Commerce Committee
Planning and Development Committee
Finance, Revenue and Bonding Committee
AN ACT CONCERNING THE DEFINITION OF MEDIAN INCOME IN ENTERPRISE ZONES FOR ASSESSMENT PURPOSES
SUMMARY: This act changes the criterion under which property owners qualify for a property tax exemption when they improve homes, apartments, condominiums, and other types of residential property in the state's 17 enterprise zones. By law, municipalities must exempt a portion of the property's assessed value attributed to the improvements over seven years.
Property owners who improve rental units or convert them into condominiums must rent or sell them, respectively only to people meeting an income criterion. Under prior law, they had to rent or sell the units to people earning no more than 200% of the municipality's median family income. Under the act, property owners must rent or sell the units to people earning no more than 200% of the median income for the area in which the municipality is located, as determined by the U. S. Department of Housing and Urban Development (HUD).
EFFECTIVE DATE: Upon passage
BACKGROUND
Enterprise Zone Property Tax Exemptions
The law requires municipalities to grant two types of property tax exemptions to taxpayers in enterprise zones who improve their properties. They must exempt 80% of the assessed value of newly constructed or improved factories, warehouses, banks, and other specified property for five years. The state reimburses municipalities for this revenue loss.
Municipalities must also exempt a portion of the assessed value of other types of property, but under a different schedule. Homes, apartments, stores, offices, and other types of property ineligible for the five-year, 80% exemption, qualify for a seven-year exemption. The exemption is 100% of the improvement's assessed value in the first two years, drops to 50% in the third, and declines by 10% per year in each of the remaining four years. The state does not reimburse municipalities for this revenue loss.
HUD Area Median Income
HUD annually determines median family income for metropolitan and nonmetropolitan areas based on census data. It uses this data to determine whether someone is eligible for housing or housing assistance under many different programs. According to the census, a family consists of two or more people related by birth, marriage, or adoption and residing together. One member of this group is the “householder,” the person in whose name the housing unit is owned, rented or maintained.
Related Act
PA 09-234 makes an identical change to the income criterion for the enterprise zone property tax exemption for rental apartments and converted condominiums.
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