April 18, 2011
INCOME AND EXPENSE DATA FOR ASSESSING RENTAL PROPERTY
By: John Rappa, Chief Analyst
You asked how many rental units a property must have under CGS § 12-63c before the tax assessor can require its owner to submit annual income and expense reports.
By law, tax assessors must determine the fair market value of property and assess it for 70% of that value (CGS §§12-63 and 12-62a, respectively). When determining the value of rental property, CGS § 12-63c allows them to require income and expense reports. It does not impose a unit threshold for requiring these reports, but works in tandem with one that does.
That statute—CGS § 12-63b—requires assessors to use three methods to determine a rental property's fair market value:
1. replacement cost less depreciation plus the land's market value,
2. capitalization of income based on market rent for similar property, and
3. comparable sales.
An assessor must use these methods to determine the value of any rental property that has seven or more units. He or she must also use them to determine the value of any rental property with six or fewer units if the property's owner does not reside in one of the units.
CGS § 12-63c allows the assessor to request the data needed to determine value based on the capitalization of net income method, as CGS § 12-63b provides. Consequently, the assessor can require income and expense statements for all rental property except those (1) with six or fewer units and (2) where the owner resides in one of those units.