In November of 1997, Pennsylvania voters approved a change in the Commonwealth constitution to allow a method of real property tax relief, called a homestead exclusion, to be implemented in Pennsylvania. A homestead exclusion provides real property (also known as "real estate" or "property") tax relief to homeowners. It allows certain properties, such as a home, to receive preferential treatment under the real property tax, reducing the owner's taxes. The November vote changed the constitution to permit the General Assembly to pass legislation implementing the homestead exclusion.
The Homestead Property Exclusion Program Act was passed in May 1998 (Act 50 of 1998). Act 50 was amended on October 31, 2000 (see "Amendment to Act 50"). Act 50 provided implementing language and rules for how the homestead exclusion can be used in a school district, county, and municipality (township, borough, or city). Homestead exclusions and a similar exclusion for farm properties, called the Farmstead Exclusion, can now be made by school districts, counties, townships, boroughs, and cities.
Under Act 50 of 1998, a taxing jurisdiction (school district, county, or municipality) can implement homestead and farmstead exclusions without any change to the existing local tax structure, as long as the jurisdiction can pay for them without increasing real property taxes. The law also provides a mechanism for school districts to change their local tax structure by relying more upon an earned income tax, and in exchange reducing the real property tax and eliminating several nuisance taxes (the per capita, occupation, and occupational privilege taxes). School districts making this change are required to use the homestead and farmstead exclusions to make these real property tax reductions.
Because the homestead and farmstead exclusions are not necessarily tied directly to the school tax changes in Act 50 of 1998, local tax reform issues will not be addressed, except where they may relate to the exclusions.
Amendment to Act 50
Signed by Governor Ridge on October 30, 2000
Section 3. The Act is amended by adding a Section to read:
Section 1975. Homestead Property Exclusion Procedure. -- (A) The provisions of 53 PA.C.S. § 8584 (relating to administration and procedure) shall not apply to a county of the second class, or a political subdivision of a county of the second class, that implements an exclusion authorized under 53 PA.C.S. Ch. 85 Subch. F (relating to Homestead Property Exclusion). In lieu of the provisions set forth in 53 PA.C.S. § 8584, a county of the second class that implements an exclusion authorized by 53 PA.C.S. Ch. 85 Subch. F shall adopt such rules, regulations and procedures as deemed necessary and reasonable for its use or the use of the political subdivisions situate therein to administer this program of exclusions.
This information is intended to inform readers about the homestead and farmstead exclusions. The material is general and educational, and is not intended to be legal advice, nor to replace the need for legal advice. If legal counsel is needed, seek the aid of a competent professional in the area.