Hawaii County property owners who want to claim the homeowner’s exemption to reduce their property taxes may soon be required to file a Hawaii state income tax return annually in order to qualify.
That was the consensus Monday of a county panel charged with making recommendations to the County Council on how to make the county tax code more fair and less burdensome. The Real Property Tax Stakeholder’s Task Force will advance the measure to the council, with plans to put it into effect by December 2015.
The county Real Property Tax Division wouldn’t get copies of the tax returns, or information about what is on the forms. Instead, the fact that a form was filed with the state Tax Office would serve as proof that the property owner is indeed a state resident and qualifies for the property tax break.
While Finance Director Nancy Crawford expressed concerns that the proposed policy could place an extra burden on older and low-income homeowners who don’t file tax returns, other members of the panel said filing a return isn’t that much to ask to help cut fraud in the property tax system.
A recent comparison of property owners claiming the county homeowner’s exemption against vital statistics from the state Department of Health discovered 1,200 deceased people benefiting from the exemption, some for as long as 10 years. That’s cost the county untold thousands in lost taxes.
“It is a privilege,” said Task Force Chairwoman Margaret Wille, a Kohala councilwoman. “I’d like overall to be reducing taxes. … We’re closing loopholes.”
Task force member Stewart Hussey agreed.
“They’re going to have to do something,” he said. “If you want this relief, you have to do something you haven’t had to do …. No free rides.”
Property owners claiming the homeowner’s exemption get $40,000 of property value deducted from their assessment, thus lowering their tax. The deduction increases for seniors, the disabled and veterans. A property owner older than 70 gets a $100,000 exemption, with an additional $50,000 for disabled property owners.
In Hawaii County, about 40,000 property owners claim the homeowner’s exemption. To qualify, they must assert the property is their primary residence. The exemption currently automatically renews each year. Currently, individuals younger than 65 don’t have to file state taxes if their taxable gross income is $3,344 or less or $6,688 for a married couple filing jointly. Those 65 and older don’t file if their income is $4,488 or less, or $8,976 for a married couple filing jointly.
The county, under a memorandum of agreement with the state, is currently sending its homeowner list to the state Tax Office, to compare it against those filing state income taxes. The problem is, there isn’t a way to verify that those who don’t file state taxes aren’t indeed residents.
The county about six weeks ago sent letters to 6,700 property owners seeking verification that they qualify for the homeowner’s exemption.
“We got hammered,” Real Property Tax Administrator Stan Sitko said of the response.
Sitko described the response as “very positive,” although homeowners had a lot of questions.
He said his office will send out smaller batches of letters in the future.
Checking the homeowner’s exemption list against vital records and tax returns was one of 40 recommendations in a 99-page March 2012 report by the International Association of Assessing Officers. The task force was another of the recommendations.
Email Nancy Cook Lauer at firstname.lastname@example.org.