Who is a member?
Our members are the local governments of Massachusetts and their elected and appointed leadership.
The Honorable, Mark J. Cusack, House Chair
The Honorable, Adam G. Hinds, Senate Chair
Joint Committee on Revenue
State House, Boston
Dear Chair Cusack, Chair Hinds, and Distinguished Committee Members,
On behalf of the cities and towns of the Commonwealth, the Massachusetts Municipal Association appreciates the opportunity to offer testimony in favor of two issues before the Committee today.
Solar Property Tax
We strongly support H. 2827, An Act relative to clarifying property tax exemptions for solar and wind systems, filed by Representative Barrett, which would modernize the long-standing exemption for renewable energy property to better reflect the impact of new technologies and business practices that were not anticipated when the law was first enacted.
Because of an Appellate Tax Board (ATB) decision in 2017 that created uncertainty about the rules governing local taxation of solar and wind energy property, it has become more difficult to determine the financial aspects of proposed new projects and the status of existing projects. The uncertainty could result in delays in approving new renewable energy projects. In addition, some cities and towns may be facing unanticipated abatements, leading to a shift in tax burden to homeowners and businesses, and lost tax capacity in the future.
H. 2827 would update clause 45 of section 5 of Chapter 59 of the General Laws to re-codify the current exemption from the municipal property tax for solar or wind powered systems. The exemption would be limited to systems that are capable of producing not more than 125% of the energy needs of the residential property upon which it is located. Other systems would be subject to local taxation absent an executed agreement with the city or town for a payment in lieu of taxes.
Local-Option Payment in Lieu of Taxes
We strongly urge you to support H. 3080 and S. 1874, An Act relative to payments in lieu of taxation by organizations exempt from the property tax, filed by Representative Uyterhoeven and Senator Gomez, respectively, which would enable local-option payments in lieu of taxation (PILOT) for tax-exempt organizations.
These proposals would allow a municipality, upon acceptance at local option, to implement a program through which nonprofits that own property valued over $15 million would make an annual PILOT to the municipality equivalent to 25% of the amount that the organization would have been assessed on real and personal property if it were not exempt from taxation. Municipalities that adopt this section would craft local ordinances or bylaws to allow for PILOT agreements between the municipality and nonprofits, and may allow for exemptions or consideration of community benefits that reduce the amount of the required PILOT by the nonprofit.
Cities and towns provide a wide array of costly core services that benefit these nonprofit entities that own over $15 million in tax-exempt property, including police, fire and emergency response services, public works maintenance for the sidewalks and roadways surrounding the property, planning, zoning, and economic development services to facilitate safe access to the property, appropriate commerce and development in the area, and much more. It is important to note that the vast majority of nonprofit organizations do not own buildings or land, and as renters, their lease payments are used to fund the landlords’ property tax obligations. It is ironic, and inequitable, that much larger nonprofits with larger financial resources are exempt, while smaller nonprofits contribute to their host communities’ tax levy.
This legislation would simply create a process for municipalities and property-owning nonprofits to work closely to ensure their mutual interests and create a sustainable system to ensure that nonprofits make a consistent contribution to fund local public services. Many municipalities have experienced a dramatic reduction in their taxable property base because a significant portion of the total property within their borders is tax-exempt, leaving the municipalities with a comparatively small tax base to finance the provision of a wide array of services. Other municipalities see properties leave the tax rolls for nonprofit use as the nonprofit sector continues to grow, constricting the tax base they rely on to fund essential municipal services.
Nonprofits play a crucial role in the social, cultural, and economic fabric of our communities, and ensuring their long-term viability and success is truly a shared priority with municipalities. However, municipalities provide important, necessary public services to the nonprofits within their borders, including police and fire protection, infrastructure construction and maintenance, and water and sewer, at a cost borne by local government and the residential and commercial taxpayers in the community. This bill would create a consistent structure through which a nonprofit would contribute resources to support the municipal services that the nonprofit directly enjoys.
This legislation offers an important mechanism to close a loophole created by the property tax exemption of nonprofits, in that those nonprofits with the highest-value property receive significant benefits regardless of whether they are providing the highest-value services to the community. Under this legislation, municipalities could exempt nonprofits offering crucial social services to members of the community, or reduce the required PILOT below 25%, based upon the degree of community benefit.
In addition, many cities and towns host nonprofits that provide services that do not primarily benefit residents of those cities and towns, but instead benefit residents of other communities, states or countries. However, all of the public service costs associated with the nonprofit are borne by the host community alone. This legislation would allow for the consideration of the direct benefit that the property-owning nonprofit has within its host community, with a resulting PILOT that makes a direct community contribution and offsets the public service costs expended by the municipality.
Massachusetts is fortunate to be home to some of the finest nonprofits in the nation, many of international renown. From acclaimed museums and cultural institutions to cutting-edge medical centers to the best universities and private schools in the world, our cities and towns are enriched by our nonprofits every day. While municipalities are dedicated to the continued prosperity of these nonprofits, the nonprofits must in turn have an interest in the fiscal vitality of local communities, as their long-term prosperity is ultimately linked. This legislation would create an equitable framework for PILOT agreements between property-owning nonprofits and municipalities that would allow municipalities to meet continued demands for public services, and allow nonprofits to make contributions proportionate to the public services they receive.
We appreciate this opportunity to submit testimony on these important municipal revenue issues. If you have any questions or require additional information, please do not hesitate to contact us. Your office may reach out to me or MMA Senior Legislative Analyst Jackie Lavender Bird at firstname.lastname@example.org at any time.
Thank you very much.
Geoffrey C. Beckwith
MMA Executive Director & CEO