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County considers repealing property tax credit

'In some cases the credit was given to accounts with no dwellings'

February 01, 2011|By HEATHER KEELS | heather.keels@herald-mail.com

A measure passed last year to protect landlords from rising tax assessments has had some unintended results, Washington County Treasurer Todd Hershey said Tuesday.

The Nonhomeowner-Occupied Homestead Tax Credit is meant to stabilize rents by limiting tax assessment increases on rental properties due to market conditions.

But some property owners instead benefited from the program because their assessments rose due to property improvements such as renovations or garage additions, Hershey told the Washington County Commissioners at their meeting Tuesday.

The program, which caps assessment increases at 5 percent per year, was an extension of benefits already available for homeowner-occupied properties under the state's Homestead Tax Credit.

The commissioners voted last May to offer a similar credit for residential properties that are not occupied by the homeowner in hopes that slowing tax increases for landlords would help stabilize rents. The program is the only one of its kind in the state.

In its first year, fiscal 2011, which began on July 1, 2010, the new credit benefited owners of 2,447 properties who received a total of $105,347.28 in credits, Hershey said.

More than 99 percent of those properties were in Hagerstown and its surrounding area, which is the part of the county that had not been reassessed since 2008 and was thus still affected by high market values, he said.

In the other two more recently reassessed sections of the county, only 18 properties were eligible for the Nonhomeowner-Occupied Tax Credit in 2011, and, according to a state official, none of those 18 was the county's intended beneficiaries.

"In my opinion all the credits (in those two groups) were not deserved, because none were due to a normal increase in assessment," wrote Adam Lewis, the Maryland Department of Assessments and Taxation supervisor for Washington County, in a Jan. 18 letter to Hershey. "This is likely to remain the case as assessment values have dropped, if any increase it would be due to other factors."

For example, Lewis wrote, one property received the credit to cap an assessment increase related to adding a machine shed on the property. Another received the aid as a result of losing a $15,000 blindness exemption credit when the disabled property owner died.

"In some cases the credit was given to accounts with no dwellings," Lewis wrote.

These unintended applications of the measure are only one reason to consider repealing it, Hershey said.

The cost of administering the tax credit will go up next year because the state will no longer provide technical support in determining which properties are eligible, Hershey said.

Washington County would have to outsource that work at a cost of about $10,000, he said. With the Hagerstown-area properties newly reassessed, likely at lower values, the amount of credit to be awarded this year might be less than the cost of administering the program, Hershey said.

"Believe me, the program did have great results last year," he said. "My concern is that this year the dollar amount is probably going to be insignificant, and more importantly, that dollar amount is going to target accounts that in all likelihood are not eligible."

Commissioners President Terry Baker said he was in favor of keeping the program in place to provide whatever rent stabilization it could offer, while Commissioner Ruth Anne Callaham said she wanted to see data on whether the program had any effect on rents this year.

The commissioners agreed to make a decision by the end of March about whether to continue the program.

If it is not repealed, the credit would apply for one more tax year before expiring on June 20, 2012, under a sunset provision in the resolution that established it.

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