).
Consumer Price Index (CPI)
State law requires the Department to notify county auditors by February 1 of each year of the CPI. The law also requires the county auditors to notify each taxing district, except school districts, within the county by March 1 of this index factor. SDCL 10-13-38 The index factor is the percent a taxing district may increase the taxes payable in the following year SDCL 10-13-35. Total amount of increase is the CPI and growth.
Caution should be expressed to taxing districts that accurate growth numbers will not be available until county auditors receive the growth of utilities by the fourth Monday in August. See the Consumer Price Index Letter to County Auditors (PDF) for the most current notification sent to county auditors with regards to CPI.
Utilities Breakdown Information
On the 4th Monday in August, the Department of Revenue sends each county auditor the valuation of all centrally assessed utility companies in the county. The documents show how the information was reported to the Department. The county auditor must then break that value down by taxing district, remove any discretionary, and account for any other nuances specific to the county. In order to break the information down, the following steps should be taken:
- Get a blank copy of the county growth forms from the DOE.
- To avoid getting overwhelmed we advise that you look at each utility company separately.
- Break down the value in a couple of different ways:
- First, by townships, secondary road, road districts, and cities; then
- By school districts; then
- By special districts:
- Fire districts
- Ambulance districts
- Water districts
- Finally, countywide
Note: The only concern is with the Taxable Value and Taxable Growth columns. For more information and a breakdown of the steps, see the Utilities Breakdown Overview (PDF).
Tax Increment Financing (TIF) Information
Tax Increment Financing is a means of financing public improvements in a defined geographic area, known as a tax increment financing district, or TIF district. In South Dakota, a TIF district can be created by either a municipality or county. TIF has become an increasingly popular tool for communities looking to upgrade existing infrastructure or as a means of incentivizing new investments in infrastructure for economic development. As of July 1, 2018, South Dakota state law authorizes four classifications for TIF districts: Local, Industrial, Economic Development, and Affordable Housing. TIF district classification is a function of the state-aid to education formula and determines how a given TIF district impacts school funding in South Dakota.
The Department has put together some guidelines for the creation, classification and annual certification of Tax Increment Financing and Tax Increment Districts. The Tax Increment Financing Annual Report (PDF) details project descriptions, valuation information, and timelines for each TIF district. For more information, please reference the following guidelines.
- TIF Guidelines (PDF)
- Tax Increment Financing (TIF) Tax Fact (PDF)
- Tax Increment Financing Pre-Submission Form (PDF)
- New or Dissolved TIF (DOC)
- SDCL Chapter 11-9
Appeal Documents to Township Boards
Appeal to the local board must be perfected by mailing or by filing a written notice of appeal with the clerk of the local board by the specified date in March. Postmarked by the deadline is considered timely. The local board of equalization shall begin meeting on the third Monday of March and adjourn no later than the following Friday. The meeting shall be at the office of the clerk or finance officer of the township or municipality.
The local board of equalization has the duty to hear and decide appeals within five days. The board's action must be included in the minutes. The board has the authority to equalize assessments between individual parcels of property but does not have the authority to change the level of assessment between classes of property. Any appeals not resolved by the local board are considered as no change. A written notice must be sent within seven days of adjournment to each appellant on the board’s decision of his/her appeal.
Individuals have the right ensure their property is being assessed at no more than market value, as well as assessed equitably in relationship to other properties. Land owners who have questions on the assessed value of their land are asked to first speak with their county director of equalization. If the land owner still disagrees with the total value of the property may submit an appeal to their local board of equalization. Land owners may appeal the following:
- Property’s owner-occupied status;
- Taxable status of the property; or
- Total value of the property.
For more information, reference the Appeal Process Guide for the Property Owner (PDF) or Appeal Process Guide for Boards of Equalization (PDF).
