Act 1 OverviewACT 1 taxpayer informationIn the summer of 2006, the PA state legislature approved a property tax reform bill known as "Act 1." Under Act 1, state gaming revenues and possible local earned income or personal income taxes would be used to fund property tax relief for homeowners. Until gaming revenues reach $500 million, homeowners will not see any tax relief from those revenues. Once the minimum level is obtained, the tax relief will come as an assessment reduction on tax bills (not as a rebate check). The State estimates that savings related to the new law will range from $110 to $275 annually. Additional real estate tax relief may be seen if township residents approve a tax shifting referendum in the spring primary election. In Great Valley, the question on the May 15th ballot will ask residents to approve or deny the enactment of a one percent earned income tax. Information about Act 1is listed below:
Applying for a Homestead/Farmstead exclusion
Property owners must complete a homestead/farmstead exclusion application to qualify for possible property tax reductions. This application was mailed to all township residents. The deadline for filing applications for 2007 was March 1st. However, residents may still apply for future years.
School budget restrictions
Beginning with the 2007-2008 budget, school districts may not increase the real estate tax rate above an inflationary index percentage as determined by the State (the index was 3.9% in 2005 and will be 3.4% in 2007-2008). School districts that wish to increase millage beyond that percentage to maintain or improve existing programs must either apply for exceptions from the Dept. of Education or receive voter approval for an increase via a tax increase referendum question during the Spring primary election. If the referendum tax question should fail, the District would be forced to cut or reduce programs from the budget. Another result of the legislation: an accelerated budgeting process.
There are referendum exceptions built into Act 1 should a district need to raise taxes beyond the new inflationary index cap. The exception categories provide partial relief for increases in the cost of special education, retirement expenses and health care; emergencies and disasters; and some school construction projects. It is anticipated that most school districts will be requesting relief through some of the exceptions.
Act 1 requires a minimum of three and maximum of six installments with the last installment paid no later than December. An individual who chooses to pay in installments will pay the flat tax, with no discount offered, in three equal payments.
More Information on Act 1:
- PA Assoc. of School Business Officials
- Specifics on Special Session Act 1 of 2006
- PA Department of Education
- Info on Homeowner Tax Relief Act(Act 72)
- PA Assoc of School Administrators
- Summary of key provisions of Act 1
- PA Property Tax Relief web site
- Info for residents and seniors about tax breaks
- PA Legislature web site
- Direct link to current copy of House Bill 39 (Act 1)