Bar News - February 18, 2015
Tax Law: Legislature Opens Door to Late Abatement Requests, Bars Appeals
By: John Tobin
While New Hampshire’s business taxes are the subject of much debate in the new legislative session, New Hampshire property owners pay far more in property taxes than is collected through all of the business taxes combined – more than $3 billion each year, according to the NH Department of Revenue.
The Tax Foundation, a national nonprofit that analyzes taxes at all levels of government, has determined that property taxes on owner-occupied residences in our state are the third-highest in the nation in actual dollars and second-highest in the country as a percentage of home value and as a percentage of income.
Because property taxes in New Hampshire are a significant burden, it is important for lawyers who advise individual homeowners and their families about real estate, family law, and wills and estates to be aware of the property tax relief that may be available, especially to elderly and disabled homeowners with limited incomes and assets.
The NH Legislature has created a variety of property tax relief programs, including elderly exemptions, tax deferrals for the elderly and disabled, and veterans’ tax credits. But taxpayers who find themselves behind in their taxes face strict deadlines in seeking such relief.
Homeowners often make partial payments or simply wait for their circumstances to improve before swallowing their pride and asking for help, only to be told that the deadlines for filing for relief have passed.
Abatement of Old Taxes
Although the abatement statute had a provision that allowed town officials to abate the interest on prior years’ taxes, and some municipal officials had believed that they had inherent power to abate old taxes as well, there was no clear authority for the abatement of prior years’ taxes.
In 2014, however, the Legislature amended the abatement statute to allow town officials, in their discretion, to abate prior years’ taxes and/or interest “for good cause shown.” But there is no appeal process for challenging these discretionary decisions. Instead, the appeal process for abatements remains open only to taxpayers who file a written abatement application by March 1 following the final tax bill.
Thus, town officials will be able to provide relief in compelling cases when the appeal deadlines have passed, but a decision to deny such a request will be shielded from further review by the Board of Tax and Land Appeals or the Superior Court.
Property Tax Tips for Attorneys
Here is brief list of other property tax issues that practitioners should be aware of:
Notice of tax relief required in all property tax bills. All New Hampshire municipalities are required, by RSA 76:11-a, II, to include “prominent” notice of the availability of these forms of tax relief in all of their property tax bills. New Hampshire Legal Assistance has successfully challenged the validity of tax deeds when the tax relief notice in the town’s tax bill was not prominent, and the elderly or disabled homeowners were not aware of elderly exemptions, tax deferrals, or poverty abatements that might have prevented the loss of their homes.
Mandatory and optional tax relief. Elderly exemptions, tax deferrals for the elderly and disabled, poverty abatements and the standard veterans’ tax credit are required in all cities and towns, while other forms of tax relief, such as exemptions for the disabled, blind, and hearing-impaired, and the expanded veterans’ tax credit, must first be adopted by a town or city.
A municipality can decide to use more generous elderly exemptions and eligibility levels, so a homeowner or her attorney should contact the municipal office to find out what it allows. The NH Department of Revenue Administration also maintains a chart that shows the exemption amounts and eligibility limits for all towns and cities, available on the DRA website.
Tax deferrals - a largely untapped source of relief. The tax deferral program authorized by RSA 72:38-a is enormously underutilized. Under this statute, elderly and disabled people who would suffer serious financial hardship or a possible loss of property because of the burden of their property taxes can apply for a deferral of their property taxes.
Many municipal tax officials are not aware of tax deferrals and how they operate, or mistakenly believe that they are an optional form of tax relief that a town or city must choose to adopt. A taxpayer who applies for this relief, especially in a small New Hampshire town, should be prepared to insist that this form of relief is available upon application.
Once the town files a deferral lien, it will charge five percent (5 percent) annual interest on the taxes owed. Although a tax deferral is like a mortgage, the homeowner does not have to pay any of the deferred taxes or the interest while he remains living in the home. The deferred taxes do not have to be paid until after the homeowner’s death, unless the property is sold. In the end, however, the municipality recovers all the unpaid taxes, plus 5 percent annual interest, so this should be a more palatable form of tax relief for hard-pressed local officials.
“Good cause” for an abatement includes poverty and hardship. In addition to the typical “valuation” abatement process, Ansara v. City of Nashua (1978) established the right to an abatement based the taxpayer’s hardship or poverty.
In Ansara, the NH Supreme Court said that homeowners seeking poverty abatements who have some equity in their homes must show that it is not reasonable for them to relocate, refinance or otherwise obtain additional public assistance. As with tax deferrals, town officials often are not aware of the case law supporting poverty abatements, and a taxpayer or her lawyer may have to press the officials to seek advice from town counsel or the NH Municipal Association.
For elderly exemptions and veterans’ tax credits, the deadline is April 15 of the year in which the taxpayer is seeking relief. For relief in 2015, the deadline is April 15 of this year. The town or city will have until July 1 prior to the date of the final tax bill (usually sent in November or December) to make decisions on credits and exemptions.
If the homeowner disagrees with the town’s decision, or the town fails to issue a decision, the homeowner may file an appeal with either the Superior Court or the Board of Tax and Land Appeals by Sept. 1 of the year following the tax bill.
For tax deferrals and abatements, the deadline is March 1 following the final tax bill for the year. For relief for 2014 taxes, the deadline is March 1, 2015. The town will have until July 1 following the tax bill to make a decision. If the homeowner disagrees with the town’s decision, or the town fails to make a decision, the homeowner must file an appeal with either the Superior Court or the Board of Land and Tax Appeals by Sept. 1 of the year following the tax bill.
John Tobin recently retired after 38 years at New Hampshire Legal Assistance, where he represented low-income and elderly homeowners in property tax cases.