Property Tax Alert–Massachusetts

December 2004

The capitalization-of-income approach for determining the value of a commercial office building for property tax purposes was defective because it failed to include net service income generated by the property. The taxpayer contended unsuccessfully that service income, i.e., charges for additional services requested by tenants, could be excluded because it was offset by the costs associated with earning it. Also, a reduction in the allowance for general capital repairs and improvements was proper because pass-through provisions in the building's leases provided for tenant reimbursements, which reduced the taxpayer's operating costs.

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