Some Oregon property owners benefit from “partial” property tax exemptions that apply to the “assessed value” of the property. Notably, this includes active-duty military personnel (ORS 307.286) and disabled military veterans, as well as their surviving spouses (ORS 307.250).
In Oregon property tax parlance, the assessed value is the lesser of the Real Market Value and the Maximum Assessed Value, or MAV. The MAV is the “ceiling” on the value at which property can be taxed. It was set by Measure 50 in 1997, initially at 90% of a property’s 1995-96 real market value, and generally is limited to 103% of a property’s assessed value for the prior year.
For years, and based on guidance they received from the Oregon Department of Revenue, county assessors did not recalculate the underlying MAV of a property when the property or property owner ceased qualifying for a partial assessed value exemption (for example when an active duty military personnel completed their active service, or when a disabled veteran sold their property to a buyer who did not qualify for the exemption). Instead, they simply stopped applying the exemption.
Things have now changed. The Department of Revenue has updated its guidance and told counties that they have been doing it wrong for all these years, and that Article XI, Section 11(1)(c) of the Oregon constitution requires them to recalculate the MAV to be equal to the real market value of the property multiplied by the Changed Property Ratio (CPR), which is generally the ratio of the average MAV to the average RMV of all property in the same property class in the county for that year. That provision of the constitution states that “property shall be valued at the ratio of average maximum assessed value to average real market value of property located in the area in which the property is located that is within the same property class, if on or after July 1, 1995…[t]he property becomes disqualified from exemption, partial exemption or special assessment[.]”
The end result is that properties that are rolling off these partial exemptions to assessed value could see substantial increases in property taxes in the year after the exemption goes away. This is particularly the case for properties that had relatively low real market values in the mid-90s but have since seen relatively high increases in value. We have talked to members who have seen property tax increases in the thousands of dollars for buyers who do not qualify for the exemption and are purchasing property from a disabled veteran who qualifies for the exemption. This is a problem not only for non-veteran buyers, but also for the disabled veterans who are selling their homes, as it reduced the marketability of their property. It also means that active-duty military personnel could get huge tax increases when they return from service, and some may be better off not applying for the exemption in the first place.
Oregon REALTORS® is working to identify policy solutions to this problem. Most potential solutions (such as converting these tax exemptions into tax credits) will only solve the problem for veterans and active-duty military personnel who have yet to apply for an exemption.
For real estate transactions, it is critical that this issue is caught early so that deals don’t blow up and buyers aren’t surprised with unexpected tax bills. With that in mind, here are steps you can take:
- Share this communication with your network of lenders and escrow companies so that they are aware of this situation. Many lenders and escrow companies are not aware that there has been a change in how assessors are treating these properties
- Remind buyers that the property tax listed on the MLS likely reflects what the seller paid, not what the buyer will owe in the future.
- Tell your buyers to ask their lenders if there are property tax exemptions that will no longer apply once they purchase the property, and if so, what the tax will be once the property’s maximum assessed value is reassessed.
- Instruct your buyers to carefully review documents. The preliminary title report may include information about whether the property is subject to tax exemptions. However, an even better source of information is the property tax statement from the county (something that the lender should be pulling and can also be found online in many counties).
- Buyers can also contact the county assessor’s office directly if they have questions about how properties may be reassessed after the removal of a tax exemption.
Because the size of the property tax bill could impact whether the buyer can afford the property and the price they are willing to pay for it, ideally, the information about future property tax liability would be obtained prior to the buyer making an offer. Recognizing that it won’t always be the case, the buyer should use their Due Diligence Period to confirm their future property tax liability. The Oregon REALTORS® Forms include a Due Diligence Period that gives the buyer the opportunity to review the property for any matters reasonably related to the purchase or economic feasibility of the Property, without risk of losing their earnest money.
*Buyers should be aware of any property tax exemption that could be rolling off the property, as it could trigger a re-assessment of the Maximum Assessed Value. This article focuses on disabled veterans’ and active-duty military exemptions because these are partial exemptions to assessed value for residential property that are awarded not based on the property or its use but on the characteristics of the occupant. Also, these are the examples where we are aware there has been a recent change in how they are treated. For special property tax assessments that are based on the characteristics or use of the property rather than the occupant, Oregon REALTORS® has Form 2.22 Special Property Tax Assessment Addendum and Form 4.3 Historic Property Addendum that address risks, benefits, and burdens related to those special assessments. A list of all property tax exemptions that exist in a particular county can be found by contacting your county assessor, and a statewide list can be found in Chapter 2 of Oregon’s 2025-27 Tax Expenditure Report.