SUMMARY:  Overlay and Overlay surplus

These guidelines explain recent amendments made by the Municipal Modernization Act that impact the Allowance for Abatements and Exemptions (overlay). St. 2016, c. 218, §§ 131, 133 and 152. They explain the statutory standard for maintaining an adequate overlay and the actions the Commissioner of Revenue (Commissioner) may take when approving a tax rate or determining available funds (free cash) to ensure compliance with that standard. Overlay is an account to fund anticipated abatements and exemptions of committed real and personal property taxes. The overlay amount is determined by the board of assessors (assessors) and may be raised in the tax rate without appropriation. Excess overlay is determined, certified and transferred by vote of the assessors to a Fund Balance Reserved for Overlay Released by the Assessors for Expenditures (overlay surplus). Overlay surplus may then be appropriated by the legislative body for any lawful purpose until the end of the fiscal year, i.e., June 30. Overlay surplus not appropriated by year-end is closed to the general fund undesignated fund balance. G.L. c. 59, §§ 23 and 25.

This is posted so as to try and inform people of what the item is and how it is used. If you hear or see overlay surplus at Town Meeting, now you will hopefully have an idea of what it is and how or why it comes to be.