Topic:
PROPERTY TAX; TAX EXEMPTIONS;
Location:
TAX EXEMPTIONS; TAXES - PROPERTY;

OLR Research Report


December 23, 2004

 

2004-R-0975

PROPERTY TAX EXEMPTIONS IN CONNECTICUT AND OTHER STATES

By: Kevin McCarthy, Principal Analyst

You asked for (1) a summary of property tax exemptions that Connecticut municipalities must provide and (2) a discussion of such exemptions in other states. Regarding the latter, you asked us to identify differences in the exemptions Connecticut and the other states give. In addition to the exemptions described below, many states including Connecticut have tax abatement programs, such as the circuit breaker program for low-income elderly and disabled households.

SUMMARY

This memo describes mandatory exemptions in Connecticut and ten other states (California, Colorado, Illinois, Maryland, Massachusetts, New Jersey, New York, North Carolina, Rhode Island, and Washington). Many exemptions that Connecticut requires are also required in most or all of these states. The exemptions include those for publicly owned property, property owned by charitable and religious organizations, schools, and colleges.

MANDATED EXEMPTIONS IN CONNECTICUT

Table 1 lists Connecticut's major mandatory property tax exemptions in Connecticut. In some cases, the state reimburses the municipality for some or all of its lost revenue. OLR memo 2003-R-0072 provides a detailed listing of mandated exemptions for which municipalities are not reimbursed by the state.

Table 1: State-Mandated Property Tax Exemptions in Connecticut

U. S. and state government property

Municipal property, including property used for public purposes located in other towns and not operated for profit

Property used for scientific, educational, literary, historical, charitable purposes

Water supply land owned by municipality or metropolitan district when residents of the town can use the water

Nonprofit camps and recreational facilities

Property owned by state and municipal authorities and quasi-public agencies

Property owned by state and municipal authorities and quasi-public agencies

Property owned by veterans (amount exempted depends on income and disability status)

Houses of worship and related properties

Manufacturing and other designated facilities, machinery, and equipment in designated distressed areas

Hospitals

New and newly-acquired manufacturing equipment

Non-profit nursing homes

Commercial fishing vessels and equipment

Air and water pollution control equipment

Farm machinery up to $100,000 and livestock

Aircraft

Computer software

New commercial trucks

Manufacturers', wholesalers', and retailer' inventories

In addition to these mandatory exemptions, the law allows municipalities to exempt specified properties from taxation or abate the taxes owed on them.

MANDATED EXEMPTIONS IN OTHER STATES

The U.S. constitution precludes states from taxing federal property, and most states exempt state and municipal property. Every state exempts charitable organizations, although the definition of such organization varies widely by state. A Lincoln Institute of Land Policy paper provides examples of these definitions and additional information on the charitable organization exemption. The paper is available online at http://www.lincolninst.edu/pubs/pub-detail.asp?id=830. As discussed in OLR memo 2003-R-0271 most states also exempt nonprofit hospitals, private schools, and colleges. Other common exemptions are for houses of worship, cemeteries, and housing owned by veterans. A 2000 analysis of exemptions in New Jersey found that nearly 80% of the value of all property tax exemptions, abatements, and credits were attributable to public property, schools and colleges, churches, and charitable institutions. The study is available online at http://www.njpp.org/rpt_freenj.html.

Table 2 provides examples of property that is tax-exempt in Connecticut but taxable in other states. In addition, none of the states appear to have exemptions for manufacturing facilities comparable to Connecticut's, although Maryland exempts manufacturing facilities in Baltimore City. In contrast, exemptions for manufacturing equipment appear to be fairly common.

Table 2 also provides examples of additional exemptions that these states provide that Connecticut does not. Among other things, California and Illinois provide relatively small exemptions for all homeowners, while Illinois and Washington provide exemptions for home renovations. In some cases, Connecticut allows municipalities to provide similar exemptions. Rhode Island is unusual in that many of its tax exemptions apply to specific towns and cities. There are town-specific provisions for the veteran's exemption as well as many of the local option exemptions.

Table 2: Exemptions in Comparison States

State

Property Exempt in Connecticut that is Taxed in Other State

Additional Exemptions Not Provided in Connecticut

California

Most aircraft

Homeowner exemption ($7,000)

Private low income housing

Colorado

Not applicable (N.A.)

Private low income housing

Personal property, if worth less than $2,500, owned by any taxpayer

Illinois

Manufacturing machinery and equipment

Homestead exemption ($4,500 in Cook County, $3,500 elsewhere)

Exemption on up to $45,000 in home renovations

Maryland

Certain leasehold interests

N.A.

Massachusetts

N.A.

Limited exemptions for widows and widowers and minors with a deceased parent.

Broader exemption for manufacturing equipment

New Jersey

N.A.

Automated fire suppression equipment

New York

Municipalities have the option of taxing certain non-profit organizations

Taxes phased in for new commercial and industrial buildings.

Private not for profit housing

Certain agricultural structures

-Continued-

State

Property Exempt in Connecticut that is Taxed in Other State

Additional Exemptions Not Provided in Connecticut

North Carolina

Certain forms of nontangible personal property and software

Taxes on improvements in brownfield areas are phased in

Rhode Island

Wholesale and retail inventories (being phased out)

Narrower exemption for property owned by religious organizations

Exemption for manufacturing facilities is local option

Limited exemption for visually impaired people

Washington

Some types of personal property, e.g., tools, owned by individuals

Value of home remodeling and additions (up to 30% of the home's value) for three years

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