But officials with the Ohio Department of Taxation told this newspaper Monday that auditors “shall” attempt to recoup the funds, according to state law.
A spokesman for Keith’s office said the office will work with the department of taxation on a process for recouping as much of the money as possible.
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, taxation department officials said.
Newspaper probe launched review
Keith's office learned of the issue from an I-Team analysis of the county's tax rolls this summer. That analysis found that thousands of properties received a credit meant for a homeowner's primary residence even though they were rentals, owned by a company, or owned by someone receiving the credit on multiple properties.
“We had to weed through some of those to get to the ones we believe were receiving the credit in error,” Keith said.
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Keith this week said his office put in new reviews to catch properties improperly getting the credit. This includes automatically removing properties from the credit when those properties are placed on the rental registry.
Rental properties are not eligible for the credit, yet the audit found 3,039 properties on both lists because they were not routinely compared to each other. The tax credit on these properties totals $161,358.
Keith’s office will also conduct routine audits to catch improper applications of the credit, he said.
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, the total impact is $11.3 million. The state reimburses communities for the cost of the credit.
Ohio’s largest counties are required under state law to track rental properties. There are 24,128 registered rentals in Montgomery County.
‘A lot of this is self-regulated’
The audit also looked into the I-Team’s findings that people were receiving the credit for multiple properties. There are some permissible reasons for this — a home and garage being on different parcels, for example — but that was not the case in many properties.
Keith’s office sent notices to 971 property owners getting multiple credits on a combined 2,345 properties and gave them 30 days to respond. This led to 1,984 properties being removed from the program either because the owner didn’t respond or they identified one of the properties as not their home.
The audit also removed 159 commercial properties and 1,265 LLC’s from receiving a combined $80,656 in credits.
Keith said his office is working with some of the largest of these to recoup the money, including the Miami Twp. business park.
“They had properly completed their paperwork and did not apply for the credit,” he said, explaining it happened because of a data entry error in his office.
“They had indicated to us that they had no intention of trying to get a credit for something that they are not eligible for and entitled to, so their intention is to pay us back for those credits.”
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Getting a return on the rest of the money won’t be easy.
“There’s just no good mechanism to go back and try to retrieve that,” Keith said.
“A lot of this is self-regulated. We do rely on property owners to notify us,” Keith said of how these mistakes occurred. “We didn’t get any indication anybody was doing this maliciously or anything like that.”
Other Ohio counties say monitoring compliance with the exemption is a constant effort.
Hamilton County Auditor Dusty Rhodes said the problem likely increased during the recession.
“When people had trouble selling their homes, they sat on them for a year and had to do something, so they started renting it,” he said. “The only way we could catch them was through rental registration, but a lot of them didn’t know they had to do that.”
Rhodes said new rental registrations are checked against the owner-occupancy credit to make sure it’s taken off, but the process is done by hand and is imperfect.
“I think we’re in good shape. I think we’re 95, 96 percent accurate, maybe more,” he said. “We’re counting on the public to let us know. The more people are aware of this, the more helpful they can be.”
In Franklin County, people had until his month to respond to notices sent out in March to owners of property that is not currently registered as a rental or receiving the owner-occupied credit. The 27,073 property owners who received he notices had to choose a designation or risk a $50 fine.
These fines have netted $3.5 million over the past six years, the office says.
“We look at this as a way to root out absentee landlords,” Franklin County Auditor Clarence Mingo said in a release this month. “Their delinquency erodes tax revenues, property values in the surrounding areas and helps to lower the standard of living for everyone in the county.”
Franklin County also posts a form on its website allowing residents to anonymously report properties improperly receiving the tax credit.
‘Somebody is dropping the ball’
The I-Team investigated Montgomery County's tax rolls after Kelly Livers of Dayton complained that Keith's office wasn't looking into her complaints about neighbors improperly receiving the credit.
“They threaten to take my house every year if I don’t pay my taxes, then they’re giving people credits that haven’t lived in their houses for years upon years, or businesses that are more able to afford it than me,” she said.
Livers believes the number of properties improperly receiving the credit is even higher if you factor in abandoned properties. She suggested the county could send letters out every year requiring people to confirm they still own and live in the home.
“There’s got to be a better solution than what they’re doing now.” she said. “Somebody is dropping the ball.”
Breakdown of properties removed
3,039 parcels receiving both owner-occupancy credit and rental registration (total value $161,358)
1,984 properties that had one owner with multiple parcels (total value $86,196)
159 commercial or industrial classed parcels (total value $14,588)
1,265 Properties listed as owned by an LLC ($66,068)
Source: Montgomery County Auditor’s Office