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State Auditors find thousands of Homestead Tax cheats

March 6, 2013

Legislative auditors who tested the state’s 1.3 million homestead property tax credits found that between 8,400 and 109,000 recipients are not eligible. (The wide range is due to the fact that the auditors examined only 114 properties). Following on reports in the Baltimore Sun more than a year ago, the auditors report (PDF link) that the State Department of Assessment and Taxation “has not established a formal comprehensive compliance program to administer” the program.

Specifically there are no procedurs for processing applications for the tax break, which allows the owner-occupiers of homes to avoid steep tax increases according to a formula set by the state and the county where the home is located. Typically an annual increase is limited to no more than 10 percent, which can save the taxpayer a lot of money right after a new assessment. The city’s cap is even better: four percent. The auditors say the break costs the state about $300 million each year in taxes foregone.

State administrators of the tax program did not monitor their county counterparts, the auditors found: “Furthermore, local assessment offices were not consistently using available sources of information to help identify properties that may not be eligible.”

Sun reporters Scott Calvert and Jamie Smith Hopkins checked city tax records in 2011 and found the program was treating similar properties and similar owners inconsistently. They also found “obvious mistakes” that reduced some tax rates to zero.

Said the Sun, in December, 2011: “In addition to revealing errors and widespread disparities, the analysis found that wealthy homeowners reap large benefits from the credit.”

In follow-up stories, the Sun found 17 property owners with at least three homestead tax credits, plus “hundreds of double-dippers“–owners of multiple properties who received the tax credit on at least two of them.

Such fraud has been commonplace for many years and was often pointed-out by citizen bloggers. Questions about her multiple homestead tax breaks may have cost former City Council woman Belinda Conaway her seat in 2011. Her father, Court Clerk Frank Conaway, reportedly paid back $3,640 in homestead tax breaks he was erroneously awarded. He said he did not realize he was getting the break.

In the new audit, auditors say the Department of Assessments and Taxation “does not plant to investigate the propriety of HTCs [shorthand for Homestead Tax Credits] received in prior years on properties removed from eligibility.”

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