This month's Ask DLS features frequently asked questions relating to the effect of conveying property during the fiscal year with respect to exemptions. 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.
1. How are taxes handled where Cindy Lou Who, a current owner, is receiving a veterans exemption on real property for fiscal year 2024 and the home will be sold to a new owner, the Grinch, who is not eligible for a veteran exemption, in November of 2023?
The exemption is not pro-rated if a sale is made after July 1, 2023. Cindy Lou Who, the owner as of January 1, 2023, is liable for the full upcoming fiscal year 2024 property taxes and that liability does not change because she later sells her home. The veterans exemption Cindy Lou Who qualified for as of July 1, 2023 goes to the subject property and is applied to the assessed owner’s tax bill by subtracting the amount of the exemption from the total tax owed for the fiscal year. Changes of ownership after July 1st are irrelevant to exemption qualification or allocation of tax liability. Typically, lawyers in a real estate transaction will adjust the purchase price to reflect tax benefits received and tax burdens being assumed. As a practical matter, the Grinch will have to pay taxes billed subsequent to the closing to avoid a tax taking of the property. However, it is not the responsibility of the assessors to make any adjustment. Assessors assess taxes and apply exemptions in accordance with law.
1A. The attorneys in the conveyance above made no such arrangements so the closing price did not take account of the reduction in the tax liability as a result of the exemption. Cindy Lou Who’s holiday spending is tight, and she reaches out to the Assessor to see if Whoville will be mailing her a refund check. How should the assessor of Whoville advise Cindy Lou Who?
Cindy Lou Who, the assessed owner for fiscal year 2024, is not entitled to a refund unless the property taxes for the entire fiscal year 2024 taxes are overpaid. As described above, Cindy Lou Who is still liable for the full amount of the assessed tax for the fiscal year. If the Grinch takes over the payment of the taxes for the remainder of the fiscal year after his purchase, no refund is due to Cindy Lou Who.
2. The Grinch is a veteran who has owned and occupied a property in Anytown Massachusetts and received a veterans exemption in Anytown Massachusetts for fiscal year 2024. The Grinch sold his property in Anytown Massachusetts on July 7, 2023 and is elated (as much as he can be) that he acquired 11 Happy Lane in Whoville Massachusetts from Cindy Lou Who on July 20, 2023. The deed was recorded in the Registry on the same day. In this fact pattern, Cindy Lou Who, the assessed owner, did not qualify for a veteran’s exemption. However, Cindy Lou Who and the Grinch entered into a Purchase and Sale Agreement for 11 Happy Lane on June 15, 2023. The Grinch visits the Whoville assessor and is quite insistent that he is eligible for a veterans exemption for the fiscal year 2024. Is the Grinch correct that is he is eligible?
The Grinch is not eligible for exemption because he did not own the subject property in Whoville on July 1. The Purchase and Sale agreement entered into in June 2023 did not make the Grinch an owner, despite his protestations otherwise and despite him having received a veteran’s exemption in another Massachusetts municipality for the fiscal year 2024.
3. Whoville has authorized a residential exemption to all Class One Residential properties that are the primary principal residence of taxpayers. Cindy Lou Who owned and occupied 11 Happy Lane in Whoville as her domicile on January 1, 2023. On November 13, 2023, Cindy Lou Who conveys 11 Happy Lane in Whoville to the Grinch. The Grinch visits the Whoville assessors and would like to know what effect the sale has on the residential exemption granted to Cindy Lou Who for the fiscal year 2024 taxes?
The residential exemption is established by G.L. c. 59, § 5C and is part of property tax classification. Therefore, eligibility is determined as of the January 1 assessment and classification date for the fiscal year for which the exemption relates. Since Cindy Lou Who, the assessed owner, occupied the property as her domicile on January 1, 2023, the residential exemption applies to the fiscal year 2024 tax bill. Any change in ownership and occupancy of the property occurring after that date should not be considered by the assessors of Whoville when determining the eligibility for the exemption and the amount of the tax assessed on the property for fiscal year 2024.
4. Whoville takes the Grinch’s property by eminent domain on December 2, 2023. The Grinch visits the Whoville assessors and reasonably is asking about the taxes for fiscal year 2024 and fiscal year 2025.
The Grinch is personally liable for the entire tax assessed for fiscal year 2024 because the eminent domain statute includes its own mechanism for allocating the taxes between the parties through the award of compensatory damages. Whoville is required to include as a separate element of damages payable to the Grinch the fiscal year 2024 taxes pro-rated from the date of taking until the end of the year which is June 30, 2024. G.L. c. 79 § 12. This reimburses the Grinch for paying the portion of the taxes allocable to Whoville’s ownership of the property.
The tax status of the property for fiscal year 2025 depends on several factors. If the taking occurred between July 1 and December 31, 2023, which is the case here, the parcel is to be removed from the tax rolls for that next fiscal year. Where the taking occurs between January 1 and June 30, however, the eminent domain statute requires that the damages also include taxes for the subsequent fiscal year. The property owner will be assessed as of January 1 for that year and therefore, will remain personally liable for paying those taxes as well. G.L. c. 59, § 72A does not apply to eminent domain.
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| Date published: | January 4, 2024 |
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