News & Thought Leadership from Sulloway & Hollis

October 26, 2020

Coronavirus, Tax Abatements and Real Property Valuation in New Hampshire

Seven months into the coronavirus pandemic, it is clear that a profound societal shift has occurred. Whether the move to remote work has made companies re-think their need for commercial office space or the lockdown has accelerated the shift to online shopping, pandemic-induced changes have caused substantial adjustments in real property use – and values – in New Hampshire and beyond. For those paying taxes on retail, hospitality and commercial office properties, these shifts present both challenges and opportunities. This article will address the framework for seeking a reduction in real property taxes under New Hampshire law in the face of the pandemic.

Real Property Taxation and the Ability to Abate

Without sales tax or a broad-based income tax, property taxation is the primary method of financing local government in New Hampshire. Property taxes are based on the fair market value of the real estate subject to taxation. Each municipality is required to regularly appraise all real property within its borders. Under RSA 75:1, the resulting assessment is to be based on the property’s “full and true value.” New Hampshire law requires that all assessments and resulting taxation be proportional. There are several nuances to this analysis; in brief, the standard is not simply whether property is assessed higher than fair market value, but whether it is assessed at a greater percentage of fair market value than other properties in the same community. This is generally determined by relying on “median equalization ratios” – calculations established by the Department of Revenue Administration – which measure the general level of assessment in municipalities. For example, a ratio of 95% means that on average, real estate in a particular municipality is assessed at 95% of its market value. Under this example, a taxpayer is entitled to an aggregate assessment that reflects 95% of its property’s fair market value.

New Hampshire’s statutory scheme allows “any person aggrieved by the assessment of a tax” to file an abatement request with the selectmen or other local authority by March 1, following the issuance of the year-end tax bills. Thus, Tax Year 2020 abatement requests must be filed by March 1, 2021.

The Selectmen have until July 1st to respond to abatement requests. If they deny the request or do not respond, the taxpayer has until September 1st to file an appeal with either the Superior Court or with the Board of Tax and Land Appeals (“BTLA”), an administrative body with parallel jurisdiction.

Duty to Abate When Warranted

Given that New Hampshire law requires real property taxation to be proportional, the tax abatement scheme is meant to provide selectmen a liberal framework to promote equitable resolutions. This goal of remedial justice requires the tax abatement scheme to be construed liberally, free from technical and formal obstructions.

In both setting the initial assessment and considering any abatement requests that flow from it, the selectmen have certain obligations. The New Hampshire Assessing Standards Board has stated that selectmen and assessors must ensure that their processes are well documented, transparent, credible, accurate and fair. Such an approach helps to ensure that the an abatement request is not denied in an over-zealous attempt to defend the initial assessment.

Similarly, the selectmen have independent legal and ethical obligations to ensure that assessments reflect fair market value and are proportional. When a municipality discovers that property has been over-assessed based on subsequent information, subject to tests of materiality and reasonableness, the assessment must be abated. The BTLA recently observed that “to decline to do so is a dereliction of that governmental obligation and professional responsibility.” Accordingly, while the taxpayer will bear the burden of proof to show disproportionate assessment, the tax abatement scheme is meant to aid, not hamper, redress.

Methods of Valuation

If a taxpayer seeks to appeal the denial of an abatement request, they will have to prove that the property is assessed at a greater percentage of the fair market value as compared to the other properties in the same community.

The determination of fair market value is generally accomplished by using any one or a combination of the various accepted appraisal techniques in valuing real property. In brief, there are three main approaches to value: (1) income (or income capitalization); (2) cost; and (3) sales comparison.

The income approach can be used for income-generating properties, with the expected income over time capitalized at a given rate to determine the anticipated benefits the property may yield. The cost approach estimates value by determining the cost required to replace or reproduce the property taking into account all applicable forms of depreciation. Finally, the sales comparison approach compares the property at issue to other recent sales of similar properties, adjusting to allow for comparisons. The appropriate approach often depends on the category of property. The New Hampshire Supreme Court has never held a single valuation approach or a specific combination of approaches as correct as a matter of law.

Valuation Issues and the Coronavirus

Although the long-term impact of the coronavirus on real estate values is uncertain, in the short term, real estate investment trusts show sharp drops in returns across almost all sectors, with commercial office space, retail and hospitality topping the list. Suffice it to say, the pandemic has led to declines in occupancy, declines in rent collection and temporary or permanent closures of many businesses. All of these factors, in turn, impact the valuation methods used to determine fair market value.

With respect to the income approach, it will likely be necessary for appraisers to take into account a radically changed environment, where property cannot generate as much income as it could prior to the pandemic. For example, restaurants will likely continue to operate with patrons further spaced out, thereby decreasing income. Downsizing in workforce and the need to socially distance reduces the income commercial office space property can generate. Similar restrictions cuts across other industries.

Under the cost approach, it is unclear how the pandemic may affect this valuation method. If land values and construction costs decrease, the cost to replace or reproduce property may similarly decrease. That said, the construction business has seemed to be fairly resilient to the downturn thus far. Similarly, land values have remained strong for the time being, particularly on the residential side. The sales approach, even under normal circumstances, operates on a lag; thus, it will likely take some time for the sales approach to reflect the changes we are now seeing – the expansion of online retail at the expense of brick-and-mortar stores, depressed values in the hospitality sector, decreased demand for commercial office space, and increasing demand for residential property.

Taxpayers considering filing for an abatement need to pay special attention to the industry in which they are involved and the property at issue. The practical implications of the shutdown and the various public health measures – what it means for this business, in this industry, for this timeframe – need to be considered, as those factors will influence the appraisal methodologies relevant to specific properties necessary for a supportable valuation.

Proration for Natural Disasters

In addition, RSA 76:21, makes an allowance for the proration of an assessment “whenever a taxable building is damaged due to unintended fire or natural disaster to the extent that it renders the building not able to be used for its intended use.” Although the “natural disaster” provision of the law has not yet been interpreted by the BTLA or the courts, a reasonable argument could be made that the coronavirus pandemic amounts to such a disaster, given that the pandemic prevented multiple sectors from using the building for their intended use as a result of emergency orders issued by the Governor.

The legislative history behind the statute indicates that it was enacted to remedy “unreasonable situations in which taxpayers may be paying taxes for structures” that are not unusable. In the one Supreme Court decision interpreting the statute, involving a structure damaged by fire, the Court observed that a taxpayer’s rights under to an abatement were not precluded or limited by RSA 76:21. Moreover, while the tax abatement scheme generally applies to disproportionate assessments, RSA 76:21 suggests that even if the property is not disproportionately assessed, that an abatement may be due. Indeed, the Supreme Court has observed that illegality and irregularity are not the only causes for which taxes should be abated, but that other misfortunes may furnish good cause for abatement.

Taken together, taxpayers affected by the coronavirus shutdown could consider pursuing relief not only with an abatement request, but also under RSA 76:21. A request for proration must be made either within 60 days of the triggering event or by March 1, whichever is later. This option seems particularly apt to those industries forced to partially or fully close for a period of time as a result of government orders.


New Hampshire’s tax abatement scheme is meant to be a liberal tool to allow municipalities to correct disproportionate assessments “for any person aggrieved.” While the long-term impact of the coronavirus on real property use and values remains unknowable, filing an abatement request may be a viable option for taxpayers who have suffered a disproportionate assessment, particularly in the face of the pandemic.