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Last Updated: 3/6/2012

Determination of the Contamination Tax Rate

The contamination tax is equal to a percentage multiplied by the contamination net tax capacity of the property. The percentage or "contamination tax rate" for the property depends upon documentation supplied by the owner of the property:

The default tax rate is 100%. This is the tax rate that applies if:
 

(a) there is no cleanup or cleanup plan, or asbestos abatement plan, and the owner and/or operator is a responsible party, or
(
b) the owner does not supply the required documents to the assessor to qualify for a lower tax rate

The tax rate is 50% if:

(a) there is a response action plan or asbestos abatement plan and the owner and/or operator is a responsible party, and
(b) the property owner provides the assessor with a copy of the response action plan approved by the PCA or the DOA (unless the contaminants are asbestos) and an affidavit indicating when work under the response action plan began.

The tax rate is 25% if:

(a) there is no cleanup or cleanup plan, or asbestos abatement plan, and the owner and/or operator is a not a responsible party, and
(b) the property owner provides the assessor, by July 1 of the assessment year, with a copy of the determination by the PCA or the DOA that the property owner (and the operator, if there is one) is not a responsible party.

The tax rate is 12.5% if:

(a) there is a response action plan or asbestos abatement plan and the owner and/or operator is not a responsible party,
(b) the property owner provides the assessor with a copy of the response action plan approved by the PCA or the DOA (unless the contaminants are asbestos) and an affidavit indicating when work under the response action plan began, and
(c) the property owner provides the assessor, by July 1 of the assessment year, with a copy of the determination by the PCA or the DOA that the property owner (and the operator, if there is one) is not a responsible party. 

If the contaminants are asbestos, the owner must provide the assessor with:

  • a copy of the asbestos abatement plan, 
  • an affidavit indicating when work under the asbestos abatement plan began, and
  • a copy of either:
    • the binding contract (with a licensed contractor) for completion of the work OR
    • the owner's license (from the Commissioner of Health) to perform the work. 

The abatement plan must provide for completion of the work within a reasonable time period, as determined by the assessor.

Note: A property is exempt from the contamination tax if the contaminants are asbestos and the property owner is implementing a proactive in-place asbestos management program consistent with the rules, requirements, and formal policies of the United States Environmental Protection Agency.

The table below shows a simplified version of the determination of the appropriate tax rate to use, depending on whether the owner and/or operator is a responsible party, and whether or not there is a cleanup plan or an asbestos abatement plan.

 

Cleanup Status  

Tax Rate
Responsible Party Non-Responsible Party
No cleanup or cleanup plan. 100% 25%
Plan approved or contaminants are asbestos and owner has an abatement plan in place. 50% 12.5%
Cleanup done. No tax No tax

The determination of the contamination tax rate gets more complicated if more than one form of contamination is involved and the property owner is a responsible party for one form of contamination but not the other, or if there is a response action plan for one form of contamination but not the other. First of all, it must be determined if there are separate market value reductions involved - one for each form of contamination.

If there are separate market value reductions involved, the $10,000 minimum market value reduction provision for contamination tax purposes applies to each of the separate market value reductions, not to the sum of the market value reductions for the different forms of contamination.

If there are separate market value reductions involved, each separate contamination value has its own tax rate, depending on the responsible party status and on the response action plan status. Therefore, the contamination tax is determined separately for each form of contamination.

However, if a market value reduction that has been granted involves more than one form of contamination, the contamination tax rate that applies is the highest rate that could be determined based on an examination of the responsible party status and the response action plan status, and it applies to the total contamination value. Examples are as follows:

  • If for one or more forms of contamination the owner is a responsible party, and for one or more forms of contamination there is no approved response action plan, the tax rate that would apply to the entire contamination value would be 100%.

  • If for one or more forms of contamination the owner is a responsible party, and for all forms of contamination there is an approved response action plan, the tax rate for the entire contamination value would be 50%.

  • If for all forms of contamination the owner is not a responsible party, and for one or more forms of contamination there is no approved response action plan, the tax rate for the entire contamination value would be 25%.

  • If for all forms of contamination the owner is not a responsible party, and for all forms of contamination there is an approved response action plan, the tax rate for the entire contamination value would be 12.5%.

Next Section: The Role of the PCA and DOA in Contamination Taxes
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