@divinemsm wrote:
Thank you for your reply, Opus 17,
The charge, or fee is based upon the length of the property side facing a street, so not a fixed charge applied equally to every residence. It is not a fee for a particular service provided to the property, such as trash. The fee is not based upon whether there is a sidewalk or not. It is to fund the construction, repair and mainenance of sidewalks citywide, so it is a general community benefit, and does not directly add value to the privately owned property.
While I generally agree with @Anonymous_ that this is more similar to a community benefit tax, I am still a bit hesitant, for 2 reasons.
First, will this fee be applied to every property, regardless of whether that property has a sidewalk? Or only to properties with sidewalks? If every property, then it's probably fine. It's a tax only they don't want to call it a tax. If only to properties with sidewalks, then it is a benefit for those properties only, which doesn't pass the IRS regulations.
Second, I'm worried about the formula, that the fee will be calculated "based on the linear footage of the property frontage multiplied by a value assigned to the street type of that frontage." In other words, it sounds like the fee for a 1-family house on one street will be different from a 1-family house on a different street.
In reading about the California Mello-Roos fees, I found that California disputed that the taxes were deductible since they were not ad valorem, and I read the response from the IRS that the tax doesn't have to be ad valorem as long as every property is treated the same. I can see there might be an argument for taxing business property different from residential property, but if you have residential property that is zoned the same (urban single unit residential, for example) but they are taxed differently, that might also run afoul of the regulations.
And in fact, if E-SU property (urban edge, single unit residential) are taxed differently than U-SU property (urban single unit), that might be enough to defeat the deductibility, even if all E-SU property were taxed alike and all U-SU property was taxed alike.
The bottom line idea is that like properties must be treated alike, but I don't know how deep the IRS definition of "like properties" will go. So I can't endorse either position without knowing more about what is actually meant by "multiplied by a value applied to the street type".
