Tax breaks … for the dead?

When Ben Franklin said, “nothing can be said to be certain except death and taxes,” he apparently wasn’t talking about Hawaii County.

A comparison of property owners claiming the county homeowner’s exemption against vital statistics from the state Department of Health has discovered 1,200 deceased people benefiting from the exemption, some for as long as 10 years. That’s according to county Real Property Tax Administrator Stan Sitko.

Sitko, addressing the Real Property Tax Stakeholder’s Task Force on Thursday, said his office has been coordinating with state agencies such as the Department of Health and the Department of Taxation to purge the dead and nonresidents from the homeowner rolls.

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 automatically renews each year.

The oversight doesn’t rest entirely with the county. The Department of Health in 2005 quit sending vital statistics to the counties, thus hampering their efforts to purge their tax rolls. It wasn’t until last year, following a mandate from the state Legislature, that the data became available again, said county Finance Director Nancy Crawford.

Crawford couldn’t immediately put a dollar figure on how much revenue the county might have lost because of the problem, but noted that surviving spouses, children and other residents on the property might have qualified for the exemption anyway. The exemption would have expired if the property had been sold.

Property owners were notified last year and had to pay the higher tax bill going forward or file for exemptions. Crawford said the county didn’t go after them for back taxes that might have been missed.

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.

Kohala Councilwoman Margaret Wille, who co-chairs the task force with Hilo Councilman Dennis Onishi, praised the Finance Department for starting to tackle the list of improvements without waiting for the task force to get up and running. Still, she said, there’s plenty to do.

“There hasn’t been a lot of accountability and a lot of coordination,” Wille said. “I think the key thing is, we need to tighten up the abuses. Someone pays for this, and if it’s not done fairly then the rest of the people are paying for it.”

Sitko said that Maui County has addressed the issue by requiring property owners seeking the exemption to file their state tax returns annually with the county, thus proving their residency. Hawaii County would have to change its laws to follow that procedure, he said.

Meanwhile, he plans to scrub the county list regularly against vital statistics and is working on a memorandum of agreement with the state Tax Department for that agency to check the county list against the state tax rolls.

Finance Department officials were unsure, however, whether the county should cease its automatic renewal and instead require annual registration for the exemption.

“That’s 40,000 submittals coming in every year for our staff to review,” Crawford told the task force. “There would be a cost associated with that.”

Still, the homeowner’s exemption needs a thorough review, said task force member Al Inoue, a Hilo real estate agent attending his first meeting Thursday.

“Property owners are taking advantage of the homeowner’s exemption,” Inoue said. “We think it’s quite significant.”

“Our difficulty is, we have to prove it,” Sitko responded.