Pioneer Institute’s legal arm sent a formal notice to the state Department of Revenue that asserts the City of Boston is “unlawfully retaliating” against commercial real estate owners who appeal their tax assessments by tacking on a hidden penalty.

The notice sent Tuesday to DOR Commissioner Geoffrey Snyder describes a practice where the city’s assessing department “has been quietly and systematically increasing property tax assessments on commercial properties that are under appeal at the Commonwealth’s Appellate Tax Board, imposing what amounts to a financial penalty on taxpayers who exercise their statutory rights under” state law.

“This practice is unauthorized and unconstitutional,” Frank J. Bailey, Pioneer New England Legal Foundation president and retired judge of the U.S. Bankruptcy Court for the District of Massachusetts, said in a statement.

“(By) targeting property owners for higher assessments simply because they filed an appeal, the city is punishing people for seeking redress through lawful channels,” he said. “That’s retaliation — plain and simple — and a violation of fundamental constitutional protections.”

Pioneer’s formal notice comes after the practice was revealed by Daniel Swift, a principal at the global tax consulting firm Ryan that represents a number of commercial property owners in Boston, and reported on this month by the Herald.

Swift crunched the numbers after hearing of the so-called “hidden tax” penalty by his clients. The penalty, which seemingly involves the city jacking up the assessed value of commercial properties that had filed an appeal to a prior tax assessment, is listed as an “ATB dispute” on property record cards that are on file at City Hall.

Per Swift’s analysis, the penalties have come without notice from the city and have added anywhere from a few hundred or thousands of dollars to up to close to $400,000 of additional property taxes for different commercial parcels.

“It’s very unusual,” Swift told the Herald earlier this month. “I’ve never seen it anywhere else in Massachusetts. I hadn’t seen it in Boston up until fiscal ‘24. They’re now penalizing you for filing an appeal on your subsequent year’s assessment.”

The Pioneer Legal Foundation said it drew the same conclusion after conducting its own investigation into the alleged city practice.

In its letter, Pioneer describes how Boston has quietly overridden its own commercial property valuations, increasing assessments by in some cases, millions of dollars in the fiscal year after a taxpayer files an appeal.

Those overrides, per Pioneer, are not disclosed on property tax bills or public notices, but rather through internal property tax cards that have to be obtained by taxpayers in person at City Hall. Along with “ATB dispute,” Pioneer has seen the penalty listed as “override open appeal,” per a statement from the foundation.

Pioneer’s investigation also found that the city has sought to remove those internal references to assessment override before releasing final public versions of the records, which representatives described as the city’s effort to conceal its actions.

The notice also mentions that the alleged assessment practice comes at a time when the “value of commercial real estate in post-pandemic Boston has been generally declining.”

Related Articles

Disgraced Boston City Councilor Tania Fernandes Anderson plans to ‘celebrate’ at final meeting: ‘One last stand’

Josh Kraft rips Boston Mayor Michelle Wu on bike lanes: ‘Streets are a chaotic mess’

Critics fear tall towers turning downtown Boston into Manhattan

Michelle Wu bashes Josh Kraft for leaking ‘entirely false’ $172M tax hit for Boston’s White Stadium

Josh Kraft blasts Boston Mayor Wu again on ‘out of control’ White Stadium taxpayer spending

“These added assessments are not based on market conditions or improvements to the properties,” Bailey said. “They are based solely on the fact that the taxpayer is exercising their legal right to challenge an overvaluation. That is illegal under both state law and the federal and Massachusetts constitutions.”

Mayor Michelle Wu’s office did not immediately respond to a request for comment but disputed Swift’s analysis that revealed the hidden penalty in a prior statement to the Herald.

“These assertions either misunderstand or ignore the specific requirements in state tax law defining how cities assess and finalize valuations,” city spokesperson Emma Pettit said. “The City of Boston follows all state law when assessing values, and all values have been certified by the State Department of Revenue.”