Narrow homestead tax credit extension draws criticism

Baltimore Sun

The couple see it as a marriage penalty: They plan to live separately in the two homes they own, but currently only get one homestead tax credit on the house considered their primary residence.

"We're a happily married couple," said Karen Smith, a Frederick lawyer, whose husband is retiring and wants to stay in their Western Maryland lakeside home. "I don't want to have to get a divorce to have the same rights as single people."

Their state senator, Republican David Brinkley, is pushing legislation to remedy their situation: He wants to extend the state's homestead tax credit, but in a way so narrow that it likely would apply only to couples living separately in two homes more than 90 miles apart. The bill maintains the current eligibility requirement, in which the homeowner must live in the property receiving the credit for more than six months of the year.

It is unclear how many people would benefit from such a change, though an analysis of the proposal by the Department of Legislative Services estimated that "tax revenues may decrease by a significant amount." They estimate that homeowners save from $1,630 to $188 a year in local property taxes by using the credit.

The idea faces stiff opposition from local government associations that fought hard in 2007 to shut loopholes in the tax credit. The credit caps home assessments by at least 10 percent and was widely abused in part because the state automatically extended it to all new homes, even those that were second houses and not primary residences.

"We really think this provides an advantage to individuals who are able to afford a second home," said Andrea Mansfield, an associate director with the Maryland Association of Counties, testifying against the measure Tuesday. "It is unfair to other taxpayers and is depressing the tax base."

Sen. J. Lowell Stoltzfus, an Eastern Shore Republican, said he usually supports tax relief but that this would not be a good time to further reduce county revenues.

Implementing the idea would be "an administrative nightmare" that would raise all kinds of "cross-jurisdictional headaches," said Candace L. Donoho, the director of government relations with the Maryland Municipal League. Among the pitfalls, she said: How would the state measure the distance between two homes? How could the state be sure both were actually used as primary residences? How would each county know?

Brinkley said he is not optimistic it will become law this year.

The legislation would not affect Brinkley, who as of his last ethics filing owned four pieces of property in Maryland, because all fall within the 90-mile limit. It could potentially, however, benefit Sen. John Astle, one of five co-sponsors on the bill, because he owns a home in Annapolis and a condo 115 miles away in Ocean City.

Astle said that when he signed on he was unaware that he might be affected by the legislation and he is not certain that he would support it on the floor

"Oftentimes I put my name on bills because they are worthy of on-the-table discussion," Astle said. "At a time when we are trying to encourage the real estate market to come back, it is worthy of some discussion."

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