By Scott Calvert, The Baltimore Sun
10:11 PM EST, March 6, 2012
As someone who's made a hobby of unmasking tax cheats, Patterson Park activist Matt Gonter told state lawmakers Tuesday that he backs a proposal to fine homeowners caught getting unwarranted homestead credits on their property tax bills.
Under the proposal, owners would face fines equal to 25 percent of any undeserved break on the credit, which limits increases in property tax payments for owner-occupied homes. Gonter, who regularly alerts government officials about properties that he thinks are getting unwarranted credits, said at a hearing that the risk of a penalty "may convince homeowners to think twice about applying for a credit to which they are not entitled."
Mayor Stephanie Rawlings-Blake supports the idea. In testimony written to the House Ways and Means Committee, senior advisor Kim Washington said civil penalties would provide an "even stronger hammer" to use against delinquent property owners.
She said that would complement the mayor's Billing Integrity Program, which has identified $2.3 million in additional property taxes, in part by flagging ineligible homesteads.
But representatives of the state's bankers and Realtors worry that a 25 percent fine could unfairly punish homeowners who inadvertently receive a tax break, as opposed to those who seek or receive a credit they know they don't qualify for.
The bill's sponsor, Del. Samuel I. Rosenberg, a Baltimore Democrat, says the idea for the fine arose after a Baltimore Sun investigation found hundreds of city owners were receiving breaks on multiple homes in violation of state law.
The homestead credit caps yearly increases in a home's taxable assessment, but only applies to primary residences. The limit is 4 percent in Baltimore, where four of five homeowners get credits that cut tax bills by about a third on average.
In January, state officials revoked more than 550 homestead credits in Baltimore after The Baltimore Sun found the owners were double-dipping. The revocations meant those owners had to pay back taxes. They also faced interest and penalties for late payment.
Rosenberg, vice chairman of Ways and Means, says a 25 percent fine would be a powerful deterrent against reaping undeserved breaks.
His bill would also require home sellers or their agents to give prospective buyers a written estimate of a home's full-year taxes. When a house is sold, a buyer does not inherit a homestead credit but must pay the full tax bill. "This is a matter of consumer protection and transparency," Rosenberg said.
Mark Feinroth of the Maryland Association of Realtors said sellers — not licensed agents — should shoulder the disclosure responsibility. He also said a 25 percent penalty seemed steep for "inadvertent violations" in receiving the credit.
Many double-dipping homeowners told The Sun they had no idea they were getting an inappropriate credit. Some said they lived in a home before renting it out. For decades, the credit was applied automatically if buyers indicated at settlement that they intended to live in the home.
Mindy Lehman of the Maryland Bankers Association testified in support of the bill. But she echoed concerns about the size of the civil penalty, saying it could create an "undue burden" on homeowners who didn't purposely take advantage of the credit.
State officials say a new application requirement for the homestead credit should sharply lower the number of invalid credits. Homeowners have until the end of the year to apply.
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