Home Forums Legislation Tangible Tax Rate Cap

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  • Chelsea Romano
    Participant
    Post count: 15

    My Finance Director just informed me that the State has imposed a tax rate cap on Tangible Personal Property as of 12/31/2022 if a municipality is granting an exemption on said property. I’ve copied the slide below as this is I’m first hearing of it. I wasn’t aware it had passed. I also don’t see it listed on the website yet. Thoughts? Insight? I know we had discussed some of the implications at the meeting before last.

    44-5-12.2: When 44-3-3(c) is utilized the tangible tax rate shall be capped based on the later of:

    “the tax rate in effect for the assessment date immediately preceding the assessment date on which the exemption takes effect”

    Applies to locals with NO existing tangible exemption with implementation of an exemption at some future date after the state’s FY23 budget passage

    No tangible tax cap if exemption is never implemented

    “the assessment date immediately following the effective date of this section”

    Applies to locals WITH existing tangible exemption as of the date of the state’s budget passage

    Tangible tax rate frozen at 12-31-22 assessment rates

    Tangible tax cap required for as long as exemption is utilized

    Daniel Ducharme, Ph.D.
    Keymaster
    Post count: 11

    Hi Chelsea,

    This was passed as part of the state budget, house bill H7123 pages 155 and 156.

    My reading of it has your finance director correct that as of the date of this passage, you are capped at the tax rate of the preceding assessment date. So after this, you can lower you tangible rate, but under 44-5-12.2 you are prohibited from increasing your tangible rate.. Even worse, if you have a single rate that includes personal property, my reading of the first sentence would be that you are prohibited from ever raising your primary rate., Certainly not well worded and I doubt that was the intention, but outside of solicitors opinion or any compelling discussion here, that would be my reading.

    In CF, this is going to make it difficult for me to establish a new tangible exemption, although I am certainly going to push and advocate for it. That said, I am lucky in that I have 4 separate tax rates and my tangible rate is currently 4x my residential owner-occupied rate. I know the league has said that there opinion is that this is a one year cap, but again based on my reading of this section, I am not seeing anything that does it for one year, it appears to me to be a standing cap prohibiting you from raising your tangible rate above the rate established last year.

    Chelsea Romano
    Participant
    Post count: 15

    We do have a split rate here too and just recently passed a tangible exemption of 2,500 in 2020. It is a small exemption compared to other municipalities but it did help a lot of the smaller businesses here in town. My fear is that the Council will now eliminate that exemption so we can alter the rate from year to year. Not happy about that 🙁 I’m in agreement with your interpretation, it does read as though it is a standing cap that is to extend for more than a year.

    Chris Celeste
    Keymaster
    Post count: 39

    From what I read, I agree with Dan that it’s not only for a single year as opined by Jordan from the League, once you have an exemption, the tangible rate is capped forever.

    As far as what rate becomes the “cap”, the language in the budget article (which is now law) states:
    28 …shall be capped
    29 at the tax rate in effect for the assessment date immediately preceding the assessment date on which
    30 the exemption takes effect or the assessment date immediately following the effective date of this
    31 section, whichever is later.

    So you are correct, @Chelsea, Since EG had an exemption prior to this taking effect, your tangible rate would now be capped at the upcoming 12-31-22, (the assessment date immediately following the effective date of the section.) Then that cap would remain in place as long as you are giving the exemption.

    Obligatory “check with your solicitor”, but I would say you get one more chance to raise it for next year, then you are stuck with the cap.

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