A tax abatement is a break on a building or apartment's property taxes. It is a type of governmental incentive that seeks to reduce, or abate, the tax burden a property owner must pay for a specified period. As a reinvestment tool, cities can choose to implement tax abatement programs citywide or in specific neighborhoods. It is typically awarded to investment that benefits the public, and is used by developers and property owners to offset the cost of investment in their property. Tax abatement programs can either be granted as-of-right or in exchange for the creation or preservation of affordable housing units.
Property Tax Abatement
A real property tax exemption typically refers to a full or partial exclusion of an increase in the assessed value of a newly constructed or rehabilitated property which results from such construction or rehabilitation. A real property tax abatement typically provides a reduction in the amount of taxes owed on rehabilitated property by applying credits based on the cost of the improvement. In other forms, abatement can also be given to developers or property owners in exchange for including a certain amount of affordable housing in their projects or for investing in economically-challenged neighborhoods.
In Pennsylvania, the tax abatement program that was specifically authorized for local taxing bodies is the Local Economic Revitalization Tax Assistance (LERTA). Through LERTA, local taxing bodies are able to grant up to a 10-year abatement on incremental assessment increase for any building improvements and new construction for a designated area. Since the abatement is only for the incremental value, the taxing bodies still receive the property taxes for the pre-improvement value of the property. In Pittsburgh, the Urban Redevelopment Authority offers a program that allows property owners who purchase or build a new home, or make significant home improvements in specific Targeted Growth Zones (TGZs), to receive a tax abatement for city, county, and school taxes for three, or sometimes 10 years. Some of the designated TGZs include Allentown, Arlington, Beltzhoover, California-Kirkbride, Fineview, Hays, Hazelwood, Homewood, Knoxville, Larimer, Mt. Oliver, Perry South, Sheraden, Spring Garden, Upper Hill, and Uptown,
This type of abatement entails reducing or even eliminating a portion of the tenant's rent in residential or commercial properties. The amount deducted from the rent payment generally coincides with the percentage of the property that has become affected or uninhabitable because of a certain problem. In Pittsburgh, rent abatement has been used as a strategy to address blighted business districts and vacancy. The Hilltop Alliance, for example, runs a Business Rent Abatement Program where eligible new businesses that sign a multi-year lease in a vacant commercial storefront in Allentown may apply for the Allentown Rent Abatement Program which offers to pay 50% of the business's monthly rent, up to $400 per month, for up to one year.