Small Business Tax Relief Could be Improved, Braintree Officials Say

This week, Braintree officials moved forward a property tax plan for the current fiscal year that included relief for certain small business owners.

That exemption – a state law that municipalities can choose to adopt each year – provides commercial owners with property worth less than $1 million and employing less than 10 workers with an approximately 10 percent discount on their property tax bill.

In Braintree last year, the exemption saved business owners on average $960. The impact on the community could be far greater, however, with some tweaks to the state law, local officials said.

"It's important to do what you can do," Chief of Staff and Operations Peter Morin said to members of the Committee on Ways & Means Tuesday night as they recommended favorable action on the exemption to the full Town Council.

Morin was on the Board of Selectmen in 1993 when Braintree first adopted the discount. He said it was difficult to get onto the town's books at the time because of the burden it placed on the assessor's office, which has to manage a fluctuating roster of eligible businesses, as decided by the state Department of Revenue.

Yet over the last 20 years it has not lived up to expectations. The property value and employee caps should be higher, to better reflect property values today and keep up with a larger definition of small businesses that has come with two decades of inflation and economic growth, Morin said.

Other factors that limit the effect of the law include business owners who rent rather than own, and property owners who have multiple small businesses under their roof with a total number of employees that exceeds the current cap.

The state should review the law and make adjustments, Morin said. Paul "Dan" Clifford, chair of Ways & Means, added that he would also like to see state lawmakers take action, but said a home rule petition sent from Braintree to the legislature could make changes locally.

"Small business is an important facet of our economy," Morin said.

The U.S. Small Business Administration defines a small business as one "that is independently owned and operated, is organized for profit, and is not dominant in its field."

Its size standards vary depending on industry, but range from 100 employees up to 1,500 in manufacturing and wholesaling, and $5 million to $21 million in annual sales for retailers, depending on the product. However, those limits have been criticized for being too generous.

The National Federation of Independent Business says on its website that its members typically employ 10 people and report gross sales of about $500,000 a year.

Each year the Department of Revenue sends Braintree a list of eligible small businesses. That list is not public, Deputy Assessor Robert Brinkmann said, but he provided a general overview.

This year the small commercial exemption is projected to be for 142 Braintree businesses with a total value of $52,621,000, Brinkmann said in an email.

The town takes 10 percent of that total value – $5,262,100 – and multiplies it by the estimated tax rate per thousand of $25.93 for commercial property owners.

The resulting $136,400 in savings for those 142 owners would be redistributed to non-qualifying property owners in the commercial class, not residential owners.

In fiscal year 2013, approximately 147 businesses had a total of $141,100 redistributed to the rest of the commercial base, Brinkmann said. The previous year, Braintree had 146 businesses redistribute $133,250.

The likelihood of lawmakers changing the law anytime soon is slim, Morin said, because only a handful of communities adopt the exemption each year.

"When 340 communities have not adopted it, there's not a lot of hew and cry in the legislature to take it up," he said.