Author: Municipal Finance Law Bureau
This month's Ask DLS features frequently asked questions concerning chapterlands. Please refer to our Chapterland FAQs for more information on this topic. Please let us know if you have other areas of interest or send a question to cityandtown@dor.state.ma.us. We would like to hear from you.
A wealthy money manager just purchased a mansion property containing 27 acres of land. The new owner now describes himself as a farmer and has applied to the local assessors for Chapter 61A agricultural/horticultural classification. By this means he seeks to reduce his property tax bill. Is the property eligible for Chapter 61A classification?
The parcel does not qualify since it does not meet the gross sales requirement for the two immediately preceding tax years. The owner should consider Chapter 61B for the land if it is kept in substantially a natural, wild, or open condition or in a landscaped or pasture condition.
Title to a family farm classified under Chapter 61A is held in the name of a corporation. The father is President, Vice President, Secretary, and Treasurer. The adult children serve as Directors. The father wants to retire and sell the property to his son. He wants to dissolve the corporation and the son wants to create an LLP to take ownership of the property and to operate the business under a different name. Does the municipality have any rights and do penalty taxes apply?
Change of ownership does not affect classified status, but the new owners will have to reapply for classified land status following the annual cycle. There is no right of first refusal rollback or conveyance tax where there is no change of use and the proper affidavit is filed with the assessors.
A farmer built a deluxe farmstand on a one-acre portion of his 200-acre farm which is classified under Chapter 61A. The town had declined to exercise its right of first refusal to purchase the property. How were the penalty taxes calculated? What would be the rate of interest, if any, in the calculation of the penalty tax?
As a general rule, a landowner must pay one of two “penalty” taxes, a roll-back or conveyance tax, when the use of classified land is changed to a non-qualifying use. No penalty tax is assessed, however, when the change in use is for a residence for the owner; the owner’s spouse, parent, grandparent, child, grandchild, brother or sister, or the surviving spouse of those relatives; or an employee working full-time in the use and care of the property for its classified use. In this instance, the conveyance tax would be calculated using the one acre’s value multiplied by the conveyance tax rate which declines from ten percent to one percent over the ten-year period since the owner’s acquisition. If the conveyance tax does not apply, then rollback taxes would be imposed over a five-year look-back period.
A small farm has been sold to the owner’s brother in a cash sale transaction. The buyer has begun to build a commercial automotive shop on the parcel. The deed has been recorded and notice of the sale was not sent to the town. Is the sale valid? What can the town officials do?
This is a cash sale so there is no bank halting the sale due to the Chapter 61A lien. The town attorney could consider seeking a court injunction to stop construction of the automotive shop and compel the owner either to offer a right of first refusal to the town or pay penalty taxes.
Owner of land classified under Chapter 61B plans to sell 3 acres of the 7 acre parcel, which includes a family residence. New owner has no plans to develop the property further. Can the land still qualify under chapter 61B?
No. The new owner is acquiring insufficient land to qualify for classification under Chapter 61B. To qualify under 61B the land must consist of at least 5 acres of contiguous land under the same ownership. Here, the 3-acre parcel including the house will be taxed under Chapter 59.
Taxpayer owns 15-acres of land which are used for boarding horses and riding stables. The outdoor area is used primarily for horseback riding and consists of paddocks, riding rings, riding trails and open lands. The indoor area consists of barns, riding rings, arenas, and similar facilities.
Does the property qualify for Chapter 61A? G.L. c. 128, § 1A defines agriculture for purposes of zoning to include “the keeping of horses as a commercial enterprise.” Chapter 61A, however, is a production statute which means horses must be raised for sale in the regular course of business. The taxpayer accordingly does not qualify for Chapter 61A.
Does the property qualify for Chapter 61B? The parcel’s vacant land would qualify for Chapter 61B if there were 5 acres of land for pasture or unpaved riding trails. Buildings and other structures would not qualify for Chapter 61B since they would interfere with environmental benefits. G.L. c. 61B, § 1 includes with recreational activities “commercial horseback riding and equine boarding.”
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Editor: Dan Bertrand
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| Date published: | December 1, 2022 |
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