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Last Updated: 3/6/2012

Determination of the Contamination Tax

Although the contamination tax is not a property tax, it does require the determination of net tax capacity values. The procedures described below have been developed to apply in all instances where net tax capacities need to be determined for a parcel subject to the contamination tax. These procedures take into account preferential class rates, split classifications, fractional ownerships, limited market values, "This Old House" and all of the other special provisions that impact the determination of net tax capacities.

A.  Market Valuation

Step 1.

Estimate the market value of the parcel irrespective of the existence of any pollution or contaminants.

Step 2.

 

Estimate the loss caused by the presence of any known pollution or contaminants. This determination would typically be based upon a court determination, a recent sale of the parcel indicating duress, or a written estimate of the cost to clean up the parcel contained in an approved response action plan. If this valuation loss determination is $10,000 or more, it is the market value used to determine the contamination tax. If this valuation loss determination is less than $10,000, there is no contamination tax determination.

Step 3.

 

Subtract the valuation loss attributable to the existence of contaminants (Step 2) from the market value estimate which did not consider contamination (Step 1). The difference is the estimated market value for property tax purposes. It should be noted that this procedure for determining estimated market value for property tax purposes applies even if the valuation loss determination (Step 2) is less than $10,000.

Step 4.

Determine the Green Acres deferment, if applicable.

Step 5.

Determine the Open Space deferment, if applicable.

Step 6.

Calculate the limited market value reduction for the parcel, if applicable.

Step 7.

Determine the platted vacant land exclusion, if applicable.

Step 8.

Calculate the "This Old House" exclusion, if applicable.

Step 9.

Calculate the "This Old Business" exclusion, if applicable.

Step 10.

Subtract the platted land exclusion, if any (Step 4), the Green Acres deferment, if any (Step 5), the Open Space Deferment, if any (Step 6), the limited market value reduction, if any (Step 7), the "This Old House" exclusion, if any (Step 8), and the "This Old Business" exclusion, if any (Step 9) from the estimated market value for property tax purposes (Step 3). The difference is the taxable market value for property tax purposes.

B.  Net Tax Capacity

Step 11.

 

Calculate a net tax capacity amount based on taxable market value by applying the "current year classification provisions" to the property tax taxable market value (Step 10). This is the net tax capacity to be used for property tax purposes.

Step 12.

 

If the market value loss from contamination (Step 2) is $10,000 or more, add it to the property tax taxable market value (Step 10). If the market value loss from contamination (Step 2) is less than $10,000, there is no contamination tax determination. No further calculations are required.

Step 13.

Calculate a net tax capacity amount based on the market value total by applying the "current year classification provisions" to the market value total (Step 12).

Step 14.

Subtract the property tax net tax capacity amount (Step 11) from the net tax capacity amount based on the market value total (Step 13). The difference is the net tax capacity to be used for contamination tax purposes.

C.  Contamination Tax

Step 15.

Determine the contamination tax rate following the guidelines in the section above titled "Determination of the Contamination Tax Rate." The appropriate rate to use will depend on whether the owner and/or operator of the contaminated parcel is a responsible party, and whether or not there is an approved cleanup plan or an asbestos abatement plan for the parcel.

Step 16.

Multiply the contamination net tax capacity (Step 14) by the contamination tax rate (Step 15). The result of this calculation is the contamination tax for the parcel.

Examples

 
  • The first example is for a commercial preferred parcel with one market value reduction for contamination.

  • The second example is for a commercial preferred parcel with two separate market value reductions for contamination, each with its own contamination tax rate.

  • The third example is for a commercial preferred parcel with two separate market value reductions for contamination, each with its own contamination tax rate, but one of the market value reductions is below the $10,000 threshold needed to trigger the contamination tax.

  • The fourth example is for a residential homestead parcel.

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