June 16, 2023

Senate Approves $590 Million Tax Relief Bill

Cape and Islands priorities advanced to triple septic tax credit, raise estate tax threshold, and incentivize year-round affordable rentals

BOSTON – The Massachusetts Senate unanimously advanced a progressive $590 million tax reform package on Thursday. The package incorporated several priorities long championed by Cape and Islands state Senator Julian Cyr (D – Truro) including tripling the septic tax credit to $18,000, doubling lead removal tax credits, raising the threshold of the estate tax to $2 million, and allowing cities and towns to opt-in to a property tax exemption for landlords renting affordable year-round units.

“The Senate’s tax relief bill includes significant wins for the Cape and Islands, including essential priorities on wastewater, housing affordability, public health, and health equity,” said Senator Julian Cyr. “If adopted in the conference committee, Cape and Islands homeowners will see long-sought relief for costly septic upgrades and greater ease when planning for their families' futures for generations to come thanks to a more accurate estate tax threshold. All while also giving our towns the ability to encourage a more robust year-round, affordable rental market.”

Increasing the Title V Septic System Tax Credit

Cyr advocated for bolstering Title V septic repair and replacement tax credits to lessen the burden carried by taxpayers bearing the costs of septic system upgrades. Building upon Governor Healey’s proposal to double the maximum total credits from $6,000 to $12,000, the Senate’s proposal would triple the maximum total credits to $18,000. The Senate’s bill would also make the tax credits available to taxpayers sooner by increasing the annually available credits from $1,500 per year to $4,000 per year. Additionally, the tax credit would cover 60 percent of total

project costs up to $40,000, a substantial increase over the current 40 percent covered of total project costs up to $15,000.

Failed septic systems cause irreversible damage to the environment. On Cape Cod, Martha’s Vineyard, and Nantucket, where thousands of residents rely on Title V septic systems, nitrogen and other nutrient pollution caused by failed septic systems is the single most significant threat to water quality. Failed Title V septic systems put the Cape and Islands’ single-source aquifers, estuaries and embayments, marine life, and commercial and recreational use of local waters at considerable risk.

The region currently faces a multi-billion-dollar price tag to clean up embayments and estuaries already impacted by septic system pollution. Upgrading existing Title V septic systems is key to mitigating additional pollution and preserving water quality. With septic systems upgrade costs often reaching tens of thousands of dollars, the increases to these tax credits provide significant relief to homeowners who upgrade their Title V septic systems.

Championing Attainable Housing

The Senate tax bill contains several housing provisions including an increase of the statewide cap for the Housing Development Incentive Program from $10 million to $57 million on a one-time basis and then to $30 million annually. The bill also raises the annual authorization of the Low-Income Housing Tax Credit, which directly supports the production of affordable housing units across the Commonwealth, from $40 million to $60 million.

Cyr collaborated with Senator Lydia Edwards (D—Boston) to advance a policy allowing municipalities to opt-in to a property tax exemption for landlords renting year-round units at an affordable rate to low-income residents. The amendment enables cities and towns to decide whether to adopt the exemption and choose the income threshold.

“We gave the Choice to municipalities to reward the good behavior of landlords who make rent affordable,” said Senator Lydia Edwards. “This is just one more tool in the toolbox to get people housed.”

Cape Cod, Martha’s Vineyard, and Nantucket have seasonal economies, a large second-home owner market, and extremely limited year-round housing. The region has lost much of its year-round rental housing to short-term rentals offered on platforms such as AirBnB and VRBO. The Town of Provincetown served as an example for the amendment, having approved such an exemption in 2002. Provincetown currently offers a property tax exemption for affordable year-round rentals units, incentivizing landlords to help expand affordable year-round units in the community’s strained rental markets.

“On the Cape and Islands, teachers, firefighters, police officers, restaurant workers, and others who make a life in this special place cannot find or afford housing due to high property values driven up by the second home market,” said Senator Julian Cyr. “I am thrilled this home-grown idea that incentivizes landlords to rent year-round and affordable units has been approved by the Senate. I’m grateful for the partnership and collaboration of my friend Senator Edwards.

Encouraging landlords to support affordable and year-round housing is essential to building a more accessible rental market on the Cape and Islands and across the Commonwealth.”

