The Montgomery County Auditor’s Office is mailing out notices to the owners of 1,614 properties across the county in an effort to recoup hundreds of thousands of dollars from a misapplied tax break that was first uncovered by the Dayton Daily News I-Team.
The properties are owned by businesses, landlords and those claiming more than one address as their primary residence. Combined, those property owners potentially owe up to $372,819 because of tax breaks they received but did not qualify for.
People who get the notices will have 90 days to appeal the bill to the Board of Revision.
“If they can show we shouldn’t recoup, they should have that opportunity,” said Doug Trout, auditor’s office real estate director.
The auditor’s office hopes to have the issue settled by the next tax collection period in July.
The I-Team originally reported in June 2017 that thousands of properties were listed on county tax rolls as receiving an owner-occupied tax credit meant only for people who own and occupy their home. The list included registered rental properties, businesses and owners who claimed the credit on more than one property.
ORIGINAL REPORT: Ohio county admits people got tax break they didn’t deserve
Auditor Karl Keith audited the program and removed 6,447 parcels from receiving the credit.
With the exception of the largest cases — such as a Florida company that agreed to pay back $25,041 — Keith originally said his office did not intend to go after back-taxes on most properties because there was no mechanism to do so.
But the Ohio Department of Taxation informed the county that state law requires it to go after uncollected taxes. The state reimburses communities for the cost of the credit, so every dollar not collected from property owners because of the tax credit costs state taxpayers.
The owner-occupied tax credit reduces the amount of taxes due by 2.5 percent on levies passed or in existence prior to November 2013. The average amount of the credit per parcel is $76, but with 139,295 properties getting the credit last year, the total impact was $11.3 million.
Back taxes collected by the county will be deducted from the state’s reimbursement for the credit.
Trout said some of the misapplied tax breaks date back to the 1990s and identifying how much is due has been a challenge.
“The way we’re looking at that, and I think the state’s fine with it, is we’re looking back as far as the records will give us some certainty,” Trout said. “It is difficult and quite frankly most auditors have never done this.”
While some are due to auditor’s office error, Trout said most of the cases stem from property owners not taking off the owner-occupied credit when property is rented out or changes hands.
Property owners who are aware they are improperly receiving a credit and don’t report it can face misdemeanor charges potentially leading to a $250 fine, jail time and paying back the credit, plus interest.
Fran Lesser, executive director of the County Auditors Association of Ohio, said she isn’t aware of a problem in other counties with the owner-occupied tax credit going to multiple owners who didn’t deserve it. She said many counties have worked hard over the years to make sure people who deserve the credit are getting it.
“Most county auditors maybe would prefer to err this way as opposed to a taxpayer who was deserving of it not getting it,” she said. “They want to make sure every owner-occupant is receiving it.”
Media reports over the years have found problems with the tax credit being misapplied. An I-Team investigation identified the problem in Clark County in 2014.
In 2012, the Dayton Daily News reported that a computer error led to thousands of Montgomery County property owners possibly not getting the credit when they deserved it.
Keith said the 2012 problem was discovered when his office created a county-wide registry of rental properties as required by a new state law. The rental registry was one tool the I-Team used to find misapplied tax credits. But the law only requires the registry in the state’s 14 largest counties, meaning most Ohio counties don’t have this tool.
Lesser said while maintaining accurate rental registries is a challenge for counties who have them — ultimately relying on property owners to tell the truth — she wouldn’t be opposed to requiring more counties to track rentals.
“I’m not sure it’s something we would ask for, but I don’t think we’d oppose it,” she said.