December 13, 2011
AUTHORIZATION TO ABATE OR EXEMPT PROPERTY TAXES ON HOUSING
By: John Rappa, Chief Analyst
You want to know the laws authorizing municipalities to abate or exempt property taxes on newly constructed or rehabilitated housing.
Several statutes allow or require municipalities to abate or exempt property taxes on newly constructed or rehabilitated housing. Each specifies the terms and conditions for granting these benefits.
OPTIONAL ABATEMENTS AND EXEMPTIONS
Several laws allow municipalities to abate or exempt taxes for different types of housing under different terms and conditions.
1. CGS § 12-65 allows municipalities to fix the assessment for up to 15 years on newly constructed or rehabilitated multifamily housing (three or more units) in locally designated development areas. The abatement cannot exceed the property's value before it was improved.
2. CGS § 12-81bb allows municipalities to grant property tax credits for units subject to deeds limiting their sale or rental to low- or moderate-income people. A unit meets this criteria if the occupants (1) earn no more than 80% of the area's or the state's median income, whichever is less, and (2) pay no more than 30% of their annual income for the unit.
3. CGS § 12-121e allows municipalities with anti-blight ordinances to abate the taxes on property that was cited for blight and subsequently rehabilitated. The abatement must equal the property's value before rehabilitation and last for the period specified in the anti-blight ordinance.
4. CGS § 8-215 allows municipalities to abate some or all of the taxes on low- and moderate-income housing. The owner must agree to use the abatement to lower rents, set them at levels low- and moderate-income people can afford, or provide necessary facilities and services to the occupants. Municipalities that choose to grant this abatement must do so under a contract specifying the abatement's terms and conditions.
MANDATORY ABATEMENTS AND EXEMPTIONS
CGS § 12-81(7)(A) exempts property used for temporary housing owned or held in trust for federal tax exempt organizations. The exemption applies only to structures primarily used:
1. as orphanages;
2. as drug or alcohol treatment or rehabilitation facilities;
3. to house people who are homeless, have mental retardation or illness or physical handicaps, or are battered or abused women and their children;
4. to house ex offenders or participants in a Department of Corrections- or Judicial Branch-sponsored program; and
5. as short-term housing where the average stay is less than six months.
CGS § 32-71 exempts the value of improvements made to residential (and commercial property) in the state's 17 enterprise zones from property taxes according to a 10-year schedule. But the exemption automatically terminates if the property is:
1. rented to anyone whose income exceeds 200% of the municipality's median income or
2. converted into a condominium and subsequently sold to someone whose income exceeds this threshold.