|Organization:||Massachusetts Department of Revenue|
|Referenced Sources:||Massachusetts General Laws|
Personal Income Tax
Taxpayers who repair or replace a failed septic system may be entitled to a credit (the Title 5 credit) against personal income tax due. G.L. c. 62, § 6(i). The Title 5 credit is equal to the lesser of either forty- percent of the actual cost paid by the taxpayer to repair or replace a failed septic system, or $15,000. Id. In general, a septic system that is repaired or replaced must have been determined to be a "failed system" pursuant to an inspection performed prior to such repair or replacement. See id.; 310 CMR 15.303 and 15.304; TIR 97-12.
However, for the purposes of this TIR, any taxpayer who is required pursuant to a federal court order, consent decree or similar mandate from a federal court of competent jurisdiction to connect his/her septic system to the city or town sewer system may claim the Title 5 credit pursuant to G.L. c. 62, § 6(i), notwithstanding that the taxpayer's septic system was not inspected and determined to be a "failed system" and no Certificate of Compliance was issued to the taxpayer. See generally 310 CMR 15.000 et seq., State Environmental Code, Title 5, promulgated by the Massachusetts Department of Environmental Protection in 1995; see also TIR 97-12.
In general, necessary and reasonable expenses paid by the taxpayer for construction, materials, machinery and equipment, demolition, relocation, design, engineering, testing and inspection relating to the repair or replacement of a septic system are the expenses that may be used by the taxpayer when claiming the credit. See TIR 97-12. For purposes of this TIR, necessary and reasonable expenses, as defined above, paid by the taxpayer to the city or town, and to a private entity, to comply with the federal court mandate may be used by the taxpayer when claiming the credit.
For purposes of this TIR, a taxpayer may claim the credit by obtaining a verification letter from the city or town in lieu of the Certificate of Compliance. See 310 CMR 15.021; TIR 97-12. The verification letter must state that the taxpayer is subject to federal court mandate to connect to the city or town sewer system, the date the taxpayer's sewer connection was completed, and that the "abandonment" of the taxpayer's septic system was undertaken in accordance with the Title 5 regulation. See 310 CMR 15.354.
The credit is generally available to eligible taxpayers beginning in the tax year in which the work required to repair or replace a septic system is "completed." See G.L. c. 62, § 6(i); TIR 97-12. For purposes of this TIR, the credit is available to eligible taxpayers beginning in the tax year in which the sewer connection is completed, as evidenced by the verification letter.
Taxpayers claiming the Title 5 credit pursuant to this TIR must attach a copy of the verification letter to Schedule SC when filing their Form 1 or Form 1-NR/PY.
Frederick A. Laskey,
Commissioner of Revenue
March 25, 1999