July 8, 2014 at 12:00 am

An Introduction to Property Tax Abatements in Maine

The Maine real estate market is improving.  Property owners are not the only ones pleased to see real estate values recover from the damage of the Great Recession.  Municipalities across the state are facing budget shortfalls and looking to increase revenues.  The result is some assessors are aggressively valuing real estate and some property owners are wondering if they should seek an abatement.

Under the Maine Constitution, property taxes must be assessed based on just value and fairness.  Just value is equivalent to fair market value.  The just value of property may be determined by looking at the sale prices of comparable properties (the market approach), the income that could be generated by the property (the income approach), or the cost of rebuilding or replacing the property less depreciation (the cost approach).  Maine law requires the assessor to consider all relevant factors in determining just value, including land-use restrictions, current use, physical depreciation and functional or economic obsolescence. 

The property also must be assessed fairly.  Fairness requires the assessor to value the property at a comparable rate to other similar properties in the area. 

Accordingly, a property owner has two avenues for challenging an assessment.  First, the owner can contend that the assessor’s determination of just value was incorrect.  To successfully challenge the determination of value, the owner must prove that the assessor used an unacceptable method to determine fair market value or made an error in computation.  Second, the owner can contend that the assessment is unfair in relation to comparable properties in the area.  To successfully challenge the fairness of the assessment, the property owner must demonstrate that his or her property has been valued higher than comparable properties.

So, how does a property owner know if he or she should seek an abatement?  If the owner believes that his or her property is being overvalued, the first step is to review all relevant information relating to the valuation of the property, such as the tax assessed value versus any recent sales data or appraisals.  If the tax assessed value is significantly higher than a recent sale price or appraised value, the next step is to determine whether this is due to the Assessor using inaccurate information, an improper valuation methodology, or if there is some other issue at play.  If the Assessor has used inaccurate information, applied an improper methodology, or significantly overvalued the property for some other reason, this can justify an abatement appeal challenging the just value of the assessment.   

Additionally, the property owner should compare the tax assessed value to tax assessment values, sale prices, and other information for similar properties in the local area.  If the owner determines that there is a notable difference in the valuation of his or her property versus other similarly situated properties, the owner may want to file an abatement based on fairness.  Many towns and cities have now put property tax information online, so the review process can be done from a home or office computer.    

If the property owner decides to seek a property tax abatement, he or she may elect to initially proceed via a formal or informal process.

The informal process begins by contacting the assessor to make an appointment to review the owner’s findings.  Assessors will typically review a request with the individual property owner, if time allows. Assessors will often consider reducing a property valuation for the future fiscal year in circumstances where there is a large discrepancy in valuation, larger than 10 percent, and a sound justification for a reduction in value.  The best time for such a meeting is before the taxes are committed (usually in August), as the likelihood of a voluntary reduction in valuation becomes slim after taxes are committed.  If the informal request for an abatement of property tax is denied by the assessor, the property owner must file a formal application for abatement in order to obtain any tax relief.  

The formal process begins with completing a formal application for abatement with the assessor’s office.  These application forms are often available on the town website, and should be accompanied by information about the property at issue and evidence that the property has been overvalued.  In most cases, a formal appraisal with an effective date of April 1 should be submitted in support of the abatement application.  Additionally, the appraiser should be willing to testify as an expert if the request for abatement proceeds to a hearing.  This application must be filed within 185 days of the date of commitment, which is the date the tax was committed to the tax collector (typically right before the tax bill was mailed).

The assessor will review the application for abatement, and if a decision is made, the assessor must mail notice of that decision to the requesting party within 10 days.  If the property owner receives no notice within 60 days of filing, the application is deemed denied.  If the application is denied, the property owner may appeal that decision.  An appeal can be filed with a municipality’s local board of assessment review, or, if there is no such board, with the county commissioner within the same 60-day timeframe.

The local board of assessment review may render a decision with or without a hearing.  The appeal will be deemed denied if 60 days after the appeal is filed the local review board has failed to answer.  If the reviewing body denies the property owner’s appeal, a further appeal can be filed with the Maine Superior Court within 30 days of the decision in accordance with Rule 80B of the Maine Rules of Civil Procedure.  For non-residential property with an equalized municipal valuation of $1,000,000 or greater, the land owner or the municipality may appeal the decision of the local board of assessment review to the State Board of Property Tax Review within 60 days after notice of the decision from which the appeal is taken or after the application is deemed to be denied. The board shall hold a hearing de novo. Decisions of the State Board of Property Tax Review may also be appealed to the Maine Superior Court.

While an increase in property taxes is often an unwelcome event, property owners may be entitled to relief if that increase is the result of an unfair or inaccurate valuation of their property.

Thanks to attorney Colin Hay for assisting with this article.

Categories: Maine Real Estate Insider