Personal Property Tax Developments

Massachusetts and many other states impose property tax on personal property held by a business. This memorandum details two developments under Massachusetts law on personal property taxation.

Who Can Appeal?

For fiscal year 2005 the personal property in question consisting of telephone equipment and switching machinery was owned by and assessed to Siemens. Siemens leased the equipment to RNK. As the owner on the January 1, 2004 assessment date, Siemens filed a form of list for FY05 in February 2004 with the Bedford assessors. The Bedford Tax Vollector sent a FY05 personal property tax bill that showed a valuation of about $1.3 million and a total tax over $32,000. The personal property taxes were paid. Siemens then filed a timely abatement application that the assessors denied on April 26, 2005.

After the denial of the abatement application, there was a threemonth period ending on July 26, 2005 within which an appeal could have been taken to the ATB. In a letter postmarked July 26, 2005, which was the very last day for filing, a petition was submitted to the ATB. In the ATB petition the appellant was the lessee, RNK and there was no claim the lessee filed as an agent of Siemens. Included with the petition was the lease agreement that provided the lessee was responsible for the personal property taxes. The ATB also received a document with the caption Purchase and Sale Agreement. By its terms, RNK had agreed to purchase the subject equipment for $210,000.

When the case was argued at the ATB, the Bedford Assessor questioned whether RNK had standing to file the appeal. In support of this argument, the Assessor testified Siemens owned the personal property as of the January 1, 2004 assessment date. Siemens also filed the form of list. The Assessor stated that RNK had paid the FY 2005 personal property taxes. Yet, the sale of the personal property to RNK, Inc. took place in September 2004, subsequent to the January 1, 2004 assessment date.

The ATB observed there were jurisdictional requirements for an ATB appeal. First, an abatement application had to be timely filed with the assessor by a person aggrieved as described in the statutes and case law. According to the ATB, only a person with standing to file with the assessor could appeal to the ATB. Generally, personal property taxes are assessed to the owner. Such was the situation here with the assessment to the owner, Siemens. The ATB observed, however, that if the Bedford Assessor had considered the personal property to be machinery used in the conduct of RNK s business, an assessment to RNK as the person having possession of the same on January first would have been permissible. In that scenario, RNK would have been assessed the taxes and could have sought the remedy of abatement.

Abatement rights differed for real property and personal property. For real property, the legislature had broadened the class of real property abatement applicants to include (1) a tenant obligated to pay more than onehalf of the taxes, (2) a subsequent owner and (3) a person with an interest therein. This was not the rule with regard to a personal property tax. According to the ATB, where the owner of the personal property was assessed, only the assessed owner could seek abatement.

The ATB found it immaterial that RNK was a lessee with a contractual responsibility for payment of the personal property tax. The ATB recognized that RNK had the economic burden of the tax, but state statute extended the remedy of abatement only to the assessed owner. Consequently, the ATB dismissed this case for lack of jurisdiction.

Liability For Taxes on Sold Business

Stephanie Spinosa operated a restaurant. She sold the business in June 2007 before fiscal year 2008 that began on July 1, 2007 and ended on June 30, 2008. For fiscal year 2008 the assessors valued the business personal property at $10,000 and the tax collector sent a bill for $91.80 to Spinosa. She reluctantly paid the tax bill and filed a timely abatement application that the assessors denied. Spinosa then appealed to the Appellate Tax Board (ATB) that found it had jurisdiction.

Spinosa contended her business personal property was overvalued for the simple reason that she did not own business personal property in Wellesley during fiscal year 2008. She proved that the personal property had been sold in June 2007 before the start of fiscal year 2008. For this reason she requested her tax bill be abated in full.

The ATB did not agree with the taxpayer. It noted Spinosa admitted she owned business personal property in Wellesley as of January 1, 2007, which was the assessment date for fiscal year 2008.

It is important for taxpayers to realize that the failure to file a form of list bars the taxpayer from abatement. If the taxpayer eventually submits the form of list after the March 1 deadline date or after the extension time granted by the assessors, the taxpayer may be granted abatement, but will be penalized for the late filing in the form of a reduced abatement. In that case, the assessors may not reduce any overvaluation below 150 percent of the actual value of the personal property. Assume, for example, that personal property with an actual value of $3,000 is assessed for $5,000. The taxable value that can be abated is only $500, which is the difference between the $5,000 assessed value and $4,500 (150 percent of the $3,000 actual value).

In this case, the taxpayer had satisfied the procedural requirements for abatement. On the taxpayer s substantive claim, the law provides, as a general principle, that January 1 preceding the start of the fiscal year is the relevant date for determining ownership of taxable personal property. By its terms, the statute had established a fixed date assessment for personal property. In applying the law to the facts, the ATB observed Spinosa owned business personal property in Wellesley on January 1, 2007, which was properly assessed for fiscal year 2008 taxes. The ATB found no basis in the statute for choosing another date such as July 1 for determining the ownership of this taxable personal property. According to the ATB, where it had intended July 1 to be the operative date, the Legislature clearly expressed it. For example, the Legislature listed July 1 as the determinative date for assessing ships and vessels.

Under the facts presented, the ATB ruled that the taxpayer owned the business personal property on the January 1 assessment date and was liable for the tax.

In this decision, the January 1 fixed date assessment rendered the owner liable for the personal property tax. In other cases, the fixed date assessment can benefit the taxpayer. Assume, for example, that Spinosa started her business in March 2000. Under the law, she would not have been assessed any prorated taxes for the balance of fiscal year 2000, nor would she have paid personal property taxes for the ensuing fiscal year 2001. Her business personal property would have first been assessed as of January 1, 2001 for fiscal year 2002 taxes. Furthermore, if Spinosa moved her business in June 2007 from Wellesley to an adjacent community, she would not be liable for fiscal year 2008 personal property taxes in her new community.