Property Tax Relief Programs
Our Department and state officials understand that many South Dakotans live on fixed incomes and may have difficulty meeting their tax obligations. The following explain the different property tax relief programs that are available, what eligibility requirements must be met, and how to apply.
Property Tax Reduction for Paraplegics
What the Program Does
Reduces the property owner’s taxes on a graduated scale based on their income through the abatement process. Property is the house, garage and the lot upon which it sits or one acre, whichever is less.
To Be Eligible
The property must be owned or occupied by a paraplegic or individual with the loss or loss of use of both lower extremities, or the un-remarried widow/widower of such paraplegic.
- The property must be specifically designed for wheelchair use within the structure.
- Income and occupancy limits apply.
You may download an online application (PDF) or visit any county courthouse beginning in January of each year. Applications must be submitted annually to your county auditor.
Property Tax Homestead Exemption
What the Program Does
Delays the payment of property taxes until the property is sold. The taxes are a lien on the property and must be paid along with the interest before the property can be transferred. Property is the house, garage and the lot upon which it sits or one acre, whichever is less. Learn more in the Homestead Exemption Program Guide (PDF).
To Be Eligible
- The property owner must be at least 70 years old or a surviving spouse.
- Income and residency requirements apply.
People who qualify for this program are ineligible for the Sales and Property Tax Refund Program. You may download an online application (PDF) or visit any county courthouse beginning in January of each year. Applications must be submitted annually to the applicant’s county treasurer on or before April 1st.
Calculating an Abatement
Information received from the Director of Equalization should include a breakdown of each class of land and each class total valuation for the entire county and a breakdown of each district (municipality, township, school board, etc.). Once you have identified each district, pull the information from the prior year to determine the total levy that was assess for each particular land classification. In order to determine the abatement amount you will take the following steps:
1. Determine the percentage of the total levy that goes to the school district.
Step 1 Example
If the total levy for OO in a district is 14.449 and 9.492 is for a school district, then 65.7% of every tax dollar goes to schools.
2. Determine what percentage of the total school levy goes to General and what portion goes to Spec Ed.
Step 2 Example
The total school levy is 9.492. There is a general opt out of 3.663; and the general fund levy is 4.029 and the Spec Ed levy is .500%. Therefore 81% of every school dollar goes to the general fund and 5.3% goes to Spec Ed purposes.
3. Determine the portion of the taxes abated that were for each school district.
Step 3 Example
The total abatement for the county was $7,573. We already determined that 65.7% of all tax dollars went to school. So, of the $7,573, the school is losing $4,975.
4. Calculate the portions of General and Special Ed funds that schools need to recoup.
Step 4 Example
The school is losing $4,975. The portion that applies to the general fund is $4030; and $264 is Special Ed.
Special Assessments are a financing mechanism that allow payment for improvements by those who benefit, or for specific items, rather than general taxation. Special assessments may be used alone to finance a project, or in combination with general funds, bonds, or other financing mechanisms. A governing body may make the determination that the improvement is necessary, or landowners may petition for local improvements. If landowners request an improvement be made, a petition of at least 55% of the property owners in the area requesting the construction of a local improvement to be special assessed must be presented to the governing body.
For additional information about special assessments and additional details about the steps that must be taken to impose a special assessment or maintenance fee, please references the South Dakota Municipal League Guide to Special Assessments (PDF).
Centrally Assessed Utilities
The taxes on the operating property of public utility, railroad, and air flight companies differ with respect to industry, company size, category of ownership, and degree of regulation. The Department of Revenue shares property assessment duties with local South Dakota County Directors of Equalization. While some industries pay property taxes, others are responsible for paying a Gross Receipts Tax. Regardless of the method of taxation, all tax dollars are submitted to local government.
The property tax division is also responsible of the in lieu of property taxes for land telephone companies who provide local service, the rural electric generation tax and the alternative taxes paid by commercial wind and solar farms. The commercial wind farms generated money school districts, townships, counties, and the State general fund each year. There are currently no commercial solar farms in the State that pay the alternative taxes. The rural electric generation tax and telephone gross receipts tax generated about $24.689 million for the school districts for pay 2018.
