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Baltimore asks state to strip tax credits from 2,157 homes

Owners are not eligible for the $1.3 million in homestead credits, city says

By Jamie Smith Hopkins, The Baltimore Sun

7:42 PM EDT, October 20, 2011

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Baltimore officials are asking the state to strip more than $1.3 million in property-tax credits they say were improperly granted to 2,157 homes, an early example of what city officials vow will be a continuing battle against tax-credit scofflaws.

The city's Finance Department also intends to collect up to seven years of back taxes, penalties and interest from the property owners unless they can prove they lived in the homes during those tax years. The city says those owners don't occupy the homes, as the tax break requires. The properties are a mix of rental, empty and boarded-up homes.

The effort is part of Mayor Stephanie Rawlings-Blake's "billing integrity program," which began in June when finance staffers requested that the state reverse tax-exempt statuses that shouldn't have been applied to 17 properties. The city wants to collect nearly $1 million from the owners.

The new announcement about unearned "homestead" credits comes after The Baltimore Sun reported in August that 465 properties were receiving the tax break even though the city had issued violation notices tagging them as vacant and either unsafe or uninhabitable.

Finance officials said Thursday that they plan to continue auditing the homestead program and expect to find other examples of ineligibility.

"There's numerous ways … in which people can commit fraud on homesteads," said William Voorhees, director of revenue and tax analysis for the city finance agency. "We're going to be looking at a lot of things."

The homestead credit acts as a cap, preventing the amount of assessed value on which Baltimore homeowners are taxed on primary residences from rising more than 4 percent a year.

The homestead program has long been fraught with problems because credit eligibility used to be granted automatically when buyers indicated in land records that they would occupy the home. Sometimes they weren't actually intending to move in. Others used to receive the credit legitimately but then moved out and kept the house — and kept getting the tax break, knowingly or not.

Now, new buyers must specifically apply for the credit. Everyone else has to follow suit by the end of next year or lose the break.

Voorhees said the city also plans to analyze all the other tax credits received by property owners to ferret out misuse. The finance agency found about $1 million in "brownfield" redevelopment credits with problems but is seeking more information before acting to strip them, he said.

Andrea Mansfield, legislative director at the Maryland Association of Counties, said local governments sometimes catch problems with property-tax credits and ask state assessors to fix them. But Baltimore's level of involvement is unusual, she said.

"No one is doing the broad auditing that Baltimore City is doing," she said.

The state Department of Assessments and Taxation said Thursday that it received the city's request and would remove the credits if the owners fail to adequately explain why they are eligible. If assessors strip all $1.3 million in homestead credits, $28,000 would be due to the state, with the rest owed to the city.

That's just for the current tax year, which began July 1. Henry J. Raymond, deputy director of the city's Finance Department, said he could not estimate how much the city might be due for past taxes on the 2,157 properties but added that the city wants to extract as much as it is legally due.

Jurisdictions are entitled to collect as many as seven years of back taxes, but the state assessments department has said agencies rarely reach back more than three years.

"We're taking an assertive approach on this," Raymond said.

How much of the additional taxes the city will be able to collect is an open question. If owners don't — or can't — pay the tab, the city could ultimately end up with more homes in its already large inventory of publicly owned vacants.

The city earlier sent a list of "vacant building notices" — the vacant and unsafe homes — to the state Department of Assessments and Taxation in response to The Sun's reporting that 465 of those properties were receiving the homestead credit.

Gerard Sullivan, an electrician with a rowhouse near Patterson Park he no longer lives in, told The Sun in August that he hadn't been able to work since falling from a ladder on the job a few years ago. Now his tax bill, which had been $224 with the credit, has been updated to show he owes $2,832 for this year and $3,540 for last year, including interest and penalties.

Sullivan, who could not be reached for comment Thursday, said in August that he wouldn't be able to afford the taxes without the homestead credit.

"I'm going to lose it, simple fact," Sullivan said, referring to the property in the 200 block of N. Port St. "There's nothing else I can do. Where am I going to come up with all the tax money?"

Baltimore Sun reporter Scott Calvert contributed to this article.

jhopkins@baltsun.com

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