A Guide to the Structure of Property Tax Abatements in the United States

Property tax abatements—full or partial relief from property tax for certain property parcels—constitute an integral component of many state and local economic development programs. Abatements typically are targeted for improvements but not land, thereby enabling policy makers to use them to augment the attractiveness of particular locations for investment, rehabilitation, and other economic development.

Generally property tax abatements are limited to specific parcels and are awarded after a review process that often is both political and bureaucratic. Because abatements frequently are limited to construction or significant rehabilitation on these parcels, they afford some of the benefits of a dual rate property tax system albeit with a less universal impact than a full dual rating system. However, abatements do distinguish between improvements and land rather than among property uses, as is the case in many state classification systems, thereby providing differential relief to improvements.

It is the dual rating effect of abatements that establishes their utility as a development incentive, but this impact generally has been overlooked. Indeed, there has been no attention given to the differing structure of abatement programs across the states. This guide fills this void in the literature by providing an extensive and exhaustive review of property tax abatement programs currently being offered in the United States. It identifies the states that have abatement programs and describes the critical structural differences in the various state programs. As the comparison indicates, these structural variations are considerable. As a result, both practitioners and researchers should find this document a useful tool for comparison and assessment of programs across the states.

This guide is composed of five sections. Section I provides an introduction with definitions that illustrate the approach taken to delimit the subject matter, as well as a brief history of property tax abatements. Section II presents a review of the literature, and Section III, the lengthiest section of the Guide, contains a cross-state comparison of property tax abatement programs. Section IV presents a brief summary and conclusions. Following the main text, an appendix contains detailed information for each state.