Vera Artis would seem to be a perfect fit for the state program created decades ago to ease the property tax burden on homeowners with modest incomes.
She has no major assets beyond the tidy East Baltimore townhouse that she and her husband, now deceased, bought in the 1980s. Social Security and a pension bring in just $16,000 a year. "Money," she says, "is tight."
And in fact, based on her income, the state would have picked up more than half of her $1,280 property tax bill this year — if only she had known to apply for the help.
The subsidy that Artis, 61, is missing out on is called the Homeowners' Property Tax Credit, not to be confused with the Homestead Property Tax Credit open to all homeowners regardless of wealth.
To qualify for the homeowners' credit, applicants cannot have household income over $60,000 or assets of $200,000 or more, excluding their primary residence and retirement savings. In some cases, the credit can wipe out a homeowner's entire annual property tax bill.
But an examination by The Baltimore Sun has found that thousands of lower-income homeowners in the city do not receive the credit, even though they would seem to be eligible.
And residents who do get it — legitimately — include a doctor, a lawyer and others who in recent years bought homes for $300,000 or more, in some cases with assistance from parents. One recipient of the low-income credit lives in a home valued at nearly $1 million.
The Sun also discovered that the resident of a waterfront condominium in Canton has gotten $21,700 in breaks over the past four years that were undeserved — money the state now wants back.
Del. Brian K. McHale, a South Baltimore Democrat, supports the credit and has worked to expand it to help elderly constituents on fixed incomes. But when told of The Sun's findings, he said he worried that some residents might be "taking advantage" of the program even while following the rules.
"It's an issue of fairness," he said. "When you develop a program, you obviously want to make sure it benefits the people who it's intended to benefit, not people who figured out a way to game it."
Of the roughly 10,000 city owners who get the credit, more than 700 have bought houses since 2007, and dozens just in the past year, according to The Sun's analysis — a sign that a program created to keep people from losing their homes is being used by some to help acquire one.
Young professionals and graduate students have tapped into the program soon after buying relatively pricey homes. Though the credit applies only to the first $300,000 of value, homes worth more than that still qualify.
For example, in 2007 a newly minted doctor bought a home downtown for $340,000, after a real estate agent pointed out that her modest salary as a medical resident entitled her to a break.
In another case, a graduate student bought a Riverside rowhouse for $350,000 three years ago, after borrowing money from her parents, then got the state to pay half her $8,300 annual property tax tab.
Such cases are allowed under the rules of the program, but state officials say they are exceptions: The average city recipient owns a home worth about $130,000.
Even so, a number of recipients own homes worth several times as much, The Sun found. Many are longtime, elderly owners who once might have earned large salaries but now get by on limited incomes. Some are first-time buyers.
Tax breaks for $500,000 homes
The upper tier includes 189 homes valued by the state at more than $300,000, and more than a dozen — mostly in Homeland and Roland Park — valued at more than $500,000.
The highest-valued city residence with a homeowners' credit is assessed by the state at $985,000. That owner, a retired teacher in her 80s, has lived in the sprawling North Baltimore home for decades. This year the state paid $4,550 of her tax bill.
Another recipient, Roland Park resident Patricia Paul, combined homeowners' and homestead credits to wipe out the entire $11,200 tax bill on her home, assessed at $470,000. By law, the homestead credit must come off a tax bill before any other credits. Paul has lived in the home since 1962 and says she doesn't collect Social Security, forcing her to rely on modest savings.
To anyone who might question whether she deserves a full write-off of her property taxes, Paul said: "You're not in my shoes. I don't have a car. I walk everywhere. I'm not living high."
State officials who administer the homeowner credit program say they scrutinize yearly applications to ensure owners meet the rules and merit the subsidies. They say they do their best to spread the word, even without a marketing budget.
"We want every person who's eligible to apply for this credit," said Robert E. Young, director of the state Department of Assessments and Taxation. "If you qualify mathematically, you qualify, regardless of what your circumstance is."
McHale, though, suggested that the eligibility rules themselves should be tightened to better ensure that state funds benefit the "very needy" who struggle to afford their taxes.
Despite the evidence that many potential recipients seem to be unaware of the homeowners' credit, its use has been rising in recent years, a trend flagged as a budgetary concern by the Department of Legislative Services. A jump in participation would further strain the state's pinched budget, with every additional 1,000 recipients costing about $1.2 million per year.
Statewide, the credit program is costing $60.7 million this year, up from about $47 million in 2008. All five counties closest to Baltimore have seen double-digit percentage growth in that span, and this year the state is picking up more than $21 million in property taxes in those areas.
No jurisdiction comes close to Baltimore, home to both high poverty rates and the state's highest property tax rate. The credit's cost in the city is $13.9 million, up from $11.3 million in 2008.
The weak economy has been the main factor driving the program's growth, Young said. Someone who loses a job or can't find work will probably have trouble paying taxes.
