FILE - Used Car Sales

A long line of used Challengers sits at a Dodge dealership.

(The Center Square) – Kentucky lawmakers are working on an immediate fix to the state’s motor vehicle property tax, which is expected to rise substantially this year.

The rise is not due to an increase in the rate. Instead, it will come from much higher valuations on vehicles, with the 2022 valuations expected to be around 40% higher than they were in 2021. 

Last week, the Hopkins County Clerk’s Office posted on its Facebook page a Jan. 6 letter it received from the state Department of Revenue advising county clerks, who are responsible for collecting the tax, of the increase. The letter from Director of State Valuation Cathy Thompson called the increases an “unprecedented” event.

The higher assessments were due to multiple factors, including reduced production of new cars, the lack of used cars available in the market and increased interest in used cars by dealers.

State Rep. Patrick Flannery, R-Olive Hill, said he anticipated this happening and filed a bill in the 2021 session to stop it. That bill never received a vote in a committee. 

He filed House Bill 6 Monday, which he said would address a “dirty secret” in how the state has assessed vehicles for more than a decade. 

The state constitution calls for all property to be assessed at “fair cash value, estimated at the price it would bring at a fair voluntary sale.” Flannery said the Department of Revenue in 2009 under then-Gov. Steve Beshear revised state policy to determine a vehicle’s value based on a “clean trade-in.”

According to NADAGuides.com, a “clean trade-in” means the assessed car or truck “passes all necessary inspections with ease” and has no mechanical defects with minimal wear and tear.

That determination “means the majority of automobile owners are paying more in taxes than the true condition of the vehicle,” Flannery said.

HB6 would bar the state from using either “rough trade-in” or “clean trade-in” for assessments.

Also on Monday, state Sen. Jimmy Higdon, R-Lebanon, filed Senate Bill 75, which also deals with the motor vehicle tax issue.

His bill calls for using an assessed value for vehicles from the previous year. For vehicles not assessed by the state in the year before, the owner could conduct the assessment at the county property valuation administrator’s office.

Higdon said he was disheartened to see the revenue department's letter sent to county clerks.

“We have people who are dealing with a higher cost of living because of all the impacts of the coronavirus,” Higdon said. “They don’t deserve to have to pay more on this tax because of a situation out of their control.”