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Tax Office Accepts Blame for Homestead Errors

District of Columbia tax officials, citing a clerical error, accepted responsibility for several House lawmakers improperly receiving a property tax break intended for city residents, but said Members will still be required to pay back taxes.

A Roll Call search of D.C. property tax records last week uncovered a handful of House Members who were improperly enrolled in the D.C. homestead program, which can shave hundreds of dollars a year off tax bills and limits annual increases.

“Although you never applied for the benefit or the tax cap, the Office of Tax and Revenue (OTR) applied the deduction to the property when the deed was recorded. Occasionally, these deductions are carried forward, even with ownership changes, due to the former owner having received such deductions,— the tax office letter states, copies of which were issued to Reps. Mike Rogers (R-Ala.), Phil Gingrey (R-Ga.) and Steve King (R-Iowa) last week.

A fourth letter issued Friday to Rep. Tom Petri (R-Wis.) states that his Georgetown home has also “inadvertently— received the tax benefit and that he will be billed for back taxes.

Figures were not immediately available on how much each Member will be required to repay the District.

OTR spokeswoman Natalie Wilson said Thursday that the lawmakers will be required to pay property taxes on the full assessment value of their respective homes.

Under the District’s homestead program, a taxpayer who owns a home in the city and uses it as the principal residence receives a reduction of $67,500 on its assessed value, or a savings of $573.75 off the 2009 tax bill.

In addition, properties that qualify for the homestead deduction are also protected from considerable jumps in assessed value. The District caps those increases at 10 percent above the previous year’s tax assessment.

According to D.C. tax records, Rogers’ three-bedroom home is currently valued at $679,920 for tax purposes but assessed at $747,420; King’s one-bedroom condominium is currently taxed at $308,000 but assessed at $388,000; and Gingrey’s three-bedroom home is currently taxed at $637,000 but assessed at $705,000.

When contacted by Roll Call about their tax status last week, three of the lawmakers — Rogers, Gingrey and King — attributed the tax break to an error by the District.

A Petri aide said the Wisconsin lawmaker’s home received the tax break via his wife, Anne Neal. Neal files income taxes in the District, according to Petri’s office.

Under D.C. property tax laws, spouses of Members are eligible to claim the homestead deduction, even if the property is co-owned by the lawmaker.

According to a public memorandum explaining the homestead program, factors such as income taxes may be considered, but above all else, a spouse must be registered to vote in the District to qualify for the tax break.

The voter registration requirement was added to the homestead program in 2002, more than 15 years after Petri purchased his home.

“The property was entitled to the benefit when it was purchased in 1986,— the March 27 letter to Petri from Deputy Chief Financial Officer Steppen Cordi states. “However, OTR failed to remove the benefit when the qualifications changed, which required that the owner’s principal place of residence, domiciliary and voter registration must be in the District of Columbia.—

Neal, who is also known as Dede Petri, is registered to vote as Anne Petri in Fond du Lac, Wis., according to the Wisconsin Government Accountability Board Elections Division.

D.C. tax records show Petri’s home is assessed at $2.9 million but has a tax value less than half of the assessment: $1.4 million.

Real Property Tax Administration Director Richie McKeithen said Thursday that the city, which no longer automatically confers homestead status to property owners, has upgraded its review process for the tax benefit.

“You actually have to apply [for the homestead deduction] every time a property transfers,— McKeithen explained.

In addition, the tax office plans to create a computerized database for the homestead program, which will cross-reference voter registrations and Department of Motor Vehicles records that help to determine residency.

In the meantime, McKeithen noted that residents also receive a tri-annual reminder about their tax status, which is listed on both biannual tax bills and a yearly assessment update.

“We have it on the bill and the assessment notices now,— McKeithen said. Those notices include not only a statement indicating that a property owner is receiving the homestead deduction, but also a detailed account of the tax discount.

“Those are things that are somewhat hard to ignore,— McKeithen said.

Although the tax office does not conduct targeted reviews of Member property tax records — which are often listed under a spouse’s or other relative’s name — Wilson said the D.C. government has focused on other options, including providing detailed property tax guidelines to incoming Members.

That document includes numerous examples on the homestead program, including scenarios in which a Member, Congressional aides or their families may or may not qualify for the tax break.

“It’s such a transient community, we would like to reach out to the Members of Congress to inform them and educate them on the guidelines,— Wilson said.

Roll Call’s review of D.C. property tax records indicate more than 100 House and Senate lawmakers own homes in the District.

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