Cyr also led on progressive estate tax reform, which was incorporated in the Senate’s tax package. The bill raises the estate tax threshold from $1 million to $2 million to exempt more moderate estates from the tax.

For many families on the Cape and Islands, their home is their primary source of wealth. With soaring real estate values in the region, the current estate tax threshold of $1 million affects families it was not intended to impact. For instance, in 2022, the median sales price for a home on Martha’s Vineyard of $1.5 million, far exceeding the current estate tax threshold. For many next-generation Cape Codders and Islanders, a family home is their only foothold in the region, and some are unable to afford the current estate tax and are forced to sell their generational home. A higher estate tax threshold ensures more Cape Codders and Islanders can stay and build a life in our community.

Addressing Childhood Lead Poisoning

The Senate’s tax relief proposal incorporated provisions to double tax credits for lead removal, containment, and abatement. Cyr has prioritized childhood lead poisoning prevention since he first took office in 2017 and has continued his persistent advocacy for the cause. The tax bill would increase the tax credits available to homeowners paying for the containment or abatement of lead in their home to $3,000 and to $1,000 for those pursuing an emergency lead management plan and letter of interim control.

Exposure to lead can cause severe and irreversible damage to humans, particularly to the mental and physical development of children under age six. Children exposed to lead can experience diminished intellectual abilities and higher rates of neurobehavioral disorders, and higher blood lead concentrations can cause overt symptoms including vomiting, serious illness, and even death.

In Massachusetts, the primary pathway to lead exposure in children is through lead paint in older homes. The Commonwealth has one of the oldest housing stocks in the country with most homes built before the elimination of lead paint. According to the Department of Public Health, lead exposure disproportionately impacts gateway cities and lower-income communities with larger minority populations. Doubling tax credits for lead removal, containment, and abatement would help families and communities eradicate childhood lead poisoning.

This package includes a variety of initiatives as tax relief for the residents of Massachusetts.

The bill:

· Increases the Earned Income Tax Credit (EITC), which provides critical support to working families, from 30% to 40% of the federal credit

· Merges existing credits into a new and enhanced Child and Dependent Tax Credit (CDTC), increases the amount of the credit from $180 to $310 per child/dependent, and eliminates the current cap of two children/dependents

· Increases statewide cap for the Housing Development Incentive Program (HDIP) from $10 million to $57 million on a one-time basis and then to $30 million annually

· Increases the cap on the rental deduction from $3,000 to $4,000

· Raises annual authorization of the Low-Income Housing Tax Credit, which directly supports the production of affordable housing units across the Commonwealth, from $40 million to $60 million

· Doubles the maximum senior circuit breaker credit, which supports elderly residents who struggle with high housing costs, from $1,200 to $2,400

· Excludes homes valued at under $2 million from the Estate Tax and eliminates the “cliff effect” by allowing a uniform credit of $99,600 for all estates

· Triples the maximum credit under the Title V Tax Credit, which supports families who must replace failed septic systems, from $6,000 to $18,000, and lifts the amount claimable to $4,000 per year

· Increases the statewide cap for the Dairy Tax credit from $6 million to $8 million

· Expands eligible occupations for the Apprenticeship Tax Credit

· Doubles the credit for lead paint abatement to $3,000 for full abatement and $1,000 for partial abatement

· Expands the types of alcoholic drinks which qualify for a lower tax rate as part of the cider tax

Notably, this legislation ensures that student loan payment assistance offered by employers will not be treated as taxable compensation. The bill also adds regional transit fares and bike commuter expenses to the allowable commuter expenses eligible for favorable tax status.

To encourage affordable housing, the bill gives municipalities the option of adopting a local property tax exemption for real estate that is rented to a person below a certain area-dependent income level.

Additionally, the bill also directs the following studies:

· A study by the Executive Office of Administration and Finance on the feasibility of making advance quarterly payments of the Child and Dependent Tax Credit

· A study by the Department of Revenue on the efficacy of an additional, elective entity-level tax of up to 4 percent on a portion of qualified taxable income in the Commonwealth, coupled with a refundable credit, for eligible pass-through entities.

The Senate and the House of Representatives will now reconcile both branches’ proposals' differences in a conference committee.

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