Prior to January 1, 2008, local assessment offices had the responsibility for determining Homestead Credit eligibility. If it was determined that a property was owner occupied, then it was eligible for the Credit.

SDAT had limited resources to determine the occupancy status. Typically if the owner’s mailing address matched the premise address the property was coded as owner-occupied. If the addresses didn’t match it was usually determined to be non owner-occupied. When a “first time homeowners” affidavit was completed at property settlement to pay reduced transfer taxes, the Department would also rely on that affidavit as the basis for granting an “owner occupied” status. The local assessment offices would utilize other communications such as an assessors conversation in the field with a tenant, a neighboring property owners complaint, returned/undeliverable mail, a returned assessment notice, a listing from a county or municipal government of residential property owners who applied for a rental license, or MRIS data of property listed for rental obtained by the central administration to change the property to non owner-occupied.

When a property owner contacts a local assessment office to advise us that our records have wrongly indicated that the home is not the principal residence of the owner, then it is the policy of this Department to accept that information as a request as a refund for as many back tax years as allowed under the law. This procedure applies to all property owners who owned and used the property as their principal residence prior to Jan. 1, 2008. Properties that became owner occupied after Jan. 1, 2008 have been mailed Homestead Eligibility Applications requesting the owner to inform us of the occupancy status. Abatements will not be granted for past tax years if the owner did not complete and return these applications.

The normal procedure for determining the number of past tax years to abate is three years from the initial contact that indicated that the property was owner-occupied. Additionally, to maintain uniformity of treatment and to avoid penalizing the owner for early payment of the property tax, we assume that all payments are made on Dec. 31st. with the second half of the semi-annual payment. If our records would have been right, the owner could have used the semi-annual payment schedule and paid on that date without penalty. Therefore, if the initial complaint is within July 1 and Dec 31, then going back 3 years will capture the current year plus 3 more years. If the initial contact is within January 1 and June 30, then going back 3 years will capture the current year plus 2 prior years.

Determining Amount of Homestead Credit to be Abated
Once the eligible tax years have been determined, the Credit should be calculated as follows:

1. Determine the phased-in curtilage assessment for the tax year prior to the first eligible tax year.
2. Increase this assessment by the appropriate cap percentage and determine the Credit (if any) for the first tax year to be abated.
3. Continue the calculation to the present tax year.

Example
In March, 2009 a residential property owner contacts their local assessment office and makes us aware of an incorrect occupancy status. It is claimed that the occupancy status has been incorrect for the entire eight years the resident has owned the home. Because the contact was made between Jan. 1, and June 30, the tax years beginning July 1, 2008, July 1, 2007, and July 1, 2006 will be abated.

Assume the county and state cap percentage is 10% and the following curtilage assessments:
July 1, 2005 – 300,000
July 1, 2006 – 350,000
July 1, 2007 – 400,000
July 1, 2008 – 450,000

Credit Calculation and Abatement Amounts
300,000 x 1.10 = 330,000 350,000 – 330,000 = 20,000 July 1, 2006 Credit Abatement

330,000 x 1.10 = 363,000 400,000 – 363,000 = 37,000 July 1, 2007 Credit Abatement

363,000 x 1.10 = 399,300 450,000 – 399,300 = 50,700 July 1, 2008 Credit Abatement

The Impact of the Homestead Eligibility Application

Property owners who purchased a property after January 1, 2008 must complete a Homestead Eligibility Application to be eligible for the Homestead Credit. The new law enacted by the 2007 session of the General Assembly shifted the responsibility to the homeowner for Homestead eligibility. It is important to note that the local Assessment Office may not grant a Homestead Credit refund for properties purchased after January 1, 2008 unless the Homestead Eligibility Application has been submitted and approved by the Homestead Eligibility Unit at the central office. This can be verified in the Department’s data system.

Residential property owners already receiving Homestead eligibility prior to December 31, 2007 will have until December 31, 2012 to submit the new one-time application to continue receiving that credit.

The relationship between the traditional role the local Assessment Offices have played with the Homestead Credit eligibility and the new centralized duties for administration of the Homestead Application Program in our Baltimore office can best be understood by keeping in mind that the two responsibilities are going to be kept separate. The responsibility for maintaining the “Occupancy Code” remains with the local Assessment Office, and the “Homestead Application Eligibility Code” rests with the central office. Specifically, the duties of the local Assessment Office staff regarding Homestead eligibility will be as follows:

(1) The local office will have the exclusive control of the “Owner Occupancy” code.

(2) The local office will utilize independently gathered information such as an assessor’s field notes, returned mail, change of address request, county/municipal rental licenses, and complaints from property owners to maintain the correctness of the occupancy code. The local offices will continue to have the responsibility to send out the standard occupancy status verification letter in our data system or to use a customized letter if they chose.

(3) To assist the local offices with the verification of the owner occupancy status, the Department will provide each office an individual MVA lookup. We do not want the local office to send out a letter requesting driver’s license information when a Homestead Applicant has already been approved by the central office.

(4) The local Assessment Office should maintain the correctness of the Occupancy Code for a particular property even if the property owner refuses to submit an application before December 31, 2012 and receives a “Disapproved” Homestead Application status for failure to submit the one-time application before the cutoff date.

The duties of the central Homestead Application Unit are to process the new applications by standardly using the federal income tax and the Motor Vehicle Administration databases to verify actual residency. Its primary responsibility is to determine whether or not an application has been submitted by the property owners to ensure their continued eligibility for the Homestead Credit.

Finally, it is to be expected that there will be regular communication between the local Assessment Offices and the central office when there is a conflict between the “Owner Occupancy Code” and the “Homestead Application Eligibility Code”.