Tax Classification Information

Tax Classification – History

In 1978, the citizens of the Commonwealth of Massachusetts adopted a constitutional amendment authorizing the General Court to classify real property into as many as four separate and distinct classes and thereafter to tax such classes differently. In 1979, the General Court adopted an act which implemented the amendment. The act enjoyed popular support as a means to prevent the shifting of taxes from business property onto residential property as a result of court-ordered revaluations. Classification does not raise additional dollars from the property tax, but serves to redistribute how much levy will be raised from each class. Preferential tax treatment for any class of property is not mandated, but the choice of distributing the levy burden among the various classes remains a local option.

The Commissioner of Revenue supervises the implementation of property classification. After the Commissioner has determined that a city or town's assessed values represent full and fair cash values, the Assessor classifies all real property according to use. City Councilors are then permitted to determine, within limits calculated by the Commissioner, what percentage of the tax burden is to be borne by each property class.

The determination how to allocate the tax burden by class is made annually. In Lawrence as in other cities, the decision to allocate tax burdens is made, generally in November.

Massachusetts law provides for the implementation of the classification process through three phases: first, every city and town must value all taxable property at full and fair cash value; second, each city and town must classify every parcel of property according to use; third, each city and town which has revalued and classified may allocate its tax levy among the various classes of property. The first and second steps are mandatory. The third stage, determining whether to allocate the tax burden by class, is optional with each community.

Classes of Property

The first step in implementing the Classification Act is to assign each property to the appropriate class. In most instances, the usage class has been determined in the course of the revaluation.

Assessors in Massachusetts must classify all real property in the city or town into one of the four recognized uses: residential, open space, commercial or industrial space. All other property which is not real property is considered as personal estate, or personal property. Personal property constitutes a separate class unto itself. Each parcel, both real and personal, must always be assessed at its full and fair cash value.

Class One – Residential includes all property containing one or more units for human habitation. The class includes accessory land and buildings such as swimming pools, tennis courts, garages and sheds. Single family homes are in this class, as are large apartment buildings. Hotels and motels are not included in this class.

Class Two - Open Space Includes land maintained in an open or natural condition which contributes significantly to the benefit and enjoyment of the public. Such land cannot be held for the production of income.

Class Three – Commercial includes any property held for the purpose of conducting a business, such as office buildings, retail stores, etc.

Class Four – Industrial Includes any property involved in manufacturing, processing or extraction, and includes utility real property used for storage and generation purposes.