In March 2006 a married couple I know bought a condo in Kihei. Their first property tax bill was very low—almost non-existent, actually. But this July, their 2007 bill came due, and it was $2,600. Shocked, the wife went to the County of Maui’s office in the Maui Mall to find out what had happened.
“They said I had never filed for a homeowner’s exemption,” the wife told me. “Our title company gave us a thick stack of papers to sign, but the homeowner exemption form wasn’t in there. The county also said appealing was a waste of time.”
The couple will be able to pay the bill, but will have to cut their expenses to do it.
“I couldn’t go to reflexology this month,” the wife said. “But when I called to cancel and explained why, the woman said, ‘That happened to me, too.’”
At a time when the median price of a single-family home on Maui hovers around $650,000 (down from $780,000 a year ago at this time, but still), it seems a disturbing number of residential homeowners haven’t applied for the county’s homeowner tax exemption—one of the most generous in the nation.
The $300,000 tax exemption—which also reduces the tax rate from $4.85 per $1,000 valuation to a mere $2 per $1,000 valuation—can save homeowners who live in Maui County thousands of dollars on their annual property tax bill. But for reasons that no one can quite pin down, a great many homeowners—a lot of them first time buyers—have no idea that they qualify.
“This happens to a lot of people,” Dave DeLeon, Government Affairs Director of the Realtors Association of Maui, said.
Bruce Erfer, the chairman of the county’s Real Property Tax Review Board, agreed.
“I gave a talk to real estate agents on this a few weeks ago,” he said. “I think there’s been a lot of laxness. But I don’t want to blame real estate agents. Part of the thing about buying a house is learning about property taxes.”
The homeowner exemption application form itself is a model of simplicity. A single page, it asks for the owner’s name, Social Security number and date of birth. It asks if the applicant will use a portion of the home for a business or rental and if the applicant already has a home exemption on another property. The applicant signs and dates the form, submits proof of age and is good to go.
Still, Erfer said people aren’t hearing about the exemption in time. And many are coming before his board in hopes of getting the county to kick out their non-exemption tax bill. It doesn’t happen.
“We’ve had a lot of appeals,” Erfer said. “But we on the board have almost no leeway because of the deadline.”
That would be Dec. 31—get the application to the county by then or you’re doomed to wait another year without the exemption.
“If you don’t make the deadline, you don’t make the deadline,” DeLeon said. “It’s a one-shot deal.”
“We get people who appeal who’ve lived in their house for seven years and never heard about it [the exemption],” Erfer said. For them, the tax review board can’t do anything except advise them to apply to prevent further over-taxation.
“It’s something that should be known more, talked about more, but isn’t,” he said. “My first response is always, ‘Did your real estate agent tell you about this?’ They don’t have to, but the good ones do.”
What’s more, anyone who bought a home that closes escrow on Jan. 1 is pretty much screwed for the entire year, unless the previous owner already had filed for the exemption. “That’s something that’s inherently unfair,” Erfer said.
For its part, the county Department of Finance doesn’t seem to think any of this is a crisis. “We don’t really necessarily say this is a problem,” Department of Finance Director Kalbert Young said. “We’ve done a lot of work to advertise the exemption, if you will. And the large, major escrow companies do a pretty good job of including the form in their packets [for new homeowners].”
As far as not giving the Real Property Tax Review Board any leeway on granting appeals to those who miss the Dec. 31 cut-off date, Young compared the matter to the April 15 deadline for federal income tax returns.
“The deadline is stated in the Maui County Code,” he said. “In order to give a variance on that deadline, they [the review board] would be going against the code.”
In fact, as far as the county itself is concerned, the biggest issue right now is how to make the homeowner exemption application process more stringent. On Aug. 13, the Maui County Council’s Budget and Finance Committee took up an old bill that would give the Department of Finance more power to investigate homeowner exemption applications. While the Department of Finance doesn’t deal with many unqualified people applying for the exemption, Young did say the application form should ask for more information.
“The form is extremely simple,” he said. “We’d like to see it tightened up, but don’t believe there’s rampant abuse of the exemption.”
To get a copy of the Claim for Home Exemption form, call the county Department of Finance at 270-7297 or stop by their office at 70 E. Ka‘ahumanu Ave. in Kahului. The form is also online at www.co.maui.hi.us/departments/Finance/pdf/homeexempt.pdf. MTW