July 24, 2007
PROPERTY TAX AND MUNICIPAL POWERS
By: Judith Lohman, Chief Analyst
You asked several questions about local property taxes and municipal powers. The questions and answers are listed below.
Has the state enacted any type of property tax freeze?
Yes. The state has two property tax freezes, both for elderly or disabled taxpayers with low incomes. One was enacted in 1967 and has been closed to new applicants since 1978. That program reimburses towns for the tax loss stemming from the freeze. The other program was enacted in 2006. It is a municipal option program with no state reimbursement for lost taxes.
1967 Tax Freeze Program. The Freeze Tax Relief Program was established in 1967. Elderly (65+) and disabled people who applied and qualified for tax relief had their property tax frozen at that year's level, with certain adjustments, if they owned and resided in their home. No new applicants have been allowed since the 1978 program year. Anyone who was in the program before then may stay in the program as long as they continue to meet all the conditions and requirements. The surviving spouse of a beneficiary is entitled to the benefit if she is 50 or older, lived with the beneficiary at the time of his death, and meets the income limits. To be eligible, a household must have $6,000 or less in annual qualifying income, which is considered federal adjusted gross income
plus tax-exempt interest. Qualifying income excludes Social Security income, U.S. Postal pensions, and certain other types of income. However, the maximum annual benefit under this program is $2,000. There are currently approximately 546 beneficiaries under the program.
The program cost municipalities approximately $1 million in FY 07, with the state fully reimbursing them for the loss.
2006 Local Option Property Tax Freeze. PA 06-176 allows all towns to freeze property taxes on homes owned by people age 70 or older who have lived in the state at least one year. The freeze can also apply to a surviving spouse who is at least age 62 when the homeowner dies. Homeowners must meet the income limits for the circuit breaker program, which gives elderly homeowners a credit against their property taxes. The circuit breaker income limits are currently $28,800 for individuals and $35,300 for married couples and are adjusted annually for inflation. People whose taxes are frozen can still qualify for other property tax relief programs. The act does not provide state reimbursement for revenue a town loses by freezing taxes, but it allows the town to put a lien on the property and to set asset limits for eligibility.
Can a town go beyond the 2006 property tax freeze to expand the eligibility?
Yes, up to a point.
State law allows towns to provide optional property tax relief to seniors over age 65 and disabled people without state reimbursement. It lets towns set maximum income limits for this tax relief. Thus, towns may provide relief to homeowners already receiving tax relief under the circuit breaker program as well as to those who do not meet that program's income criteria. But the overall amount of annual tax relief a town can provide under this authority is limited to 10% of the total value of real property in the town. And the total value of tax relief a particular homeowner can receive under this and the state programs cannot exceed his annual tax. The town must put a lien on the property if the amount of tax relief is more than 75% of the tax owed, and the law places several other restrictions on optional, unreimbursed local tax relief (CGS § 12-129n).
What inherent power does a town have to design a tax relief program?
None. Municipal taxing power is defined by state law.
Connecticut courts have consistently held that (1) towns have only the specific powers granted them by the legislature; (2) an enumeration of powers in a statute forbids things not enumerated; and (3) in determining whether a town has the authority to do something, the court does not search for a statutory prohibition but rather for statutory authority.
In 1995, in Windham Taxpayers Association, et al. v. Board of Selectmen, the Town of Windham, et al. (234 Conn. 513), the Connecticut Supreme Court found: “It is settled law that, as a creation of the state, a municipality has no inherent powers of its own. A municipality has only those powers that have been expressly granted to it by the state or that are necessary to discharge its duties and to carry out its objects and purposes.” Also in 1995, the Court ruled that “municipalities in Connecticut have no independent authority or independent responsibility; they are administrative units of the state and can do only what the state authorizes or delegates them to do” (Moore v. Ganim, 233 Conn. 557).
With regard to municipal taxing power, the Court ruled in 1976:
A municipality, as a creation of the state, has no power of its own nor does it have any powers of taxation except those expressly granted to it by the legislature. For these reasons, a municipality's powers of taxation can be lawfully exercised only in strict conformity to the terms by which they were given and statutes conferring authority to tax must be strictly observed. (Joseph W. Pepin et al. v. City of Danbury et al. (171 Conn. 74)).
In the same case, the Court found that “any doubt as to a municipality's power to tax should be resolved against the existence of the power and in favor of the taxpayer.” Low Stamford Corporation v. Stamford (164 Conn. 178, 182 (1972)); Consolidated Diesel Electric Corporation v. Stamford, (156 Conn. 33, 36 (1968)).
Can a town impose a residency requirement for voting in town meeting to override the state law allowing nonresidents who own more than $1,000 worth of property in the town to vote?
Yes, if it has a charter.
The statute in question, CGS § 7-6, establishes eligibility to vote at a town meeting (and adjourned town meeting on a referendum question) for “any person who is an elector of such town…and any citizen of the United States of the age of eighteen years or more who, jointly or severally, is liable to the town, district, or subdivision for taxes assessed against him on an assessment of not less than one thousand dollars on the last-completed grand list of such town, district, or subdivision….”
But in a 1993 New London case, a Connecticut trial court ruled that a charter town could establish a requirement that all electors be residents of the municipality in order to vote on a referendum question (Massad v. New London, 43 Conn. Sup. 297, affirmed 36 Conn. App. 587). Nonresident property owners were denied the right to vote on a budget and tax rate ordinance submitted to electors at a referendum. In their motions, the plaintiffs alleged the referendum was illegal because they were denied a vote and that their constitutional rights to equal protection had been denied.
The court ruled against them, reasoning that, under New London's charter, the referendum measure was not a town meeting and § 7-6 did not apply. It also held that “New London's determination that persons who want to vote on city matters must also reside within its boundaries is a reasonable exercise of its discretion and within the power granted to it to run its own affairs, which is tailored to legitimate governmental concerns and is not overridden by the interests of persons owning taxable property in the town who prefer to live elsewhere” (Ibid., p. 313).
How long has the $1,000 property threshold for nonresident voting been in effect?
The $1,000 nonresident voting threshold for all property has been in effect since 1955. From 1943 to 1955, the threshold was $1,000 of real property or $500 of personal property. From 1930 to 1943, the thresholds were $300 for real property and $150 for personal property. We did not trace the statute back before 1930.