Systemic Flaws
It appears that the City of Philadelphia Office of Property Assessment and Board of Revision of Taxes may be systematically depriving taxpayers of their rights to notice and an opportunity to appeal under the 10-year tax abatement program.
It is no secret that the 10-year tax abatement program is controversial. There have been numerous articles decrying its impact on the City’s tax base, with many criticizing how—as they see it—it props up developers to the detriment of City services and encourages gentrification that negatively impacts long-time neighborhood residents. Still others see it as a way to encourage development in a city where the cost of construction rivals that of NYC, without the similarly high market values such that the return on investment discourages housing projects. Like it or not, the program is geared to benefit not only developers, but also residential owner-occupants to either make newly constructed homes more affordable or prevent them from being taxed out of renovating homes they already own.
Apart from these debates, as an attorney, it is my opinion that any government program must be carried out lawfully, no matter how those within a governmental agency may feel about it on a personal level.
As far as the law on the 10-year tax abatement program, this is how the applicable law says it should work.
In the 1970s, the Pennsylvania General Assembly passed legislation providing for certain tax exemptions to encourage both rehabilitation of deteriorated residential and commercial real property, as well as the revitalization of economically depressed areas (i.e., to encourage development of vacant land in certain areas). The legislation addressing residential properties is called the Improvement of Deteriorating Real Property or Areas Tax Exemption Act (codified at 72 P.S. § 4711-101 through § 4711-305), and the legislation addressing commercial properties is called the Local Economic Revitalization Tax Assistance Act (codified at 72 P.S. §§ 4722-27), commonly referred to as the “LERTA” (both acts referred to hereinafter as the “Abatement Acts”). Philadelphia City Council implemented both Abatement Acts for the benefit of Philadelphia taxpayers. See, Phila. Code §§ 19-1303.2-1303.5.
Procedurally, to obtain an exemption (or, an abatement) under either of the Abatement Acts, the first step is for the taxpayer must fill out a form provided by the relevant taxing authority at the time a building permit is pulled (“or if no building permit is required,” when construction begins). See, 72 P.S. §§ 4711-205, 4711-305, 4727. Though, I suppose, read another way, the real first step is that the taxing authority in a jurisdiction where the Abatement Acts have been adopted must create the appropriate forms. In Philadelphia, the OPA’s forms provide that an approved 10-year tax abatement runs from January 1st of the year following issuance of the certificate of occupancy or completion of construction.
The second step is that the tax abatement application form is forwarded to the appropriate assessment authority. Third, once construction is complete, that same assessment authority “shall” reassess the realty at issue (specifically, the renovations or new construction). For those who are familiar with the 10-year tax abatement process, none of what I have described thus far should come as a surprise. What might be news, however, is that both pieces of legislation require the assessment agency to then, fourth, “notify the taxpayer . . . of the reassessment and amounts of the assessment eligible for exemption.” See, 72 P.S. §§ 4711-205, 4711-305, 4727 (emphasis added).
I have spoken with people who have 10-year tax abatements on their property and other attorneys who practice in this area. From these conversations, it seems as though the Philadelphia Office of Property Assessment (OPA) does not provide written notice to taxpayers approved for abatements either that their property has been reassessed or of the amount eligible for exemption, as required by the foregoing statutory provisions. This is important, because the fifth step in the procedure is that taxpayers entitled to the opportunity to appeal “from the reassessment and the amounts eligible for the exemption . . . as provided by law.” See, 72 P.S. §§ 4711-205, 4711-305, 4727. Of course, in Philadelphia, the law provides that the Philadelphia Board of Revision of Taxes (BRT) is the administrative agency to which taxpayers may appeal their assessments. Importantly, the BRT does not allow taxpayers to appeal from the amounts the OPA determines are eligible to be abated.
Aside from these general conversations, I have clients who recently ran into this problem.
Specifically, I represent two young professionals, a husband and wife, who decided to buy and renovate a home for themselves. They bought the home, pulled the permits, filled out the OPA’s tax abatement application, and forwarded the certificate of occupancy to the OPA once construction was completed. Many years later, the abatement still had not been implemented. They followed up numerous times, only to be told over the phone one day that the abatement had been implemented. However, online records revealed that the OPA had implemented their abatement recently, rather than as of January 1st of the year following the year construction was completed, as per the OPA’s forms and the applicable statutory provision. Of course, failing to implement as required by statute meant that the taxpayers could not obtain a refund or credit for the years in which they were entitled to receive one under the abatement acts. The taxpayers tried to appeal to the BRT but were told that there is “no appeal for implementing an abatement that was already approved.”
This seems to indicate that the OPA and BRT have established a process for 10-year tax abatements that denies Philadelphia taxpayers (1) notice of the abatement implementation and (2) an opportunity to appeal as required by the Abatement Acts.
I recently filed a complaint to aid my clients in vindicating their rights with respect to the 10-year tax abatement for which their property was approved years ago. If you have gone through this process and had your abatement implemented arbitrarily, at some point following January 1st of the year immediately following issuance of the CO or completion of construction, or if you disagreed with the amount the OPA identified as eligible for assessment but were never given notice or the opportunity to appeal it, feel free to contact me. I would also love to hear from anyone who did receive written notice of (i) the reassessment of their property due to new construction or renovation, (ii) the values attributable to the land and buildings, and (iii) the amount of such reassessment that the OPA identified as eligible for abatement (apart from the standard notice given in the year of a citywide reassessment).
The inability to administratively appeal the amount the OPA determines is eligible for abatement, together with the lack of notice to taxpayers (if that is, indeed, systematic), is something that I would hope City Council would address. In doing so, given that the BRT does not hold meetings to adopt rules and regulations pursuant to the Sunshine Act (which I know from experience sitting as a member of that Board), I would hope to see City Council ensure the process is an open one.