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APPROPRIATION COMMITTEE-2019 ATM Appendix D: Tax Relief Programs In early 2004,the Board of Selectmen created an ad hoc Tax Deferral and Exemption Study Committee to explore ways in which the property tax relief available to senior citizens and other needy residents could be enhanced and made more accessible. Since then, Town Meeting has taken a succession of steps to expand such relief,for the most part maximizing the options that the Town is allowed to adopt under existing state law and,in some cases,using home rule petitions to further increase opportunities for tax relief. The principal programs for tax relief now available to Lexington homeowners are: • A state income tax "Circuit Breaker"program providing a state tax credit for low- and moderate- income homeowners and renters age 65 and over. • "41A", a tax deferral program,under which low-to-moderate-income homeowners age 65 or over may defer any or all of their property tax due, after applying any available exemptions, up to half the value of their house,at an interest rate equal to the Town's cost of funds(see table below),until the house is sold or transferred, G.L. c. 59, § 5, cl. 41A. • "41C", a tax exemption program, under which homeowners age 65 or over with limited income and limited assets other than the value of their home may deduct$1,000 from their annual property tax, G.L. c. 59, § 5, cl. 41C�/z. • A locally-controlled Senior Service program adopted by Town Meeting in 2006. • A Community Preservation Act surcharge exemption program. State Income Tax"Circuit Breaker" Low- and moderate-income homeowners age 65 and over whose homes have an assessed valuation not greater than an annually adjusted ceiling may obtain a tax credit on their state tax returns(see table below). Low and moderate-income renters are also eligible for a tax credit. Qualified owners or renters are entitled to a refundable dollar-for-dollar credit,up to an annually established limit,to the extent that real estate taxes and one half of water and sewer bills (in the case of homeowners) or rent(in the case of renters) exceeds 10%of the applicant's income. This program is administered by the Massachusetts Department of Revenue and has no direct impact on Town finances. The "41A"Deferral Program This program, although it has not been widely used, is an important tool for tax-relief because it offers immediate and substantial property tax relief to seniors with significant equity tied up in a residence. Those who qualify may defer any part or all of their property tax for a given year,up to a cumulative total of half the assessed valuation of the property. All deferred taxes are eventually paid when the taxpayer dies, or when the property is otherwise sold or transferred. Towns set their own interest rates for this program, but the state caps the rate at 8%. Lexington's rate is based on a floating Treasury rate equivalent to the Town's cost of funds in the year of deferral(typically less than 1%). The rate set for each year remains in effect for the life of deferrals granted in that year(see table below). In 2008,in response to a home rule petition,the state legislature enacted a special law(Chapter 190 of the Acts of 2008) allowing Lexington to expand income eligibility limits beyond that permitted under the gen- eral laws,which are now pegged to the state Circuit Breaker limits(see table below).16 Town Meeting most recently raised the income threshold from$65,000 to $70,000 in 2016. 16 The special law also permits the Town to adopt a lower age of eligibility than 65, or to condition eligibility on objective criteria of disability or other hardship for persons who would not otherwise qualify based on their age,but the Town has never done so. 55