Valuing Land and Improvements

This project involved research on the legal requirements and local government practices concerning the valuation of land and improvements for property tax purposes. A majority of states (29) expressly require that land and improvements be valued separately for property tax purposes. Moreover, none of the fifty states or the District of Columbia legally prohibits the separate valuation of land and improvements.

Notwithstanding the legal requirements, the results of a nationwide survey show that a vast majority (99 percent) of offices charged with administering the property tax actually values land and improvements separately. And 88 percent of the surveyed offices have a high level of confidence that the allocation of value between land and improvements is correct. A majority (58 percent) of offices charged with administering the property tax notifies property owners of the separate valuation of land and improvements.

The research results are positive indicators for land value tax reforms. Adopting land or split rate tax systems requires both legal authority and the practical ability to value land separate from improvements. The legal authority exists in most states at this time. And no states prohibit such valuation. More importantly, local governments are already separately valuing land and improvements. While there are issues involved with adopting land or split rate tax systems, the critical issue of valuing land and improvements is not among them.