A new property tax stabilization program for older Mainers got off to a rough start this month as municipalities across the state began processing applications and fielding inquiries about a tax relief law that some say is seriously flawed.
The program allows homeowners to freeze their annual tax bills at the previous year’s amount if they are at least 65 years old, are a permanent resident of Maine, have owned a homestead or primary dwelling in Maine for at least 10 years, and are eligible for the Homestead Exemption on the property. They must meet all four criteria to qualify.
The tax stabilization program has no income or asset limits, which critics said was a problem when it was proposed, and the application form requires no proof of age, which is one of several challenges that have cropped up since the program rolled out three weeks ago.
Homeowners must apply by Dec. 1 to freeze their taxes next year, and reapply each subsequent year to continue paying the same amount.
It’s proving to be a costly, time-consuming process the first time around – one that municipal officials say the Legislature failed to consider when it approved the program last spring. The program requires the state to reimburse cities and towns for reduced taxes but not administrative costs.
“There are plenty of pitfalls,” said Kate Dufour, spokesperson for the Maine Municipal Association. “It’s a lot of burden placed on municipalities without any reimbursement for all the work that assessors are doing beyond their regular duties. It really is an unfunded mandate.”
Dufour, who also is a Hallowell city councilor, said the application form and written guidelines from Maine Revenue Services perpetuate confusion grounded in L.D. 290, the law that established the tax stabilization program.
While age is a significant qualifier, applicants must simply check a box stipulating that “I will be 65 or older as of April 1 of the upcoming year.” The application form doesn’t ask for date of birth or require documentation showing age. If a residence has multiple owners, the application also doesn’t require applicants to identify which homeowner is old enough to qualify for the program.
“There’s nothing on the form that requires applicants to verify their age,” Dufour said, and she questioned whether assessors have the authority to ask for proof of age under the law.
If the state administered the program, it would have access to a wide variety of applicants’ personal information that isn’t available to municipal assessors, Dufour said.
“We’re going to have to be able to prove eligibility or our reimbursements will be at risk,” she said. “There’s nothing easy about this. It just doesn’t work.”
Assessors also face challenges in proving applicants have owned a homestead in Maine for at least 10 years.
According to program guidelines, qualifying years of homestead ownership don’t have to be consecutive. Applicants could be eligible if they have owned different homesteads in different communities for different and even disconnected periods – as long as they add up to at least 10 years.
As a result, some assessors’ offices are being inundated with calls not only from local residents, but also from people who used to live in their communities. They’re seeking ownership information to list on the application, as well as documentation that may be requested to prove ownership, according to program guidelines.
South Portland has processed 505 applications so far, and Westbrook has processed over 200 applications, said Jim Thomas, who is the assessor for both cities. But they’ve also fielded hundreds of inquiries from residents of other communities.
“The Legislature passed this bill, so we’re going to comply with it,” he said. “But the work required is a significant burden beyond our daily responsibilities.”
Determining eligibility is further complicated because while applicants must be eligible to receive a Homestead Exemption to qualify, they don’t have to be a current recipient. The Homestead Exemption gives homeowners who apply for it a $25,000 reduction in the assessed value of their primary dwelling.
But having a Homestead Exemption is one way to prove permanent residency for the stabilization program, so applicants also are calling to check on past and current Homestead status. And while much of the sought-after information is available online in public databases, Thomas and his staff still assist residents when they call.
Without a current Homestead Exemption, applicants for the tax stabilization program must provide other proof of Maine residency, such as an income tax return, driver’s license, vehicle or voter registration, hunting or fishing license, or state identification card.
Proof of residency is the only documentation that must be submitted with the application for the program.
L.D. 290 was introduced by Sen. Trey Stewart, R-Presque Isle, and championed by fellow Republicans as a way to keep financially struggling seniors in their homes. Stewart didn’t respond to a request to discuss problems with the program.
Considered a “sleeper bill” by some, the legislation was expected to die on the table after the Taxation Committee decided it “ought not to pass” in 2021 based on concerns about cost, administration, lack of means testing and other issues, Dufour said.
But it was carried over this year, voted out of the Appropriations Committee, passed by the House and Senate, and became law in May without the governor’s signature.
Gov. Janet Mills, a Democrat, and Sen. Cathy Breen, D-Falmouth, chair of the Appropriations Committee, didn’t respond to requests to discuss problems with the program.
Under the new law, the state is expected to reimburse municipalities for the difference between frozen and actual property tax bills. However, there’s no guarantee the Legislature will fund more than 50 percent that is constitutionally required to cover revenue lost via statutory tax credits and exemptions, Dufour said.
The law’s fiscal note projected General Fund costs of $315,000 this fiscal year, $2.6 million in fiscal 2024, $7 million in fiscal 2025 and $14 million the next year. Funding beyond fiscal 2023 will be up to the next Legislature.
Homeowners who apply by Dec. 1 this year and qualify will see their property tax bills frozen at this year’s amount in 2023. They would have to reapply each year afterward to keep the frozen amount.
If a homeowner at any point fails to file a new application, the bill for that year would revert to the “normal” tax amount. The homeowner could apply for tax stabilization again the next year, but the property tax would then be frozen at the missed year’s tax level as long as the homeowner continued to file annual applications.
If homeowners move, they will be allowed to transfer their stabilized property tax amount to a new homestead as long as they continue to file annual applications on time.
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