'Tremendous safety valve'
"It really is a tremendous safety valve," he said of the credit, calling it "a godsend" for owners who might not be able to pay their taxes and could risk losing their home.
Medical student Pavan Vaswani is not a typical recipient. He and his father bought an Upper Fells Point rowhouse in 2010 for $285,000. The younger Vaswani lives there, and the state pays 84 percent of his property tax, under a sliding scale that caps an owner's tax bill based on income.
While credits like Vaswani's are allowed, McHale considers them at odds with the program's mission. If a parent or someone else helps to buy a house, he said, the state should consider factoring in their assets — not just the applicant's — to determine eligibility.
The delegate also thinks it might make sense to require applicants to own their home for a certain length of time before getting a tax break. Now they qualify for the credit immediately. "You shouldn't buy it if you can't pay the taxes," McHale said.
Even though state lawmakers designed the credit with existing homeowners in mind, the Greater Baltimore Board of Realtors got legislation passed 12 years ago allowing Marylanders to apply in advance of buying a home. That change allows buyers' reduced tax liability to be taken into account as they get a mortgage.
"That was a really good benefit for folks that qualify for this tax credit," said Carolyn Blanchard Cook, deputy executive vice president of the trade group.
In an interview, Vaswani said he learned of the credit on the Internet before buying. He declined to discuss his finances but said he felt it important to own rather than rent. He wanted to put down roots in Baltimore, where he plans to spend at least the next six years.
In one sense, he said, he's no different from a retiree: "Effectively, students are on a fixed income, and we do have to find a place to live, though I agree it's probably not the original intent."
When the homeowners' tax credit program began in 1975, only residents 60 and older qualified. Dubbed a "circuit breaker," it shut off a tax bill the way an electric circuit breaker trips when overloaded. The age limit was soon eliminated, though four-fifths of beneficiaries are still over 60, with the majority of city recipients earning under $30,000 a year.
In 1977, the General Assembly passed the homestead credit. Not only was that program open to all homeowners, but it functioned differently. Rather than directly limiting a homeowner's tax bill, it restricts the amount that a home's taxable value can increase each year.
Another key difference: The city and counties absorb the cost of the homestead credit, whereas the state covers every dollar forgiven under the homeowners' credit.
The much larger homestead program was the subject of a recent Baltimore Sun investigation that documented how it has grown into a huge subsidy fueling inequality among homeowners, and how lax oversight has let hundreds of owners improperly receive tax breaks on multiple homes.
To Brett Theodos of the Washington-based Urban Institute, the homestead credit gives some well-off owners an unnecessary windfall. An income-based program, like the homeowners' credit, is more sound, he says.
"I don't think it's necessarily wrong to cap property taxes for people who are in a gentrifying neighborhood, where you have older homeowners who can't afford to stay as their property tax increases," Theodos said.
The rules of the homeowners' credit are straightforward: Owners qualify on their principal residence if their gross household income, before tax deductions, doesn't exceed $60,000. Their assets must be under $200,000, not counting their home or retirement savings. They must be at least a part-owner of the home and live there at least six months a year.
Big benefits for young buyers
Dr. Yolanda Chik learned of the credit from a real estate agent while house-shopping in 2007, when she began her medical residency. The agent told her the program would cut her property tax bill, allowing her to afford a $340,000 townhouse.
"I can tell you straight out I would not have been able to afford it without this program," Chik said. "It would have been much more of a hardship economically."
This year, the state covered nearly 60 percent of her $8,100 property tax bill.
When she purchased her home, she was earning "in the high 40s" and considered buying to be financially smarter than renting, given her desire to practice medicine in Baltimore after her training ended. Now a staff neurologist, she said she earns well above $60,000 a year, which means she will soon no longer qualify for the credit.
"I totally think we were not taking advantage of this program at all," said Chik, 31. "We were within the rules."
Hal Blatt said he heard about the tax break from a basketball buddy, not long after buying a rowhouse in Ridgely's Delight in 2007. He was a law student and borrowed 99 percent of his home's $305,000 purchase price, according to mortgage records.
Blatt, now 29, applied for the credit in 2008. After graduating in 2009, he says, he was unemployed for months. He landed a temporary job at the Baltimore Circuit Court and has since gotten some work at his father's Towson law firm. This year the state paid 95 percent of his $6,500 property tax bill, records show.
Kathleen McDowell bought her rowhouse in Riverside three years ago for $350,000 after borrowing the sum from her parents, mortgage records show. In each of the past two years, the state has picked up more than $4,000 of her $8,300 property tax tab.
McDowell, a 26-year-old postdoctoral student, did not respond to messages. But her father, Stewart McDowell, cheered her tax break when a reporter mentioned it.
