RESIDENTIAL ENHANCED LERTA
By Bernstein-Burkley, P.C.
Part 1 and Part 2 of this 3-part blog discussed the Act 42 and Act 202 Residential Tax Abatement programs available through Allegheny County, the City of Pittsburgh and the Pittsburgh School District, and the Act 42 Enhanced Residential Abatement programs available through the City and School District. In addition to, or in lieu of, those abatements discussed in Part 1 and Part 2, commercial or industrial property in the City of Pittsburgh that is converted to residential property may be eligible for abatements for City and School District purposes which allow for reduced real estate taxes for up to ten years following completion of the improvements. This program is known as the Residential Enhanced LERTA, or Local Economic Revitalization Tax Act, and is available only for property located within certain deteriorated areas defined by the Council of the City of Pittsburgh, as discussed below.
Pennsylvania’s LERTA Act, 72 P.S. § 4722, allows municipalities to exempt the value of improvements made to certain deteriorated industrial, commercial and other business properties and for new construction in deteriorated areas of economically depressed communities. Both the City of Pittsburgh and Pittsburgh School District have adopted resolutions and/or ordinances providing for the establishment of LERTA districts within the City. While the LERTA programs generally apply to commercial and industrial properties, residential properties may be eligible to participate in these programs where the improvements have the effect of converting all or a portion of a deteriorated commercial/industrial property to residential use to be used and owned by the occupants for personal residence. The program is also available to property converted to commercial residential use, or residential property now owned by the residents (i.e., hotels, apartment buildings, etc.), but for purposes of this blog, we will focus on property converted to residential use to be owned by the inhabitant(s), which primarily applies to condominium units.
The City of Pittsburgh’s Residential Enhanced LERTA program allows for the exemption of up to $2,700 of City imposed property taxes per year for 10 years for the conversion of commercial or industrial property to residential use in four defined areas: Downtown District, Uptown District, Strip District and North Shore District. The boundaries for each of these areas are set forth in Section 267 of the Pittsburgh Code. Similarly, the School District’s Residential Enhanced LERTA program allows for the exemption of up to $3,480 of School District imposed property taxes per year for 10 years for such conversions in the same defined areas. For both programs, the exemption is available for each residential unit located in the converted property and is based upon the increased value of the property upon completion of the improvements.
As with the Act 42 Residential Abatement and Act 42 Enhanced Residential Abatement, application for the Residential Enhanced LERTA must be filed with the appropriate City and School District agency/office within 180 days of receipt of the initial building permit for making the improvements. Subject to the final determination by the taxing authorities as to the value of the improvements, taxes on the subject property may be reduced by 100% of the value of the improvements, up to maximum amounts stated above, for each year in which the exemption remains in place. In addition, the property may be freely transferred, and any person who purchases property for which an application for abatement was made, or for which the abatement was approved, will have the rights and benefits of the application or approved exemption.
While Allegheny County does not have a corresponding LERTA program, the Residential Enhanced LERTA of the City and School District may, in the appropriate circumstances, be combined with the County’s Act 42 Residential Abatement in order to maximize the property tax reductions available to an owner of converted property in one of the four defined areas described herein. This concludes the 3- part blog, Reducing Real Estate Taxes on New or Improved Residential Property in the City of Pittsburgh. Please contact our office for more information on any of the tax abatement programs discussed in Parts 1-3 of this blog or to discuss whether or not your property is eligible for one or more of such abatements.