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TAX ]POLICY DECISIONS <br /> Tax Policy Options <br /> Municipalities have several options in distributing the tax levy among taxpayers under <br /> property tax classification. Use of these options results in multiple tax rates for <br /> different property classes because they change the components used to calculate the <br /> rate, i.e., the amount of the tax levy being paid by, or the assessed valuation of, the <br /> class. The total tax levy remains the same. <br /> Single or Split Tax Rate? <br /> Municipalities must decide whether(1) to tax all classes of property at their full and <br /> fair cash valuation share of the tax levy, which results in a single.tax rate, or (2) to <br /> reduce the share of the tax levy paid by residential and open space property owners <br /> and shift those taxes to commercial, industrial and personal property taxpayers or vice <br /> versa, which results in a split tax rate. <br /> Classification Exemption Options <br /> Municipalities may also consider whether to allow (1) an open space discount, (2) a <br /> residential exemption, and (3) a small commercial exemption.. <br /> Levy Allocation <br /> The selectmen must decide the percentages of the tax levy that each class of real <br /> property and personal property will bear. To do so, a residential factor is adopted. <br /> The residential factor governs the percentage of the tax levy to be paid by Class One, <br /> Residential and Class Two, Open Space properties. The difference is shifted to Class <br /> Three, Commercial and Class Four, Industrial and Personal properties (CIP). <br /> The adopted factor cannot be less than the Minimum Residential Factor (MRF) <br /> calculated by the DOR. The MRF represents the maximum shift allowed in the tax <br /> levy for the year and establishes the parameters for local decision-making. <br /> Single Tax Rate <br /> A residential factor of"l" results in the taxation of all property at the same rate. Each <br /> property class pays it's full and fair cash valuation share of the tax levy. Example: If <br /> the value of all residential properties makeup 80 percent of the total assessed taxable <br /> valuation, residential taxpayers will pay 80 percent of the tax levy. <br /> - 2 - <br /> C:\Users\tmcook\AppData\Local\Microsoft\Windows\INetCache\Content.Outlook\234694UO\Overview of Classification4.docx <br />