Crackdown On Homestead Exemption Fraud Could Get Boost By Hiring Outside Firm
Tax fraud, abusing the Homestead exemption in Florida
After vowing to get tough on homestead exemption tax fraud, Duval County Property Appraiser Jerry Holland wants to ramp up the pursuit of people gaming the system by hiring a firm that will scour databases for evidence of tax fraud.
Holland, who took office in July, said that roughly 3,400 of the homestead exemptions claimed in Duval County might not be legitimate, but as long as the exemptions are on the books, the property tax owners avoid paying millions of dollars in taxes.
Holland intends to contract with Tax Management Associates, a firm that would charge nothing up-front to research whether homestead exemptions are legitimate. Tax Management Associates would make its money by getting a 30 percent cut from any tax liens paid by property-owners caught using homestead exemptions they aren’t support to have.
Holland said that trade-off is worth it because Tax Management Associates has shown through its work elsewhere, including in Sarasota County, that it has the research tools to uncover more exemption fraud than Holland’s staff can track down.
“It would probably take us adding 10 or 15 or 20 employees to do what they do with research,” Holland said. “It’s really being able to do a better job than we can internally.”
Homestead exemptions are intended to give tax relief for a homeowner’s primary residence. Homeowners can avoid paying taxes on $50,000 of the value of the home. (The exemption is limited to $25,000 when it comes to school taxes.)
Tax fraud occurs when property owners claim the exemption even if the home isn’t a primary residence. For instance, it might be a vacation home or a rental home. The property appraiser has found cases of a property owner simultaneously claiming homestead exemptions on homes in two different states, or even on two homes within Jacksonville.
Bringing in Tax Management Associates would require buy-in from the governmental entities that Holland serves — the city of Jacksonville, the three Beach communities, Baldwin, the Duval County School Board, the St. Johns River Water Management District and the Florida Inland Navigation District.
Those governments normally get the full amount from liens when property-owners pay off back taxes, penalties and interest. If Tax Management Associates enters the picture, those government entities would get 70 percent of the amount paid off for liens.
Holland said despite the lesser amount going to local governments for each lien, he expects local governments would still come out ahead because Tax Management Associates will be able to file more liens overall.
When those liens are filed, the property-owners loses their homestead exemptions, so they no longer are able to benefit by excluding up to $50,000 of a home’s value from taxes. The property-owners also gets stripped of the Save Our Home protection that limits how fast the taxable property value of a home goes up each year.
The bottom-line is the property-owner must pay taxes on the full assessed value of the home, which translates to more taxes going to local governments, Holland said.
“It’s a win on that end 100 percent,” he said.
Tax Management Associates has a partnership with LexisNexis to research databases.
Holland said his office gave Tax Management Associates a trial run by giving the firm some homestead exemptions to test. The firm uncovered two cases of exemptions claimed on condominiums that appeared questionable. After further investigation by Holland’s staff, his office filed liens for a total of $60,565 because the owners of the condominiums were using them as vacation homes, not permanent residences as required for homestead exemptions. The property appraiser’s office also returned the condos to their full value on the tax rolls.
“It definitely gave us the confidence that they (Tax Management Associates) could find additional cases that we have not found yet,” Holland said.
Holland said he hopes to have Tax Management Associates on board in early 2016. In the meantime, he said his office will continue to investigate the validity of homestead exemptions. Anyone who suspects a property-owner is falsely claiming a homestead exemption can call the appraiser’s exemption abuse hotline at (904) 630-7112.