Using Tax Policy for Access

Tax-based tools designed to promote and preserve access may be rooted in federal, state, or municipal tax provisions, or a coordinated effort among these authorities. Taxation can be used to encourage public access by:

Providing targeted tax relief for certain, more desired uses. Particular uses deemed socially or economically important can be encouraged through either property tax relief or income tax incentives.
Increasing the cost of less desired uses. Taxes could be levied to discourage uses that would inhibit coastal access.
Raising revenues to invest in working waterfront and coastal access. Taxes on the sale of land, or fees levied on certain activities at places where the public enjoys the beach or shore, can raise money for the acquisition of additional access rights.

Overview

Opportunities for Promoting Access Using Taxes

Challenges to Access Posed by Taxes

What impediments to access and working waterfronts exist in current law?

New Approaches to Using Taxes to Promote Access

Case Studies

Resources

How can taxes be used to generate funding for access?

Taxes can be used as a means of raising funds that the public can invest in the acquisition of public access through voluntary conveyance/acquisition tools or through eminent domain. A land gains tax, real estate transfer tax, impact fees, or tax increment financing are examples of these strategies, some of which are already used for access and working waterfront purposes, others are potential new tools that would currently require legislative action to enable their use for these purposes.

How can tax incentives be used for access?

Reductions in a landowner’s taxes can be used as an incentive for allowing public access, or to discourage uses that inhibit access. Tax incentives may include income tax deductions, reduced property taxes, reduced estate taxes, avoidance of capital gains taxes, and gained investment interest. They might also include a current use taxation structure for open space, or for working waterfronts that provide access for commercial fishing activities.

How can current use taxation be used for working waterfronts and waterfront access?

Many states have restricted tax assessments on certain kinds of property, like farmland, by restricting the basis of property valuation to its current use, rather than its “just” value (full market value), or “highest and best use” value, (developed to its fullest potential). Known as current use taxation in Maine, this is a use-value assessment affecting the valuation of a property that is dedicated for a particular use. Current use provisions allow for a reduction in just value, and thus taxes on that value, for select uses that are deemed to have public benefit. Reducing this just value results in a reduction in property taxes that may make it affordable for owners to retain the property in its current use, potentially reducing development pressure on the property.

The Maine legislature initially enacted current use taxation to provide an incentive for property owners to keep their property as open space, farmland, or forestry. Maine’s Open Space tax law is designed to prevent the forced conversion of open space to more intensive developed uses as a result of economic pressure. Parcels enrolled as Open Space are assessed at current use with additional reductions possible for those parcels allowing public access.

In 2005, 72% of Maine voters endorsed working waterfront current use taxation, and in 2007, the legislature passed an enabling act to provide for such a program for waterfront land that is used for, or that supports commercial fishing activities. Owners of working waterfront property may apply to have their properties valued according to their current use as working waterfront. In exchange, the landowner must maintain the property for working waterfront uses only, or risk a financial penalty. The reduced valuation and associated tax reduction apply only to the land, not to any structures or equipment on the property. For more information see Maine Revenue Service.

Maine’s working waterfront current use program has become a national model. Florida soon followed by amending their state’s constitution, though the Florida legislation features a much broader definition of working waterfront that includes marinas, boatyards, launch facilities, and, as of 2006, resort hotels.

See Defining Working Waterfronts.

What impediments to working waterfront preservation exist in state and federal tax law?

The obvious tax-related impediments to protection of working waterfront are those which increase the costs of sustaining commercial water-dependent uses on the waterfront: ever-increasing personal and business income taxes, and property taxes that rise with population pressure. Specifically, property taxes across the country are typically levied based on market value, which can pose a threat to less immediately profitable marine industries located on high-demand waterfront property. Logically, then, tax-based efforts to improve working waterfront preservation will aim to reduce the income and property tax burdens for water-dependent enterprises. More subtly, though, some of these tax tools, if not implemented and coordinated well with other tax tools, may reduce their overall effectiveness. For example, an overlay of current use taxation, a working waterfront covenant, a water dependent use zone, and tax increment financing on a single parcel or area of waterfront property, may lead one tactic to reduce, or even eliminate, the benefits of the other.

What are new tax tools or new ways to apply existing tax tools for access and working waterfronts?

A number of tax-related programs exist that might be applied to securing access and preserving working waterfronts in Maine, but these would require new legislative or other action to implement. More on Using New Tax Tools.

How could a new Working Waterfront Conservancy help address access needs?

Case Studies

See examples of how tax policy has been used to provide access..

Resources

Working Waterfront Preservation: Opportunities Posed by Tax Policy – Executive Summary (PDF 36 KB) and Strategy Table (PDF 56 KB)
By Kristen Grant, Amanda LaBelle, and Catherine Schmitt, Maine Sea Grant, December 2010

Tax-based Opportunities and Challenges for Working Waterfront Protection (PDF 364 KB)
By Micheal Dixon, University of Maine School of Law, Marine Law Institute, July 2010.

Working Waterfront Tax Strategies (PDF 216 KB)
By Steven R. Gerlach, Esq., Bernstein Shur, Councelors at Law, September, 2010.