Any Tax Relief if Your Building Burns Down?

The real estate tax year in New Hampshire runs from April 1 through the following March 31. Real estate is valued based on its condition as of April 1, i.e., at the beginning of the tax year; therefore, the tax one pays for the entire 365 days of a tax year is based on the condition of the property as of a single day, April 1.

What happens if a property burns to the ground after April 1? Is it fair to pay a tax on something that no longer exists? Does the taxpayer need to wait for the following tax year to get a downward adjustment? New Hampshire actually has a statute, RSA 76:21, which addresses this exact situation.

Passed in 2012, RSA 76:21 allows assessing officials to prorate an assessment for a taxable building that is damaged due to unintended fire or natural disaster based on the number of days the building is unavailable for its intended use. In other words, New Hampshire allows tax abatements for damaged properties. But there is a catch: the taxpayer must file an application with the assessing officials within 60 days of the event causing the damage. So what happens if the taxpayer misses the 60 day deadline? Well, New Hampshire courts have addressed that situation as well, and the news is good for taxpayers.

On July 1, 2014, a house situated in New London “was struck by lightning and burned to the ground.” The taxpayer did not apply for a tax proration under RSA 76:21, instead, the taxpayer filed a conventional New Hampshire tax abatement application by the March 1 deadline under RSA 76:16, some six months after the disaster. The town denied the application, citing the failure to comply with the 60-day deadline in RSA 76:21.

RSA 76:16 gives taxpayers the right to request an abatement for “good cause shown.” The reasons most commonly asserted by taxpayers is disproportionality (the value is too high) and inability to pay. In reviewing RSA 76:16 and 76:21, the New Hampshire Supreme Court pointed out it had never explicitly limited the application of RSA 76:16 to disproportionality and inability to pay. It also noted the equitable nature of RSA 76:16, and that the statute should be liberally construed to advance justice. The court ultimately concluded the New London taxpayer could indeed seek an abatement without adhering to the 60 day deadline in RSA 76:21. As the court succinctly stated: “fire-related building loss occurring after April 1 may constitute ‘good cause’ under RSA 76:16.”

While apparently giving qualifying taxpayers the option of using RSA 76:16 or 76:21, the Carr decision leaves open some interesting questions. RSA 76:21 mandates a proration of taxes “based on the number of days that the building was available for its intended use divided by the number of days in the tax year, multiplied by the building assessment,” whereas RSA 76:16 does not. If the fire occurs on March 28, does that make RSA 76:16 a better option? If so, how should the property be valued?

Furthermore, while RSA 76:21 is limited to “unintended fire or natural disaster,” RSA 76:16 is not. Given the court’s reasoning, other types of accidental damage may be fair game under RSA 76:16. One would expect that envelope to be explored over the upcoming years.

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