State auditor reports that boat excise law is ineffective
Cities and towns are losing millions of dollars annually due to an outdated and ineffective boat excise law and a breakdown in inter-governmental cooperation, according to a report released in September by State Auditor Joseph DeNucci.
The auditor estimates that many of the more than 175,000 boats located in Massachusetts escape taxation because of a lack of local collection efforts in many cities and towns, incomplete data provided to local officials by state agencies, and easily accomplished evasion by boat-owners.
DeNucci’s report estimates losses to local coffers of as much as $30 million since 1997. The report also concludes that the state is missing out on millions of dollars in boat registration and sales and use tax revenues.
An unrealistic and inequitable system for valuing boats required by state law coupled with administrative roadblocks has for many years served as a disincentive to cities and towns for collecting the boat excise. In his review of collection efforts in 162 cities and towns, DeNucci found that “a significant number of communities were discouraged with the cost ineffectiveness of the system and consequently did not assess and collect boat excise taxes.” He added that many communities that attempted to collect taxes “were not reaching their full potential.”
The auditor’s report also found many instances of possible tax evasion where boats owned by someone living in a city or town that collects the excise were registered as located in a municipality that does not collect the excise. In addition, the report found that there are about 15,000 federally registered boats that were not reported to cities and towns for boat excise purposes.
Boat excise revenues are used locally to support municipal budgets and to pay for the maintenance of local harbors and waterways.
The heart of the problem is a length- and age-based valuation schedule for boats defined in state law (M.G.L. Ch. 60B) that caps values for tax purposes far below actual values for most boats.
The tax rate is a standard $10 per $1,000 of valuation. And the law treats boats sharing age and length – but with very different real market values – the same. For example, the taxable value of a new, fully equipped 20-foot boat is capped at $3,000, even if the actual cost is $35,000 or more. The taxable valuation and the excise tax would be the same for an owner who paid only $5,000 for a more modest boat. The tax on both boats would be $30 under current law.
The MMA and the Massachusetts Association of Assessing Officers filed legislation last year to improve enforcement of the boat excise and to reform the valuation schedule. The Legislature’s Committee on Taxation held a public hearing on several bills, but did not release any bill for consideration by the full House or Senate.
The auditor recommends that the Legislature adopt the boat excise reforms proposed by the MAAO and the MMA.
Written by MMA Deputy Legislative Director John Robertson
