PA 07-140—HB 7281
Finance, Revenue and Bonding Committee
AN ACT CONCERNING PROPERTY TAX EXEMPTIONS FOR CERTAIN MACHINERY AND EQUIPMENT
SUMMARY: This act rewrites and makes several minor, conforming, and technical changes in the 2006 law that (1) exempts eligible manufacturing, biotechnology, and recycling machinery and equipment (MME) from local property taxes after a five-year phase-in and (2) requires the state to make payments in lieu of taxes (PILOTs) to municipalities for lost revenue.
EFFECTIVE DATE: Upon passage. The provisions concerning the calculation of the fixed grant apply to assessment years starting on or after October 1, 2007.
CONTINUATION OF FIVE-YEAR EXEMPTION PROGRAM WITH 80% PILOT
By law, during the exemption phase-in, MME acquired before October 1, 2010 is covered by an earlier property tax exemption program that gives new and newly acquired MME a 100% property tax exemption for five years after acquisition, with the state reimbursing towns for 80% of the resulting revenue loss.
The act specifies that (1) the 80% PILOT grant covers property first approved for an exemption for the October 1, 2010 assessment year as well as property approved for earlier years and (2) eligible MME approved for the five-year exemption program for the October 1, 2010 assessment year continues to be exempt in subsequent years under the permanent exemption program, with the permanent 100% PILOT grant for MME replacing the five-year 80% PILOT as of July 1, 2013.
EXEMPTION PHASE-IN FOR OLDER MACHINERY AND EQUIPMENT
Basis for Phase-In
In addition to the 80% PILOT for MME exempt under the five-year program, the state must provide gradually increasing payments to towns for the revenue they lose from phased-in property tax exemptions for MME that is six years old or older in each assessment year of the phase-in. Percentage exemptions for this older MME increase by 20% per year for five years. As they do, the law requires corresponding increases in state PILOT payments for town revenue losses from these exemptions.
The act simplifies these phase-in provisions. It ties each annual increase in the exemption percentage to the MME's acquisition date rather than to the fact that the town is not receiving an 80% PILOT payment for it under the old five-year exemption program. It also links the state PILOTs to the exempt percentages of the MME's assessed value. It eliminates an explicit requirement that, during the phase-in, the owner of the older MME continue to pay any residual property tax not covered by the state payment. At the end of the phase-in, the act specifies that the state's permanent PILOT replaces the phase-in grants.
Applying for PILOT Grants During the Phase-In
By law, in order to access state payments for older MME during the phase-in, towns must certify its assessed value to the Office of Policy and Management (OPM) secretary every year starting March 15, 2007. The act also requires towns to submit whatever supporting information the secretary requires, including a copy of each exemption recipient's personal property tax declaration supplement for the immediately preceding assessment date. It allows the secretary to modify a municipal grant either to correct a clerical error or when an assessor submits documentation supporting a correction.
Processing Grant Payments
By law, the OPM secretary must notify the state comptroller of the grant amounts by December 15th annually. The act extends the deadline for the comptroller to draw an order on the state treasurer for the grant payments to December 24th rather than five business days after December 15th. Finally, to correspond to the end of the exemption phase-in, the act sunsets the certification requirements as of March 15, 2012 and the payment and grant modification procedures as of December 15, 2012.
Exempt MME Valuations
By law, all existing valuation and enforcement procedures apply to exempt MME and taxpayers may appeal assessments of eligible MME to local boards of assessment appeals according to the usual procedure. The act also allows taxpayers to appeal from local board decisions according to the usual procedure.
FIXED GRANT PAYMENT AFTER PHASE-IN
Starting with FY 2014, the law freezes the state's annual PILOT to each town for exempt MME. Prior law fixed the grant at 100% of the property taxes the town would have received in the October 1, 2011 assessment year if the MME were not tax-exempt. The act fixes it at (1) the town's tax loss in FY 2013 from eligible older MME exemptions approved for the October 1, 2011 assessment year plus (2) the tax loss the town would have had in FY 2013 if the five-year exemption program for new and newly acquired MME were in effect for that year. The OPM secretary must reduce the latter amount to reflect depreciation on eligible MME acquired between October 2, 2006 and October 1, 2010 and approved under the five-year exemption program for the October 1, 2010 assessment year.
OLR Tracking: JSL: RC: PF: RO