Tuesday, April 22, 2014

Marion County Expects $97 Million Windfall From Homestead Exemption Enforcement

A law passed in 2009 that required all existing homeowners to re-verify their eligibility for the property tax homestead exemption has resulted in the removal of 34,000 residential parcels from the homestead exemption according to the Marion County Auditor's Office. Depending on the use of the property, the taxpayers' tax bill could double or triple. Although as many as 3,600 tax bills could be corrected, the vast majority are expected to stand, resulting in a potential windfall of about $97 million in additional property tax revenues to be allocated to the various units of local government.

Marion County Auditor Billie Breaux's office tells the IBJ that it has already billed back taxes over the past three years owed on about 1,000 parcels that have been improperly claiming the deduction, resulting in collections of $3.1 million. The average three-year bill has been about $3,200. The 34,000 parcels identified as improperly receiving the homestead exemption represented about 15% of the county's 220,000 homestead properties. The Indiana County Auditor's Association tells the IBJ that the rate of property owners falsely claiming the homestead exemption was particularly high in Allen and Marion Counties.

8 comments:

Paul K. Ogden said...

This year was the deadline on filing paperwork to reassert that you have are entitled to a homestead. The purpose of the requirement was to clean up the homestead records. Even though 3 years was provided to do this by the legislature, many homesteaders failed to file the renewal losing their exemption for at least one year. What I think they may be doing here is assuming because the homesteaders didn't file the paperwork to renew the homestead they must have been illegally claiming it the three years prior.

local businessman said...

This rigorous enforcement of the one homestead exemption rule has hit homes that are for sale particularly hard. I bought a new house a year ago and moved right in. My old house needed to be painted and freshened up, so I took my time getting it ready to put up for sale. I worried about how that property would be taxed, so a couple of months ago I went down to the city county building to the tax office to find out. They said the title company had filed a new homestead exemption on my behalf for my new house. And because the exemption could only be claimed on one property, my old house would see a doubling of its property tax from 1% to 2% of its assessed value. I was pretty surprised. The 2% rate was intended for rental property when they first enacted the 1,2, and 3% rates, and I don’t intend to rent the house; its empty and for sale. But apparently that doesn’t matter to the taxing authorities. Even though I lived in that house 15 years and currently have it for sale, they automatically granted homestead to my new house and doubled the tax rate on the old house. I paid it last week. But it came as quite a shock. And I feel like they ought to let the homestead exemption carryover in these circumstances for a year so people don’t get slammed by a doubling of their tax when they put their house up for sale. We don’t want to discourage people from buying and selling real estate, do we? Sometimes it takes a while to sell a house. And doubling the property tax bill seems awfully harsh. I asked them, what does the homestead have to do with the 1% rate? The property is a primary residence. Its not a rental. Isn’t that what matters? And they said the “homestead” designation has everything to do with it, and you can only have the 1% rate on one house. So there it is. And it makes me wonder what will happen if the mayor succeeds in having the homestead exemption eliminated. Does he intend for everybody to pay at 2% of the assessed value? I don’t know what Marion County Assessor Joseph O’Connor intends with these harsh enforcements affecting 15% of the county taxpayers, but I suspect he inherited the issue from former assessor Greg Bowes, who I thought was one of the worst public servants in Indianapolis history. And OConnor doesn’t seem to be making any friends.

Greg Bowes said...

Local Businessman:
The decision to use the 1%, 2%, and 3% caps was a choice made by the legislature at Governor Daniels' request. The 2% cap relates to residential property is not a primary residence. The 1% cap relates to a primary residence, and by law (and by practical application) one cannot have two residences that are "primary."
I did (and do) not approve of different caps for different types of property, but nobody asked me my opinion. The Indiana Constitution says the property tax burden should be shared equally, and the caps directly contradict that.
As for the homestead change, that is also a change made by the legislature, and is implemented at the Auditor's Office. The County Assessor has never had anything to do with that.
The enforcement of the homestead law is a good thing. The homestead is designed to encourage home ownership. When a property owner declares homestead status for a property he does not live in, he is discouraging home ownership by increasing the tax burden on homeowners.

Paul K. Ogden said...

"And they said the “homestead” designation has everything to do with it, and you can only have the 1% rate on one house."

I think they're confusing two different things. I don't believe the fact that a house you own isn't your homestead doesn't mean the tax cap is 2% for rental or 3% for commercial.

Downtown Indy said...

I wish I was a millionaire business owner and got away with paying zero property taxes for 10 years or so.

Gary R. Welsh said...

There is one loophole that seems to work for married couples. If a couple owns two homes and puts the homes under separate ownership individually rather than as joint owners, the couple can claim homestead exemptions on both homes.

local businessman said...

Greg Bowes: You were a terrible assessor. You think people forgive what damage you did, but tax appeals languished for years while innocent taxpayers paid outrageous property tax bills based on assessments that seemed criminally negligent they were so off reality. Tens of thousands of property tax appeals sat unprocessed for years while your office whined about its burdensome work load. Many people lost their homes because suddenly inflated assessments triggered huge mortgage payment increases to cover escrow arrears. Mitch Daniels personally intervened because it was, quite literally, a disaster.

Anonymous said...

Mibor is on the side of the whom?