Overview

The property tax is the most important source of revenue for most cities and towns across Massachusetts, “representing 58.3 percent of total municipal revenues in FY[20]19,” according to the Greater Boston Chamber of Commerce.2 In fiscal year (FY) 2020, the average property tax bill for detached single-family homes in the Commonwealth reached over $6,000 for the first time in history.3 While the state has restricted the amount of increase in tax collections each year through Proposition 2½, average tax bills grow at a steady rate.4 State aid is the next most significant category of revenues for municipalities,5 but if this aid does not increase at the same rate as property taxes (roughly 2.5% each year), then property tax revenues become a larger presence in local budgets. For years, the Massachusetts Municipal Association has advocated for policies that cut municipalities’ dependence on the property tax for their operations and continues to point out the importance of the property tax to fund education and other municipal services.6

For various reasons related to public policy, there are categories of exemptions from the property tax, including the following:

  • nonprofit land owners, including religious, healthcare, and educational institutions;7
  • municipally owned electric utility companies;8
  • renewable energy installations, including solar and wind power systems;9
  • targeted population groups such as veterans, widows and surviving children, the elderly, and the blind;10
  • Tax Increment Financing and other special tax abatements voted on by the community and approved by the state;11 and
  • land and buildings owned by the state or federal government, including authorities (e.g., the Massachusetts Water Resources Authority [MWRA]).12

As communities continue to rely on the property tax and deal with the substantial number of exemptions in the state’s tax laws, there are programs commonly known as PILOTs that help replace lost revenues. While some are legally mandated and others are voluntary, PILOTs replace some or all of the lost revenue from tax exemptions. PILOTs help minimize the revenue impact on communities hosting recreational areas, solar and wind farms, nonprofit institutions, and properties held by the Commonwealth.

This report will focus on two broad categories of PILOT payments.

First, there is a longstanding PILOT program related to state-owned land (SOL).13 This program, administered by the Department of Revenue (DOR), provides communities with payments in lieu of taxes on lands (but not buildings and other improvements) under state ownership that are used for a variety of purposes, including education, corrections, open space, and recreation. Subject to appropriation, the SOL program distributes local aid to 297 communities throughout the Commonwealth based on each community’s share of SOL value. The values are updated every two years. In FY2020, the Legislature appropriated $30,000,000 to compensate municipalities for $3.15 billion in SOL holdings.14

In our analysis of the SOL program, we contrast its operation and funding with that of the Watershed PILOT Program. The watershed program, which is jointly administered by the Department of Conservation and Recreation (DCR) and MWRA, protects the lands in the various watersheds that make up the MWRA system.15 Over $8,000,000 is distributed annually to 29 communities under this program.16

The second area of focus of the report relates to the taxation of solar power installations in the Commonwealth. Solar power facilities, whether they are small installations to directly power a home or larger installations providing power to the electrical grid, are subject to special consideration for property taxes. Massachusetts law grants a property tax exemption for the installation of solar power equipment,17 which until recently was understood to apply solely to residential properties.18 Another provision of state law allowed for the use of PILOT agreements between the larger suppliers of solar power and municipalities in order to calculate future payments, as long as they are based on the full and fair value of land and equipment.19 A series of Appellate Tax Board (ATB) decisions, starting in 2014 and continuing to May 2020, however, extended the original tax exemption to commercial as well as residential solar facilities, creating uncertainty about the valuation and taxation of solar installations.20

2. Department of Revenue, Division of Local Services. (2020). Revenue by source. https://dlsgateway.dor.state.ma.us/reports/rdPage.aspx?rdReport=RevenueBySource.RBS.RevbySourceMAIN; Greater Boston Chamber of Commerce. (2020). How much of your local budget do property taxes fund? https://www.bostonchamber.com/public-policy/issues-impact/property-tax-dashboard/

3. Department of Revenue, Division of Local Services. (2020). Average single family tax bill. https://dlsgateway.dor.state.ma.us/‌reports/rdPage.aspx?rdReport=AverageSingleTaxBill.SingleFamTaxBill_wRange&rdRequestForwarding=Form.

4. M.G.L. c. 59, § 21C. Note: An explanation of Proposition 2½ can be found in “About the Division of Local Mandates.”

5. Department of Revenue, Division of Local Services. (2020). Average single family tax bill.

6. Massachusetts Municipal Association. (2007, October 11). A revenue sharing partnership plan to build a stronger Massachusetts. https://www.mma.org/wp-content/uploads/2018/07/mma_rev_shar_part07_0.pdf; Massachusetts Municipal Association. (2020, October 16). MMA submits comments to DLS and DESE regarding Chapter 70 local contribution calculation. https://www.mma.org/advocacy/mma-submits-comments-to-dls-and-dese-regarding-chapter-70-local-contribution-calculation/

7. M.G.L. c. 59, § 5, Cl. 3, 11.

8. M.G.L. c. 164, § 47C.

9. M.G.L. c. 59 §5, Cl. 45.

10. M.G.L. c. 59, § 5, Cl. 17, 17C, 17C½, 17D, 22, 22A, 22B, 22C, 22D, 22E, 22F, 22H, 37, 37A, 41, 41B, 41C, 41C½.

11. M.G.L. c. 40, § 59; M.G.L. c. 40, § 60; 760 CMR 22.00 et seq.; Commonwealth of Massachusetts. (2020). EDIP incentives awarded in 2020. https://www.mass.gov/info-details/edip-incentives-awarded-in-2020

12.M.G.L. c. 59, Cl. 1, 2. See also Department of Revenue, Division of Local Services. (2020, January). “Chapter 7: Property tax exemptions module.” From Course 101, Introduction assessment administration: law, procedures, and valuation. https://www.mass.gov/doc/‌chapter-7-property-tax-exemptions/download

13. M.G.L. c. 58, §§ 13-17.

14. Massachusetts Budget and Policy Center. (2020). Budget browser: state owned land (1233-2400). https://www.massbudget.org/‌browser/‌line_item.php?id=1233240000&inflation=cpi; Department of Revenue, Division of Local Services. (2020). State-owned land values – FY2020. https://dlsgateway.dor.state.ma.us/reports/rdPage.aspx?rdReport=BLA.StateOwnedLand

15. Department of Conservation and Recreation, Office of Watershed Management. (2020). Watershed payments in lieu of taxes (PILOT). https://www.mass.gov/‌info-details/watershed-payments-in-lieu-of-taxes-pilot

16. Id.

17. M.G.L. c. 59 § 5, cl. 45.

18. Meeting with former Rep. Bosley, 6/3/2020. On file with DLM.

19. M.G.L. c. 59, § 38H(b).

20. Forrestall Enterprises, Inc. v. Board of Assessors of the Town of Westborough, No.  ATB 2014-1025 (Appellate Tax Bd., Dec. 4, 2014) (on file with DLM); KTT, LLC v. Board of Assessors of the Town of Swansea, No. ATB 2016-426 (Mass. Appellate Tax Bd., Oct. 13, 2016 (on file with DLM); Quabbin Solar, LLC v. Board of Assessors of the Town of Barre, No. ATB 2017-480 (Mass. Appellate Tax Bd., Nov. 2, 2017) (on file with DLM); PelleVerde Capital, LLC v. Board of Assessors of the Town of West Bridgewater (Mass. Appellate Tax Bd., May 29, 2020) (on file with DLM); United Salvage Corp. of America v. Board of Assessors of the City of Framingham (Mass. Appellate Tax Bd., May 29, 2020) (on file with DLM).

Date published: December 10, 2020
Feedback