Information regarding the policy decisions available under property tax classification
Information regarding the policy decisions available under property tax classification
As part of the Tax Classification Hearing to be held on Tuesday, September 14 at 6:45pm as part of the Board of Selectmen's meeting that night, the Board of Selectmen will make decisions on the following:
Adoption of Residential Factor
Residential Exemption
Small Commercial Exemption
Open Space Discount
Adoption of Residential Factor
After the State Commissioner of Revenue's certifications have been received by the assessors and the public hearing has been held, the Selectboard or Town Council in a town, or the City Council, together with the approval of the Mayor, in a city, must determine the percentages of the tax levy to be paid by each class of real property and by personal property for FY21. G.L. c. 40, § 56.
1. In determining those percentages, the Selectboard, Town Council or City Council, together with the Mayor's approval, must first adopt a residential factor. In a city, if the Mayor vetoes the City Council's factor, the City Council may override the veto with a vote equal to two-thirds of the members elected. The residential factor adopted must be an amount not less than the minimum residential factor calculated by the Commissioner. See Section III-A above.
2. The residential factor adopted by a community governs the percentage of the tax levy to be paid by residential property owners. If local officials choose a low residential factor, (for example, the statutory minimum) residential property owners will pay a proportionately lower share of the total levy. A residential factor of "1" will result in the taxation of all property at the same rate. The statute permits a city or town to adopt a residential factor greater than 100 percent, which would have the effect of decreasing the commercial, industrial, and personal property tax rates and increasing the rates for residential and open space property. G.L. c. 58, § 1A.
3. When determining the residential factor, local officials may select a percentage for Class Two, Open Space, that may not be less than 75 percent of its full and fair cash value percentage. The residential class alone absorbs any discount applied to the open space class.
4. The percentages to be paid by the remaining classes of real property and by personal property owners can be calculated according to the provisions of G.L. c. 40, § 56, using the residential and open space factors.
Residential Exemption
1. At the option of the Selectboard or Mayor, with the approval of the City Council, an exemption of not more than 35 percent of the average assessed value of all Class One, Residential, parcels may be applied to residential parcels that are the principal residence of the property taxpayer as used by the taxpayer as of January 1, 2020. G.L. c. 59, § 5C.
2. Principal residence is ordinarily the residence in which a property taxpayer lives. It is the taxpayer's domicile, that is, his fixed place of habitation, permanent home or legal residence. Therefore, Class One, Residential, parcels not eligible for the residential exemption would include accessory land incidental to a residential use, summer homes, or residential property not occupied by the owner, such as apartments.
3. The application of the residential exemption, in addition to any other exemptions allowable under G.L. c. 59, § 5, may not reduce the taxable value of the property to less than 10 percent of its full and fair cash value, except through the application of the hardship exemption found in G.L. c. 59, § 5, Cl. 18.
Small Commercial Exemption
1. At the option of the Selectboard or Mayor, with the approval of the City Council, an exemption of any percentage up to 10 may be applied to Class Three, Commercial, parcels that are (1) occupied as of January 1, 2020 by a business with an average annual employment of no more than ten during calendar year 2019, and (2) have a valuation of less than one million dollars. G.L. c. 59, § 5I.
2. Businesses certified by the Director of the Department of Workforce Development as having had an average annual employment of ten or fewer people at all locations during calendar year 2019 qualify for the exemption. If a sole proprietorship or partnership occupying the parcel on January 1, 2020 does not appear on the certified list, the assessors may determine whether it met the employment criterion for calendar year 2019. See IGR No. 16-405, Small Commercial Exemption. In all other cases, however, the assessors must rely exclusively on the Director’s certification in determining whether a business qualifies for the exemption.
The Director will provide the assessors with a list of businesses that met the employment criterion for calendar year 2019 by July 1, 2020. G.L. c. 151A, § 64A. The list of eligible businesses is not a public record. It may be used by the assessors and their staff only to administer the small commercial exemption. If any of the assessors or their staff uses the list for other purposes or discloses any of the listed businesses to people outside the assessors' office, they may be fined one hundred dollars.
3. The commercial parcel does not have to be owned by the occupying business or any other eligible business. If a parcel has multiple commercial occupants or tenants, all occupants must be eligible businesses. If a parcel is multiple use, such as a residential and commercial property, all occupants of the commercial portion must be eligible businesses.
4. The parcel must have a valuation of less than one million dollars before the application of any small commercial exemption. The exemption applies to a specific parcel occupied by an eligible business, not to the eligible business itself. Therefore, if any particular eligible business occupies more than one parcel, each under one million dollars in value, each parcel would qualify for the exemption.
Open Space Discount
The selectboard or council may allow for a discount for all Class Two, Open
Space properties.
The discount may reduce the amount of the tax levy paid by the open
space class to no less than 75 percent of its full and fair cash share of the
levy, i.e., may allow a discount of up to 25 percent.
Adopting an open space discount lowers the open space tax rate because
the amount of the levy paid by the class is reduced. Those taxes are
shifted to the residential class alone, which means a higher residential tax
rate.