The General Assembly has approved a bill imposing steep penalties on homeowners who are caught getting homestead property tax credits they're not entitled to receive.
Fines would equal 25 percent of any undeserved break – a considerable punishment given that the credit currently cuts the tax bills of many Baltimore homeowners by thousands of dollars per year.
"Hopefully this significant penalty will deter people from abusing this tax credit in the future," the bill’s sponsor, Del. Samuel I. “Sandy” Rosenberg, said Saturday evening after final passage by the House of Delegates. He said he expects Gov. Martin O’Malley to sign the bill, which would take effect June 1.
Rosenberg, a Baltimore Democrat, said the legislation was spurred by a Baltimore Sun investigation that 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 applies only 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 Sun found the owners were getting breaks on two, three and even four homes. Some owners said they didn't realize they were "double-dipping," though the credit has long been granted to owners who indicated at settlement that they intended to live there.
The revocations meant those owners had to pay back taxes. They also faced interest and penalties for late payment, along with the risk of having the property go to tax sale, which is scheduled for next month.
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State assessment officials hope a new application process will sharply reduce the number of owners receiving improper credits. Homeowners have until the end of the year to apply or else they'll lose the break, at least for a year.