Supplemental Assessment Letter

Supplemental Tax Assessment on New Construction

Chapter 46 Sections 41 & 42 of the Acts of 2003

(Amending Massachusetts General Law Chapter 59 Section 2D)

You are receiving this cover letter and bill because your property has met or exceeded the guidelines for a Supplemental Tax Assessment for Fiscal Year 2008. Below you will find a summary of information pertaining to this new tax reform as passed in the Acts of 2003, formally know as the Hopkinton Bill. Please review this information carefully and if you have any questions please contact our office and we will be happy to assist you.

Summary

Under MGL Ch. 59 §2D, cities and towns shall make a pro rata tax assessment on the value of certain improvements to real estate made after the January 1 assessment date. The assessment is made only on those parcels for which an occupancy permit is issued during the fiscal year and the new construction increases the parcel value by over 50 percent. This assessment is in addition to the regular property tax that is assessed on the property based on its January 1 status. It is calculated by applying the tax rate to the value of the improvement and pro-rating that amount over the remainder of the fiscal year after the permit was issued. If the permit was issued between January 1 and June 30, a pro forma tax assessment may be imposed for the following fiscal year as well. In addition, the assessors must abate property taxes on any parcel in the community whenever it loses more than 50 percent of its value due to fire or other natural disaster after the assessment date. The purpose of this supplemental assessment is to provide the city or town with some of the real estate taxes that would have been due for the fiscal year if the new construction had existed on that year’s assessment date.

Under a recent amendment, the statute now applies automatically unless the Department of Revenue is notified in writing by the selectmen, town council or city council, with the mayor's approval if required by law, of its rejection. Previously, the statute only applied if accepted by voter referendum.

Assessors must assess supplemental assessments on any qualifying new construction for which an occupancy permit has been issued, and grant abatements on any qualifying property loss that occurs after July 31, 2003, the effective date of the amendment.

Supplemental Assessments Procedure

A supplemental tax assessment is made on a real estate parcel for the fiscal year whenever;

a temporary or permanent occupancy permit is issued for that parcel during that fiscal year, and the new construction or improvements increases the assessed value of the parcel by over 50%. In some cases, a supplemental tax assessment may be made for the following fiscal year as well.

1. Occupancy Permits: Assessments are triggered by the issuance of a temporary or permanent occupancy permit. Therefore, the assessors and building inspectors will have to develop a system for ensuring that the assessors’ office receives timely notification of all occupancy permits issued.
2. Assessment: The Pro Rata Supplemental Assessment will be pro-rated based on the number of days left in the fiscal year after the Occupancy Permit is issued. The assessment is based on the increased valuation that results from the parcel’s being improved by new construction after the regular tax assessment on the property was determined for that fiscal year. An assessment may be made only if the value of the parcel, as improved by the new construction, is more than 50 percent higher than the assessed value for the year. No assessment is made if the construction results in a 50 percent or less increase in the valuation of the parcel.
   
   The pro rata assessment is computed by applying the tax rate for the current fiscal year, i.e., the fiscal year in which the occupancy permit is issued, to the value of the improvement and multiplying the result by a fraction.
   1. The value of the improvement is the difference between the assessed valuation of the parcel for the current fiscal year, and the valuation of the parcel as improved, i.e., the assessed valuation that the parcel would have had if the improvement had existed on that year’s assessment date.
   2. The numerator of the fraction is the number of days remaining in the fiscal year after the permit was issued and the denominator is 365.

Example

January 1, 2005 assessment $70,000, current assessment $280,000, date of Occupancy Permit, September 1, 2005, increase in value is $210,000, value increase is greater than 50% therefore a supplemental bill shall be issued for 303 days of occupancy, tax rate is $13.52 yielding a per diem (daily) rate of $7.78. Total Supplemental tax of $2,356.92 is assessed and a bill is generated by the Tax Collector.

For additional information visit the Department of Revenues website (PDF).