Residential Tax Exemption Explained; Board To Take Formal Vote In September

CHATHAM – In a little more than a month, the select board will take a formal vote to implement a residential property tax exemption.

 While a majority of the board voted last January to support a 20 percent residential tax exemption (RTE), its approval at a tax classification hearing in September isn’t a sure thing. Board members Jeffrey Dykens and Stuart Smith have consistently supported the exemption, while Cory Metters and Dean Nicastro have opposed it. Shareen Davis, the third vote in favor of the RTE, left the board in May. New board member Randi Potash elected last May could prove to be a swing vote, although at a candidate forum in May she said she supported the RTE. 

At the May annual town meeting, voters approved a nonbinding resolution backed by the finance committee urging the select board to delay implementation of the exemption by one year, while a finance committee working group studies possible alternatives. The group is expected to deliver a report in the coming weeks.

More than 650 of the estimated 3,267 eligible property owners have already applied for the exemption, according to the assessing department. If approved, the exemption will apply to fiscal 2027 tax bills, the first of which will be issued in October.

Select board members who support the RTE see it as a way to help year-round residents better afford the region’s high cost of living, especially when it comes to housing.

The summer residents advisory committee (SRAC) recently held an informational session on the RTE given that it is a “substantial change to how tax policy is administered for the town of Chatham, and will impact all of us, summer and full-time residents” alike, said chair Jeff Spalter. 

The advisory committee opposes the exemption, and in a May position paper asked the select board to reconsider its position. The paper is available on the SRAC page of the town’s website.

About 20 Massachusetts communities have adopted the RTE since it was established as a local option more than 40 years ago, including 11 on the Cape and Islands. Towns can opt for an RTE of up to 35 percent, although towns like Chatham with an approved seasonal community designation can increase the exemption to as much as 50 percent.

The RTE isn’t a strict property tax discount, Spalter said. It is calculated by dividing the total assessed value of residential properties by the number of residential parcels to reach an average assessed value. For the current fiscal year, the averaged assessed value is $1,642,816. That value is multiplied by the 20 percent exemption to arrive at a figure of $328,563. 

That amount is then deducted from each eligible property’s assessed value. According to the SRAC’s figures, a property at the average assessed value of $1,642,816 would see a taxable value reduction to $1,313,000, resulting in a property tax of $5,278, a savings of $748 over the tax bill without the RTE. Lower value properties would see more savings while higher valued properties would have less savings. Properties valued at $3.7 million or more would see no savings and could pay a higher amount than without the RTE, even if eligible for the discount.

The SRAC’s figures are based on current assessed values and the current tax rate. Had the 20 percent RTE been in place for the current fiscal year, the tax rate would have increased from $3.67 to $4.02. 

The figures will change once the latest values are approved by the state and a new tax rate is set at the September hearing, said SRAC member Tom Garvey.

Properties that do not qualify for the RTE will see a tax increase of about 10 percent, according to the SRAC’s figures. The town must raise the same amount of revenue from property taxes with or without the RTE, Spalter noted.

 “So the tax rate increases to offset the value of the exemptions,” he said. “The RTE is revenue neutral because it largely redistributes the tax burden,” shifting property taxes from “owner-occupied homes to non-owner occupied residential properties.”

Second homeowners are not eligible for the RTE. To qualify, a property must be the primary domicile of the owner as of Jan. 1 of this year. Those renting or second homes owned by year-round residents are not eligible. Homes owned in trust are eligible if the resident is both a beneficiary and trustee of the trust. Properties owned by corporations or LLCs are not eligible.

There are no income restrictions, a fact many have cited in opposing the exemption, since wealthy year-round residents will qualify for the same exemption as less affluent residents. At the SRAC’s July 16 session, all of the audience members who spoke opposed the RTE, some saying more data was needed, while others questioned the fairness of the measure.

 “This is not fair,” Joe White concluded. “It should be means tested.” Garvey said there are several local initiatives before the state legislature to allow that.

Nicole Stern, a year-round resident, agreed that “means testing would make a difference.”

 “It’s just a redistribution of wealth, and no one asked our permission,” she said. If there are residents who need financial assistance, other means should be found, she said, “because this system doesn’t work for anyone.”

Four members of the select board attended the session. Metters said he’s keeping an open mind but has constituents opposed to the RTE “breathing down my neck.” 

 “I’m not sold one way or another,” he said.

The SRAC is recommending that officials explore other exemptions that are available under state law, which has also been the position of the finance committee. A list of exemptions currently available to residents — most targeted at seniors, veterans and the disabled — is available on the assessing department webpage.

Applications for the RTE are also available on the assessing department page. Applicants must provide a number of documents, including tax returns, vehicle registration and a copy of a Massachusetts driver’s license or other identification, with financial figures redacted. The deadline to apply is April 1, but assessing officials ask that applications be filed as soon as possible.