Nameplate Capacity Tax
Wind farms pay a nameplate capacity tax in lieu of property tax. The nameplate capacity tax is $3.00 times the number of kilowatt hours of capacity. For the first year following the commercial operation date, the nameplate capacity tax is prorated based on the number of days the wind farm is in service.
Nameplate Capacity Tax Example
If each tower has a capacity of 1.5 MW, then the per tower nameplate capacity tax is:
1.5 X 1000 X $3.00 = $4,500 (per tower nameplate capacity tax)
Distribution of the nameplate capacity tax:
100% of the nameplate capacity tax goes to the counties.
The production tax is the actual amount of electricity produced in a calendar year times the production tax rate of $.00045 for any wind farms that began producing power on or after April 1, 2015. The production tax rate for wind farms that began producing power prior to April 1, 2015, is $.00065. To calculate the production tax an estimation of the wind farm efficiency, a reasonable assumption is 40%. If the wind farm operates at 40% efficiency, the production tax is calculated as follows:
Production Tax Formula
#KW of capacity x 24 hours x 365 days in a year x 40% (efficiency factor) x production tax rate
0.00065 for wind farms producing before April 1, 2015; and
0.00045 for wind farms producing on or after April 1, 2015
Production Tax Example
For example, a wind farm with 1.5 MW Towers that begin producing power today, the production tax per tower would be:
1.5 X 1000 X 24 X 365 X .40 X .00045 = $2,365.20 of production tax for each tower
Distribution of Production Tax:
- 20% to the counties
- 80% to the State
Distribution of the Nameplate Capacity Tax and the County Portion of the Production Tax:
If the wind towers are located in a county with no organized townships or in an unorganized portion of the county, the township portion will remain with the county.
- 50% School(s)
- 35% County
- 15% Township(s) where the towers are located
Additional Information: There are no taxes due while the commercial wind farm is under construction. The first year the wind farm will pay the alternative taxes is the year after the commercial operation date.
Important Date: Annual reports for wind farms are submitted in February of each year, payments are remitted to the counties prior to May 1st.
Railroad Tax Credits
The purpose of the railroad property tax credits is to encourage railroad companies to make capital investments to portions of line in the state that are vital for the state’s economy but may not have enough traffic to warrant frequent capital investment. No credit may be given for:
- The repair or replacement of railway line necessitated by washout, fire, or train derailment;
- Any portion of the project that is funded with state or federal grant funds or paid for by any third party; or
- Any expense of a capital nature that are made on a segment of the rail line that exceeds ten million gross tone miles of revenue freight per mile in the previous calendar year.
Once the credit has been certified by the Department, the credit provided will be applied proportionally across the railroad’s entire mainline within the state, excluding any portion of the mainline that goes over ten million gross ton miles of revenue freight per mile annually in a calendar year. The credit will be applied to the tax liability over a three-year period in equal amounts.
Notice of Intention to Add Omitted Property to the Assessment Rolls
It is the duty of the board to certify the accuracy of the assessment roll and deliver it to the director of equalization on or before the fourth Monday in March, along with a copy of the minutes and all completed PT 17 forms. The board is to review all properties to ensure there is equalization of the assessments and that all property is listed. Prior to adding omitted property or increasing an assessment on property, the board must notify the property owner of the proposed addition or increase and the time and place of the board meeting at which the addition or increase will be considered. The board must give a property owner an opportunity to appear before the board or submit written documentation concerning the addition or increase.
The local board of equalization does not have the authority to hear appeals on owner-occupied status. They may inform the Director of Equalization of errors in owner-occupied status. The Notice of Intention to Add Omitted Property to the Assessment Rolls form (PDF) is used add previously omitted property to the assessment rolls of a specific county.