October 29, 2024
By: Nicholas W. Vitti Jr., Joseph D. Szerejko, and Jaimie L. Russell
October 1st has come and gone, and new grand lists across many Connecticut municipalities are now in the process of being finalized. During this busy time of the assessment year, it is crucial for property owners—and particularly owners of business personal property—to not lose sight of other crucial deadlines that are right around the corner. Specifically, it's crucial for Connecticut property owners to remember to file their annual personal property declarations with their local assessor, in addition to other documentation if they seek relief such as tax exemption. Failing to file your declaration with the assessor on time can have significant financial consequences. Not only do you risk having a 25% assessment penalty added to your personal property’s annual tax bill or risk being subject to a different depreciation schedule than the one that would apply had you filed by November 1st, but if you own tax-exempt property and fail to file necessary documentation by that date, you risk losing any exemption status altogether. We want to ensure you are fully prepared to satisfy these and other related legal requirements with respect to assessment of your personal property in Connecticut.
What You Need to Know:
- Personal property tax declarations must be filed annually with your local assessor by November 1st.
- If the declaration is not submitted by this date, a 25% penalty will be added to the assessed value of the undeclared property.
- Municipalities allow you to request an extension of up to 45 days, but the request must be made in writing before November 1st. Be sure also to check if your town or city has an ordinance that relates to this procedure as well.
- For owners of tax-exempt property—such as certain machinery or equipment used in manufacturing or farm machinery—be sure to check for the latest exemption application forms used by your local assessor. These oftentimes are posted on the assessor’s website, but you may have to request them individually. Bear in mind that these forms are updated frequently, so don’t assume that last year’s form is still operative! Also, be sure not only to complete and file the exemption application forms themselves, but also be sure to include all necessary supporting documentation as part of your filing.
Am I Obligated to File?
In general, if you own tangible personal property that is located in a municipality for at least three months out of the year, it is not taxed in any other Connecticut municipality, and it is used for business or other valuable purposes, you are obligated to declare it with the town’s or city’s assessor. In making this determination, however, it is important that you first review the statutory exemptions that are codified in Chapter 203 of the Connecticut General Statutes. Personal property tax declarations filed with municipal assessors are the operative documents for this purpose. Moreover, even if your property is exempt by statute, bear in mind that you may still have to declare it, in addition to filing the application for exemption or exemption renewal. The process of preparing and filing this documentation is not merely a formality or an optional submission in order to obtain beneficial tax treatment; it is a legal obligation codified in state statutes and other law, which—if a taxpayer fails to meet without justifiable excuse—could have penal consequences. A taxpayer’s failure to comply with these filing requirements not only incurs penalties for the year in question, but it could lead to additional costs in later grand list years. This is not to mention that it may compound inaccurate assessments of your property and incorrect information in the assessor’s files.
What Types of Property May be Exempt?
Provided that the necessary documentation is filed with the town or city, some of the assets that might be exempt include the following examples:
- Machinery or equipment used in the production of tangible retail products; computers used for business purposes; business furniture, fixtures, and equipment (“FFE”) used in day-to-day operations; and equipment used to service or repair this property.
- Motor vehicles, especially those used for commercial purposes, may need to be declared, as well as certain farm machinery and livestock.
- Manufacturers’ inventory held for resale by businesses may be eligible for exemption under certain circumstances.
- Certain renewable energy systems or other sources, such as solar panels, fuel cells or wind turbines.
It cannot be taken for granted, however, that simply because you own one of these assets, the municipality must treat it as tax-exempt. Most of the operative exemption statutes impose additional procedural requirements on the property owner, all of which they typically must meet first before the assessing authority will afford them exemption status.
What Happens if I Miss the Deadline?
If the declaration is not filed on time, the assessor is required to estimate the value of your property and apply an additional 25% assessment as a penalty. This can lead to significant tax liability, especially for businesses with large portfolios of business property in a particular town or city. There is even Connecticut Supreme Court precedent providing that if a personal property owner does not furnish the assessor with adequate documentation and other information to support their declaration or exemption application, then the assessor typically is permitted to use the best information available to them in order to place an assessment value on the property. It is easy to see how this could ultimately end up hurting the taxpayer but getting ahead of it early and often will avoid such an outcome. In addition to annual filing requirements, some property owners, such as nonprofit organizations, must also stay on top of quadrennial and other period filings because missing a deadline could result in the loss of their tax-exempt status.
The Importance of Compliance – Real World Example:
Murtha Cullina recently secured a significant victory for a client in the energy industry who owned exempt renewable energy sources in Connecticut. The client commenced a personal property exemption appeal against a Connecticut town ("the Town") back in 2017 after the assessor, among other things, denied its exemption application to have the property deemed as a tax-exempt renewable energy source. A more detailed summary of the issues and the recent Connecticut Supreme Court decision affirming the trial court’s decision in our client's favor can be read here.
Notably for purposes of this alert, the Town's assessor and the Town heavily relied on the position that our client had not provided the assessor with adequate documentation and information in order to support its exemption application. Of course, the trial court record and the Connecticut Supreme Court’s decision ultimately disproved the Town’s position. One of the underlying reasons for the client's favorable outcome, however, is the fact that it at least complied with the exemption application requirements. Ultimately, our client was refunded all of the taxes it had paid over several years on the exempt property, its property was determined to be exempt thereafter, and all penalties imposed by the Town were nullified. At bottom, this appeal highlights the importance of a taxpayer’s compliance with filing and other procedural requirements in order to avoid costly penalties and litigation.
Take Action Before November 1, 2024:
We urge you to review your records and ensure that your personal property declarations are ready for submission by November 1st. If you anticipate any challenges meeting this deadline, we recommend submitting an extension request as soon as possible.
Always check with your local assessor's office, as different towns may have specific filing requirements or additional exemptions.
If you have questions about your obligations or need assistance with your filing, please contact Nicholas Vitti Jr. at 203.653.5435 or nvitti@murthalaw.com, Joseph Szerejko at 860.240.6186 or jszerejko@murthalaw.com, and Jaimie Russell at 860.240.6032 or jrussell@murthalaw.com.
Murtha Cullina is the exclusive member firm in Connecticut for the American Property Tax Counsel (APTC) – the only organization of law firms providing major portfolio owners with a single source for their property tax reporting and tax reduction needs. Nicholas W. Vitti Jr. and Joseph D. Szerejko are the APTC representatives for Connecticut from Murtha Cullina.
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