The Other Tax Day You May Not Know About
By: Rudman Winchell Attorney John Hamer
It just is not fair– April 15th gets all the notoriety but is it the first tax day of the year? No, it is not. News crews run flashy stories of people waiting in line at the Post Office at 11:30 pm on April 15 waiting to mail their tax returns. Everyone is thrilled when April 15 falls on a weekend so there is extra time to file. Meanwhile, unassuming April 1 receives little fanfare, perhaps overshadowed by April Fools’ Day. Make no mistake about it, April 1 is a day of tax consequence in the municipal real estate tax world.
April 1 is the day when liability for municipal taxation is established. “All real estate within the State… is subject to taxation on the first day of each April.” 26 M.R.S.A. § 502. In other words, whoever is owner of record (or being assessed taxes as the party in possession) on April 1 will be responsible for paying the whole year’s taxes. When real property is sold, this responsibility is handled by contract- the buyer and seller generally apportion the tax liability based on the date of sale and taxes for the rest of the year are paid to avoid any problems. Absent a contractual agreement to apportion the taxes, the seller would remain liable for the real estate tax for the rest of the year even though the seller no longer owns the property, and if seller did not pay the taxes, the municipality could place a lien on buyer’s property, effectively forcing buyer to pay it off or face municipal foreclosure.
While the responsibility to pay the tax is set on April 15, the amount of tax that will be due will not be calculated until a later date. Once the municipality creates and passes a budget and therefore knows how much money it must raise for the next fiscal year, the budget is divided by the value of all taxable property in the municipality to derive the mil rate, or tax rate per $1,000 worth of valuation. When that happens, then the tax bill can be calculated- the mil rate is multiplied by property value. Unlike income taxes, which taxpayers must calculate for themselves, municipalities kindly calculate real estate taxes for us. Since the amount of property taxes depends upon both valuation and the established mil rate, the total amount of your taxes may well change from year to year even if the tax rate stays exactly the same because the assessed value changes.
Perhaps it is fitting that this other tax day shares the calendar with April Fool’s Day, but it should not go unnoticed!