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APPROPRIATION COMMITTEE—2.020 ATM 25 March 2020 been deferred. The Clause 41A deferral program, as noted in the discussion of Article 6 above, allows qualified residents age 65 or older to postpone the payment of some or all of their property taxes, in an amount(including interest) up to half the value of their home, until the property is sold or otherwise dis- posed of. Deferral Interest Rate Clause 41A originally provided for a deferral interest rate of 8% but now permits a town, by vote of its town meeting, to establish its own deferral interest rate anywhere from 0%to 8%. That rate continues in effect for each year's deferral until the property is sold or conveyed or the person whose taxes have been deferred dies. The deferred taxes, plus accrued interest, are due and payable when the property is sold or conveyed,whether that occurs before or after death. At the 2006 Annual Town Meeting, Lexington adopted a variable interest rate for deferrals intended to match the return the Town would otherwise earn on the funds deferred: the monthly one-year Constant Maturity Treasury(CMT)rate as published by the Federal Reserve for the first week in March before each applicable fiscal year,not to exceed 8%. That rate,which tends to be roughly 3 percentage points less than the prime rate, was 1.96% for deferrals granted in FY2019; 2.55% for deferrals granted in FY2020; and will be 1.41%for deferrals granted in FY2021. Escalated Rate While Clause 41A gives towns the flexibility to establish a reasonable interest rate for deferrals during the life of the person whose taxes are deferred,but it does not allow the same flexibility once that person(or a surviving spouse who has assumed the deferral obligations) dies. Rather, it mandates an immediate escala- tion of the deferral interest rate, upon "the conveyance of the property or the death of the person whose taxes have been deferred,"to the rate of 16%.5 This high interest rate may be justified in the case of deferrals that are not promptly repaid, as required, when the property is sold or conveyed. However,in a case where a person whose taxes have been deferred has died, but the property has not yet been sold or conveyed, its immediate imposition upon death has proved, in many cases,to result in hardship. Although the Town certainly has an interest in having low-interest tax deferrals paid back promptly, it generally takes some time for an estate to arrange for the sale or conveyance of a decedent's property necessary to enable the deferrals to be repaid, particularly if the home has to be put on the market for sale to a third party. If the estate must be probated, even the most agile executor may need months to complete the judicial process required to convey the property,especially if the homeowner died intestate.Under these circumstances, a high interest rate is hard to justify as an incentive to assure prompt payment. Given that such delays are common, and often unavoidable,the imposition of a 16%interest rate immedi- ately upon the death of a low or moderate-income homeowner can result in a significant financial hardship for that person's heirs. If substantial taxes have been deferred,the higher interest rate,applied over the first twelve months, can easily add up to the equivalent of an additional year of property tax (e.g., $80,000 in deferred taxes at a 16%rate would generate an interest charge of$12,800). If the property is sold to a third party,that higher interest must be deducted from the proceeds of sale. If the property is conveyed directly to an heir, the estate (or the recipient of the property) must generate sufficient cash not only to repay the deferred taxes but also to pay a higher interest bill. 5 Specifically, Clause 41A provides that interest shall accrue at the rate provided in Chapter 60, § 62 of the General Laws. Section 62 allows a homeowner whose property has been taken or sold for nonpayment of taxes to redeem the property upon payment of all taxes in arrears,plus interest at the rate of 16%. 24