The bill amends Section 44-5-2 of the General Laws regarding the levy and assessment of local taxes by introducing new provisions that allow cities and towns to exceed the maximum tax levy under specific conditions. Effective for tax assessments dated on or after December 31, 2025, the bill permits taxes levied on new housing units added to the municipal tax base during a fiscal year to exceed the maximum levy. This provision applies to newly constructed residential properties, including single-family homes, two-family homes, single-family attached structures, multi-family dwellings, mixed-use developments where residential units constitute at least fifty percent (50%) of the building's total square footage, and existing buildings converted into residential housing units, provided they meet applicable zoning and building code requirements and increase the municipality's total housing stock.

To qualify for this provision, a city or town must meet the following criteria: (i) issue over ten (10) certificates of occupancy for new housing units during the fiscal year in which the exemption is sought; (ii) ensure that at least ten percent (10%) of the units are designated as low- or moderate-income housing; (iii) tax the qualifying new housing units using the same valuation methods and rates as similar units in the respective city or town; and (iv) allow the taxes levied on these qualifying new housing units to exceed the maximum levy only for the fiscal year in which the certificate of occupancy is issued and two (2) fiscal years thereafter, with a phase-in of the full taxes into the maximum levy by the fourth fiscal year following the issuance of the certificate of occupancy.

The bill does not alter the existing structure of tax levy caps, which gradually decrease from 5.5% in fiscal year 2007 to 4% in fiscal year 2013 and beyond, nor does it change the conditions under which a city or town may exceed these caps, such as losses in non-property tax revenues, emergency situations, and substantial growth in the tax base due to new construction. Any levy exceeding the specified percentage increase must still be approved by a significant majority of the governing body or the electorate in a financial town meeting.

Statutes affected:
1091: 44-5-2