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Removing false homestead exemptions to yield bonanza

April 22, 2014

When this spring's tax bills are collected, Marion County stands to receive tens of millions of dollars from property owners who’ve been claiming false homestead deductions.

The property-tax billing cycle that ends May 12 is the first to reflect the enforcement effort that kicked off with a 2009 state law requiring property owners to verify their eligibility for the deduction, which applies only to primary residences.

In Marion County, Auditor Billie Breaux removed the deduction from about 34,000 parcels for the 2014 tax bills, homestead verification specialist Stephanie Miller said.

Many of those deductions were removed because the property owner failed to complete and send back a pink-colored verification form, Miller said. The auditor’s office has been flooded with calls, and Marion County might end up correcting as many as 3,600 tax bills, she said.

After sending out multiple notices over four years, Miller believes most of those who lost their deductions are homestead scofflaws.

“I would imagine, the overwhelming majority of these, they don’t qualify,” she said.

Tax bills could double or triple, depending on the actual use of the property. The maximum tax rate on primary residences is 1 percent of assessed value, but it’s 2 percent on rentals and 3 percent on commercial property.

Under the law, those former homesteads also can be subject to three years of back taxes. The Marion County auditor’s office already has billed back taxes on about 1,000 parcels and collected about $3.1 million, Miller said.

The average three-year bill has been about $3,200, Miller said. If the same average applies to the final batch of ineligible homesteads, the county could collect $97 million.

The rate of property owners misusing the homestead deduction has been especially high in Marion and Allen counties, said Dawn Coverdale,  the president of the Indiana County Auditors’ Association.

Marion County has more than about 220,000 homestead properties, so the 34,000 that were removed represents 15 percent.

In Hamilton County, where Coverdale serves as auditor, the deduction was removed from 3,800 parcels, or 4.6 percent, of the county’s 82,000 homesteads.

The Indiana Department of Local Government Finance, which maintains a database of homestead deduction information, does not know how many parcels lost deductions as a result of the verification and enforcement process, spokeswoman Jenny Banks said.

The law required property owners to submit Social Security and driver’s license information so that auditors could figure out whether one person was claiming deductions on multiple properties. The DLGF database contained only a homeowner’s name and address, so multiple homesteads appeared to belong to different property owners with the same name.

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