Whitefield’s personal property tax committee, formed in the wake of the uproar caused by the Whitefield Board of Selectmen’s effort to update the town’s personal property tax list, invited Sen. Chris Johnson, D-Somerville, and Rep. Deb Sanderson, R-Chelsea, to their meeting Thursday, May 28.
Committee members asked a simple question – if, according to Maine law, personal property tax is not limited to businesses, how is it legal for municipalities to only tax them?
The short answer given by Sanderson and Johnson: it is not legal.
A legislative fix may be the only solution to the issues raised by the Whitefield community after businesses were asked to complete a survey of their equipment, much of which may be subject to the personal property tax.
“It’s a bad law,” Selectmen Dennis Merrill, Sue McKeen, and Tony Marple said at different points in the discussion. Municipalities, however, face a penalty from the state, through a reduction in revenue sharing and school funding, if the law is ignored.
The personal property tax, established over 100 years ago, is one of the few vehicles municipalities have to generate revenue. According to the law, the personal property subject to the tax “includes all tangible goods and chattels wheresoever they are and all vessels, at home or abroad.”
In its application, municipalities have limited the personal property tax to businesses. According to Mike Rogers, of the Maine Revenue Services Property Tax Division, this is common practice due to the issue of “discovery” or tax assessors knowing the personal property an individual or business possesses.
For municipalities that host large corporations, the personal property tax is a critical source of revenue. For a rural community like Whitefield, the additional tax on personal property will drive many small businesses and farms out of business, committee members said.
“Young farmers recently have become very attracted to this state,” Sanderson said. The tax “is going to discourage them from getting involved.”
According to selectmen, the effort to update Whitefield’s personal property tax list was done to be equitable. Less than 1 percent of Whitefield’s population pays the tax and many of the businesses on the current list no longer exist.
Nineteen businesses paid the personal property tax in 2014, generating $112,786.74 in revenue for the town, according to the 2014 annual town report. The largest personal property tax bills were paid by Time Warner Cable and Maritimes and Northeast Pipeline.
By raising additional revenue through the personal property tax, selectmen hoped to reduce the town’s tax rate and the overall burden on property owners. Through the state’s Business Equipment Tax Exemption, Business Equipment Tax Reimbursement, and a generous depreciation schedule, selectmen hoped an undue burden would not be placed on small businesses and farms.
The two programs are currently undergoing revision in the Legislature, however, with plans to combine the two programs into one. The exemptions are also limited to the purchase of new equipment or out-of-state used equipment and would not apply to many of the small businesses and farms in Whitefield, committee members said.
The effort to be equitable by applying the personal property tax to businesses in Whitefield uncovered a broader problem with the application of the personal property tax in Maine. “It’s an unfair law,” Merrill said.
“If you only comply with half of the law then what’s the point?” McKeen said.
“It’s a badly designed, archaic tax structure that doesn’t allow us to support small businesses and farms in particular,” Marple said.
According to Sanderson and Johnson, reforming the tax law may be Whitefield’s best option. “You want the local option,” Sanderson said. Drawing a comparison with the Maine Uniform Building and Energy Code, which exempts certain communities from building code standards based on population, Sanderson suggested the possibility of reforming the law so it is optional for small communities.
Johnson suggested Whitefield selectmen reach out to the Maine Municipal Association and other rural communities to determine if there is enough support to form a coalition to reform the tax law before introducing a bill to the Legislature.
According to Johnson, the earliest a bill could be introduced to the Legislature would be in 2016. Johnson and Sanderson also said they will look into the law to determine what local thresholds and exemptions municipalities could apply to the current law to reduce the burden on small business and farm owners.
“This is something really important to small towns,” Sanderson said. “If you talk to your leaders to get them on board, I’ll talk to my leaders to get them on board.”
