By Tom Glynn
Staff writer

As was pointed out by one Town Meeting representative during floor discussion two weeks ago, the state stands to be a winner as a result of the town’s new rules for tax exemptions for qualifying property owners 70 and over.

The reason is that in some cases, the new $1,000 town exemption will mean elderly recipients will no longer qualify for the state’s $750 circuit breaker tax credit.

Town Meeting voted to double the existing $500 property tax exemption and to ease income guidelines to qualify for it, beginning July 1, 2003. The qualifying age was left at 70; the qualifying age for the state circuit breaker is 65.

Take a couple, one of whom is 70, with a combined income of $35,000, including $12,000 from Social Security. The couple pays $4,000 a year in property taxes and $500 in water and sewer bills.

In the current town tax year (FY 2003: July 1, 2002 to June 30, 2003,) the couple does not qualify for a property tax break because their income exceeds the limit of $20,000. (The town income calculation does not include Social Security.)

In the current state tax year (calendar 2002,) the couple does qualify, however, for a state tax credit under the circuit breaker law because their property tax plus half their water and sewer bills ($4,250) exceeds 10 percent of their income, including Social Security ($3,500.) The couple will get the maximum $750 credit ($4,250 minus $3,500) on their state taxes for 2002. (With a credit, whatever amount exceeds state income taxes otherwise owed is returned as a refund.)

In the town’s next fiscal year (FY 2004, which starts July 1, 2003), the couple will qualify for Walpole’s $1,000 tax exemption because their income now falls within the new higher limit of $30,000 (with Social Security excluded.)

The couple will pay $3,000 ($4,000 minus the new $1,000 town credit) in property taxes and the $500 in water and sewer bills in the coming town fiscal year. So it looks as if the couple would no longer qualify for the full $750 state credit for 2003. But they do, if only just this once.

The reason they will qualify for the full 2003 state tax credit is that the couple will not see their $1,000 exemption from the town until the second half of the town’s FY 2004: January to June 30, 2004. (The first two quarterly property tax bills – July 1 to Dec. 31, 2003 are estimates and will not reflect the new town exemption.)

So for calendar year 2003, the couple will be paying full Walpole quarterly tax bills. And thus for calendar (and state tax year) 2003, they’ll still be eligible for the full $750 state tax credit.

But once the couple realizes their $1,000 town savings in the first half of 2004, they will no longer qualify for the state credit for that and future years, assuming they continue to receive the town exemption annually.

In the second half of 2004, the couple will be eligible for a further exemption of up to $500 from the town to offset any increase in their property tax bill. (In addition to raising the base exemption from $500 to $1,000, Town Meeting voted last month to continue the practice of making an additional 50 percent of the base available to cushion tax increases.)

So future annual property tax savings for the couple would be $1,500, making it less likely that their local tax payments would ever be high enough to restore their eligibility for the $750 state circuit breaker.

The hypothetical couple’s case is in the mainstream. In a case with lower income and higher real estate taxes, an elderly property owner could qualify annually for the full local tax exemption and full state tax credit.

As was pointed out by assessors before Town Meeting, there are no numbers available for the annual income of Walpole property owners 70 and above.

Under Proposition 2 1/2, the exemptions granted the elderly are treated as an expenditure by the town. The money comes from the assessors’ overlay account – money set aside each year to cover exemptions and abatements.

If assessors foresee a need for a higher overlay account because of the new elderly exemption rules, they can instruct the town administrator to find the money as he prepares the annual budget for the town. If the need is considerable, Town Administrator Michael Boynton said in mid-October, it would be necessary to dig into money that otherwise would be available for town services.

An alternative approach advocated by municipal officials statewide, Boynton said, would allow the overlay account to increase beyond the Prop. 2 1/2 limit, thus avoiding conflict between tax relief for the elderly and other community needs.

The assessors have not yet begun their deliberation on how much they should ask for the overlay account for next year, town appraiser Dennis Flis said. That account, built up over the past four or five years, has close to $400,000 in it.