26 C.F.R. § 1.164-4

Taxes for local benefits

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(a) So-called taxes for local benefits referred to in paragraph (g) of § 1.164-2, more properly assessments, paid for local benefits such as street, sidewalk, and other like improvements, imposed because of and measured by some benefit inuring directly to the property against which the assessment is levied are not deductible as taxes. A tax is considered assessed against local benefits when the property subject to the tax is limited to property benefited. Special assessments are not deductible, even though an incidental benefit may inure to the public welfare. The real property taxes deductible are those levied for the general public welfare by the proper taxing authorities at a like rate against all property in the territory over which such authorities have jurisdiction. Assessments under the statutes of California relating to irrigation, and of Iowa relating to drainage, and under certain statutes of Tennessee relating to levees, are limited to property benefited, and if the assessments are so limited, the amounts paid thereunder are not deductible as taxes. For treatment of assessments for local benefits as adjustments to the basis of property, see section 1016(a)(1) and the regulations thereunder.

(b)(1) Insofar as assessments against local benefits are made for the purpose of maintenance or repair or for the purpose of meeting interest charges with respect to such benefits, they are deductible. In such cases, the burden is on the taxpayer to show the allocation of the amounts assessed to the different purposes. If the allocation cannot be made, none of the amount so paid is deductible.

(2) Taxes levied by a special taxing district which was in existence on December 31, 1963, for the purpose of retiring indebtedness existing on such date, are deductible, to the extent levied for such purpose, if (i) the district covers the whole of at least one county, (ii) if at least 1,000 persons are subject to the taxes levied by the district, and (iii) if the district levies its assessments annually at a uniform rate on the same assessed value of real property, including improvements, as is used for purposes of the real property tax generally.

[T.D. 6780, 29 FR 18147, Dec. 22, 1964]

Notes of Decisions

Cited in 6 cases, 1972–1993 · leading case: Louismet v. Comm'r, 43 T.C.M. 1496 (Tax Ct. 1982).

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Louismet v. Comm'r, 43 T.C.M. 1496 (Tax Ct. 1982). · cites it 14× “Held, petitioner cannot deduct under sec. 164 his portion of special tax assessments paid, see sec.”

Rose v. Comm'r, 31 T.C.M. 142 (Tax Ct. 1972). · cites it 2× “, provides: (a) So-called taxes for local benefits * * *, more properly assessments, paid for local benefits such as street, sidewalks, and other like improvements, imposed because of and measured by some benefit inuring directly to the property against 143 which the assessment…”

Noble v. Comm'r, 70 T.C. 916 (9th Cir. 1978). · cites it 6× “They bear the further characteristic that "the property subject to the tax is limited to the property benefited.”

Harris v. Comm'r, 39 T.C.M. 1126 (Tax Ct. 1980). · cites it 6× “As such, payments made by petitioner solely to extinguish his liability on such bond do not entitle him to a deduction for taxes paid under section 164 or section 1.”

Page v. Comm'r, 66 T.C.M. 571 (Tax Ct. 1993). · cites it 2× “56 in penalties paid on the Valley View property because fines and penalties are not provided for under sections 163 or 164 and are generally not deductible under section 162(f).”

Constantine v. Comm'r, 37 T.C.M. 1154 (Tax Ct. 1978). · cites it 4× “Petitioner failed to prove, as she was required to do by section 1.”

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