"It would be nice for somebody in this family to be on the receiving end of a government program, instead of on the contributing end, which we've done massively in this family for 35 years," he said by phone from his home in North Carolina. "So, hooray."
The Sun's analysis also found one property owner, Canton Cove condominium resident Athena Lakis, who was receiving a homeowners' credit even though she didn't qualify, a finding confirmed by state officials.
The state has paid nearly $22,000 of Lakis' property taxes over the past four years, but records and interviews revealed that her assets exceeded the $200,000 limit, because she and her father share ownership of commercial property in Essex worth $472,000.
This month, the state requested a repayment of the homeowners' discount, said Silma Raymond, who manages the credit for the assessments agency. Athena Lakis initially qualified, but her ownership stake rose above the limit in 2007. While records in the agency's own files could have revealed this two years ago, an oversight by a staffer meant that the dots weren't connected, Raymond said.
"If they take the credit off and we're liable for the bill, we have to pay the bill," said Michael Lakis, Athena Lakis' father and a nonresident co-owner of her condo.
'They do not know it exists'
Of course, in order for homeowners to receive the credit, they must know about it in the first place.
Housing counselors at several Baltimore nonprofits say the credit is unfamiliar to many current owners who are eligible for assistance.
"They do not know it exists," said Mary Warlow, director of programs and development for Belair-Edison Neighborhoods, whose services include home counseling and foreclosure prevention.
"Our counselors, when a homeowner comes in and their hardship is an increase in property taxes, that's one of the things they ask: 'Well, have you applied for the homeowners' tax credit?' And I feel almost always the answer is no."
Young, the assessments director, defended efforts to spread the word. At least yearly, Baltimore Gas and Electric utility bills include a flier about the credit, he said.
In addition, his agency trains staff at housing groups and public agencies that work with the elderly; details credit programs in income tax booklets put out by the state comptroller and provides information in reassessment notices mailed to homeowners every three years.
Young said he lacks money for high-profile marketing steps such as television commercials or bus ads. "If anyone has an idea that we can use to help publicize this and we haven't tried it, we want to hear it," he said. "It has to be at minimal or no cost."
This year just over 13,000 city residents applied, with about 10,500 receiving credits.
But those numbers appear to be far below the citywide pool of eligible owners. Based on the Census Bureau's 2010 American Community Survey, roughly 55,000 owner-occupied homes have household income of $60,000 or less.
By that measure, just one in five eligible city homeowners presently receives a credit.
It's not that simple, though. Just because someone qualifies does not automatically translate to a tax break. That depends on two factors — where on the income scale someone falls, and the size of the home's tax bill, which in turn stems from the home's value.
So, while the program might cut the taxes of someone making $50,000, it might yield zero benefit to someone else making $25,000 and living in a less-expensive home.
Young cannot estimate how many income-eligible city owners would benefit. "I don't think anybody really knows," he said, though he contends it is a low number. Years ago, the agency mailed applications to 125,000 Maryland homeowners it thought might qualify. Only 1,200 replied, with one-third actually qualifying.
Unaware in East Baltimore
In East Baltimore's Johnston Square neighborhood, where Vera Artis lives, word of the homeowners' program has reached some, including Charvette McLaurin, a 41-year-old single mother. McLaurin has been receiving the credit for a dozen years. "Word of mouth" is how she heard about it.
The first year she got the credit, McLaurin was so convinced her $900 break was too high she called to verify it, concerned she'd end up in jail. "I like freedom," she recalls telling a state worker whom she asked to verify the figure.
McLaurin, a toll collector, said she tries to make others aware of the program. "I tell people all the time — fill out an application for a homeowners' tax credit," she said. "A lot of people don't know."
Artis didn't know.
She vaguely recalls getting something in the mail years ago, but that's it. "It's news to me," she said after hearing the program outlined.
She and her husband, Joseph, bought the house in 1984, the year the subdivision was built south of Green Mount Cemetery. He worked at Sparrows Point, she at a school cafeteria. By 1999, when arthritis and high blood pressure forced her to stop working, she was a widow.
Her home is valued at $92,000, translating to a $2,200 property tax bill this year. The homestead credit knocked that down to $1,280, the amount she paid in December.
But her $16,000 income means that she would have to pay only $420 in taxes — or perhaps $600, if cash support she's gotten from her daughter is factored in.
Artis said she religiously pays $632 a month toward her mortgage, which she'll pay off in two years, and all she can toward gas and electric. But some bills she has to let slide when money runs out. Now, she says, she'll be sure to apply for the tax credit.
Cutting her tax bill by several hundred dollars would be a huge help, she said: "It'd make a lot of difference, a good difference."
Baltimore Sun researcher Paul McCardell contributed to this article.
Homeowners, not homestead
The Homeowners' Property Tax Credit provides breaks to Maryland homeowners with low to moderate incomes. It's different from the Homestead Property Tax Credit, which is open all homeowners regardless of wealth.
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