May 15, 2008
WAIVER OF PENALTY UNDER THE 490 PROGRAM
By: Kevin E. McCarthy, Principal Analyst
You asked whether there is any provision under the 490 program that allows for a waiver of the conveyance tax imposed by CGS § 12-504a et seq. for land that is sold within 10 years of its classification as farm, open space, or forest land. The Office of Legislative Research is not authorized to provide legal opinions and this memo should not be considered one.
By law, property is usually assessed for purposes of the property tax on its market value. However, under CGS § 12-107a et seq., farm, forest, and open space land that meet certain criteria can participate in the 490 program (the program is named for act 490 of 1963, which created it) and be taxed based on its current use, which can substantially reduce the property taxes due on the property.
However, if the property owner sells the property or changes its use within 10 years of its classification, the property is subject to a conveyance tax under CGS § 12-504a et seq. If the property is sold or its use changes in the first year after its classification as farm, forest, or open space land, it is subject to a tax of 10% of the (1) total sales price in the case of a sale or (2) the property's fair market value in the case of a change in use. The tax decreases by 1% in each subsequent year. (This tax is in addition to the generally applicable conveyance tax imposed under CGS § 12-494.) The law specifies conveyances that are not subject to this tax, such as transfers for no consideration within a family. On the other hand, the law does not give the Department of Revenue Services (DRS) authority to waive the tax in case of hardship. In the absence of specific statutory authorization, it does not appear the DRS commissioner can waive the tax. The commissioner can abate a tax, with the approval of the Abatement Review Committee, but only if it is uncollectible.