For years, city administration has struggled to monitor and maintain records involved in real property tax assessments for mixed-use properties. Owners of these units pay property taxes based on the higher valued commercial use of the property, as well as the residential use, which provides a lower tax rate.
As the city continues its build-out of rail transit and planned transit-oriented development, many more mixed-use properties are expected.
Currently, the city requires taxpayers to provide burdensome documentation, which requires the real property staff to spend numerous hours processing and screening each submittal for completeness and accuracy. There is also no consequence for discontinuation of the residential use and lack of notification, so property owners continue to pay the lower rate without currently using it for residential purposes. For the 2016 tax year, the Real Property Tax Division conducted an audit on approximately 4,000 properties and found numerous discrepancies indicating that taxpayers may have been under paying their taxes for a number of years.
Under Bill 8, condominium owners will be required to dedicate their mixed-use unit for residential use in order to receive the benefit of the lower residential tax rate. In the absence of a dedication the unit would be classified based on the unit's highest and best use in the same manner as all other property. The dedication will be an automatically renewed 5-year dedication for residential use, which eliminates the burden of proof for the taxpayer, except in the case of an audit, and allows for a rollback should a violation of the dedication occur.
