Tax Increment Financing / Special Tax Assessment
Certified Project Description
A Certified Project is a business that is expanding its existing operations, relocating its operations, or building new facilities and creating permanent new jobs within an EOA. Prospective candidates submit an application to the community project liaison for consideration.
Certified projects may receive state Investment Tax Credit for qualifying tangible, depreciable assets. There also is a 10-percent abandoned building tax deduction for costs associated with the renovation of an abandoned building. In addition, such businesses qualify for municipal tax incentives, including:
- Special Tax Assessment (STA) – a phased-in assessment of the total value of the project property, or
- Tax Increment Financing (TIF) – a five- to 20- year property tax exemption based on the increased value of the project property due to new construction or significant improvements. With tax increment financing, all personal property taxes are exempt.
Special Tax Assessment (STA)
Covers both the existing and new value of the real estate owned or leased by the prospective Certified Project candidate. In year one, the tax is zero percent of the existing and new assessed value of the real estate. In year two, up to 25% of the assessed value is taxed. In year three, up to 50% of the assessed value is taxed. In year four, up to 75% of the assessed value is taxed. In years five and following, up to 100% of the assessed value is taxed. The Special Tax Assessment is for a period of no less than five and no more than twenty years.
Tax Increment Financing (TIF)
Massachusetts’ version of Tax Increment Financing allows municipalities to provide flexible targeted incentives to stimulate job-creating development. The TIF Plan, completed by the municipality, describes proposed public and private investment in the TIF Zone, and is agreed upon by the municipality and all the private owners in the TIF Zone. The municipality and the prospective Certified Project candidate agree to a property tax exemption based on a percentage of the value added through new construction or significant improvement for a period of no less than five and no more than twenty years.
The real estate taxes generated by the new increased assessed value is then allocated by the agreed-upon percentage of value added to one or more of three categories. The categories are:
- Exemption from real estate taxes.
- Payment of real estate taxes.
- Payment of betterment fee in lieu of real estate taxes to finance related infrastructure.
Each category, if necessary, may change from year to year. The percentage of allocation is calculated in a formal, negotiated agreement between the municipality and the Certified Project candidate. TIF serves to pass the tax savings on to property owners for use in project development, while ensuring that the development risk is borne by those parties as well.
A Certified Project Application is available online at: http://www.mass.gov/hed/business/incentives/edip/edip-application.html
Certified projects are administered in the City of Holyoke by the Office of Planning & Economic Development. For additional information, please call (413) 322-5655.
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Last Updated on January 17, 2013 by Planning Department