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APPROPRIATION COMMITTEE-2.020 ATM 25 March 2020 Article 6 Establish Qualifications for Tax Deferrals Funds Requested Funding Source Committee Recommendation None N/A Approve (8-0) This article proposes to raise the income limit for participation in the Town's tax deferral program under G.L. c. 59, § 5, Cl. 41A from $75,000 to $90,000. Under the deferral program, qualifying residents age 65 or older can postpone payment of some or all of their property taxes, in an amount up to half the value of their home,until the property is sold or otherwise disposed of. For general background on Clause 41A and other programs offering property tax relief to seniors,please see Appendix D to this report.2 The 41A Program and the Home Rule Petition Under generally applicable state law, the highest income limit a Town may adopt for participation in the Clause 41A program is that established by the Department of Revenue each year under the state's "Circuit Breaker"income tax relief program for a single person who is not a head of household, currently$60,000. 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 eligibility beyond that permitted under the general laws. Among other things, Chapter 190 permits the Town,by vote of Town Meeting and with the approval of the Select Board,to set a higher income limit for deferrals.'Town Meeting most recently raised that limit from $70,000 to $75,000 in 2019. The Proposed Increase This year, the Tax Deferral and Exemption Study Committee (TDESC) has recommended that the Town increase the deferral income limit by an additional $15,000 to $90,000, and the Select Board has voted to approve such an increase.The change is intended to help ensure that all persons who have been participating in the program can continue to do so, and to allow more residents to participate. The proposed new limit is based on the state Circuit Breaker's current limit for married couples filing jointly,which is considerably more generous than the single-filer maximum limit referenced in Clause 41A. While a$90,000 limit is higher than that in most other communities, it is not unique. Last year,the Town of Arlington established a limit of$88,000, the then-applicable Circuit Breaker limit for married couples. The TDESC considered proposing that Lexington's limit be pegged automatically to the higher Circuit Breaker limit, effectively indexing it for inflation, but elected to defer such a proposal until the impact of this year's substantial increase on the number and magnitude of deferrals can be evaluated. Committee Recommendation With a history of low utilization, and a participation rate that has not materially changed after the most recent increases in the income limit(see chart below), it is unlikely that this year's proposed change will significantly increase the number of deferrals or produce a material impact on the Town's finances. The cumulative balance of all deferrals outstanding increased from about $1 million in FY2015 to about $1.8 million in FY2019, but it has been relatively stable for the past three years as the dollar amount of old deferrals paid off roughly offsets the dollar amount of new deferrals taken out. 2 A brochure prepared by the Tax Deferral and Exemption Study Committee entitled Property Tax Relief Programs is available on the Town web site http://www.1 exi ngtonma.gov/taxrel i ef. The site also has detailed information about who qualifies for Clause 4 1 A deferrals and the application process. ' 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. 22