The Property Tax System
The Property Tax System
The source of the power to tax property is a direct grant from the Tennessee Constitution. The Constitution requires that all property is subject to taxation except property which has been exempted. Generally, in accordance with the Constitution, exempt properties consist of property owned by any government and used exclusively for public or corporate purposes; property held and used for purely religious, charitable, scientific, literary or educational purposes; direct products of the soil for the producer and the immediate vendee, and personal checking and savings accounts. The Legislature has within these guidelines made many specific exemptions from taxation. Although the Legislature has the direct power to tax property, the State does not tax real estate or personal property. The power to tax property has been delegated through the statutes to the local cities, towns, and counties.
The Constitution has also delegated to the Legislature the power to ascertain the value of each property in the manner as the Legislature may determine is proper. However, the Constitution specifically provides through a property classification system the percentages of value that all property will be assessed.
To accomplish this classification system, the Constitution first divided all property into three (3) separate classes. These property classes are real estate, tangible personal property, and intangible personal property. The Constitution then further mandates that each class of property shall be further divided into various subclasses and assessed at percentages of value as set forth.
| | | | | Classes and Subclasses of Property | | Percentage | | | | | | 1. REAL ESTATE | | | | Subclasses | | | | a. Residential Property | | 25% | | b. Commercial and Industrial Property | | 40% | | c. Public Utility Property | | 55% | | d. Farm Property | | 25% | | | | | | 2. TANGIBLE PERSONAL PROPERTY | | | | Subclasses | | | | a. Public Utility Property | | 55% | | b. Commercial & Industrial | | 30% | | c. All Other Tangible Personal Property | | | | Except Household Furnishings | | 5% | | | | | | 3. INTANGIBLE PERSONAL PROPERTY | | Various |
The Legislature was delegated the power to determine the assessment percentages of value on intangible personal property.
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