July 13, 2006
PROPERTY TAX RELIEF FOR SENIORS
By: Kevin E. McCarthy, Principal Analyst
You asked for a description of the law authorizing a property tax freeze for seniors. You wanted to know whether all towns can authorize the freeze, how often income limits are modified, and whether neighboring states have similar programs.
PA 06-176 allows all towns to freeze property taxes on homes owned by people age 70 or older who have lived in the state at least one year. The freeze can also apply to a surviving spouse who is at least age 62 when the homeowner dies. Homeowners must meet the income limits for the circuit breaker program, which gives elderly homeowners a credit against their property taxes. (OLR report 2006-R-0309 (enclosed) compares this program with the new tax freeze program.) The circuit breaker income limits are currently $27,700 for individuals and $33,900 for married couples and are adjusted annually for inflation. People whose taxes are frozen can still qualify for other property tax relief programs. The act does not provide state reimbursement for revenue a town loses by freezing taxes, but it allows the town to put a lien on the property and to set asset limits for eligibility.
An earlier tax freeze program was established in 1967. Elderly (65+) and disabled people who applied and qualified for tax relief had their property tax frozen at that year's level, with certain adjustments, if they owned and resided in their home. No new applicants have been allowed since the 1978 program year. Anyone who was in the program before then, and their surviving spouse, may stay in the program as long as they continue to meet all the program's conditions and requirements. There are currently around 800 people in this program.
In addition to the tax freeze and circuit breaker programs, seniors may also be eligible for other property tax benefits, for example those provided to veterans. OLR Report 2005-R-0884 (enclosed) describes veterans' tax benefits. Finally, towns may provide additional tax relief, with certain restrictions, for the elderly upon approval by the town's legislative body. The state does not reimburse towns for lost revenue for optional relief programs. OLR memo 2006-R-0342 (enclosed) describes local option programs in 11 towns.
Rhode Island has a local option property tax freeze program that is somewhat similar to one adopted in Connecticut this session. Rhode Island's law (R.I. Gen. Law § 44-3-16) generally applies to residents age 65 and older or disabled (although in Warwick the minimum age is 70). Massachusetts and New York do not have similar laws, although they have tax exemption programs for the elderly.
NEW OPTIONAL PROPERTY TAX FREEZE PROGRAM (PA 06-176)
The act allows any town to freeze qualified homeowners' real estate taxes at the level of the tax due for the assessment year beginning October 1 of the year immediately preceding the date the homeowner applies. For subsequent years, if the town lowers taxes, those lower taxes apply to the homeowner. A town may freeze taxes only if its legislative body approves. The freeze can also apply to a tenant for life or for a term of years who is liable for property taxes. It can continue for the homeowner or tenant's surviving spouse or anyone who has a joint interest in the property with the owner at the time of the owner's death, as long as the person continues to qualify under the act. After the first year the claim is filed and approved, the participant must reapply every two years on a form prepared by the town assessor.
To qualify for the tax freeze, a taxpayer must:
1. as of the prior December 31, (a) be at least age 70 or have a spouse living with him who is at least age 70 or (b) be at least age 62 and the surviving spouse of a taxpayer who was entitled to the tax freeze when he died, provided they were living together at the time of death;
2. occupy the property, including a mobile home, as his or her home;
3. have lived in Connecticut for at least one year before filing the claim (this applies to either spouse);
4. have qualifying income (both taxable and nontaxable) in the immediately preceding tax year at or below the limits for the circuit breaker program; and
5. submit evidence of his income, in a signed affidavit, to the assessor in the town where he is applying.
The act exempts Medicaid payments made on the owner's or his spouse's behalf from counting as income for eligibility purposes. It also exempts the spouse's income if he resides in a health care or nursing home facility in Connecticut that receives Medicaid payments for the spouse.
The act allows the town to (1) impose asset limits for tax freeze eligibility and (2) place a lien on the property for the total tax relief granted plus interest at a rate the town determines. It gives such a lien priority in the settlement of the person's estate.
It specifies that obtaining benefits from this tax freeze does not disqualify people from other tax relief programs for which they are eligible (e.g., the circuit breaker program, the earlier elderly tax freeze, and the local option tax relief for seniors over age 65 and disabled people).
Level of Tax Relief
The act requires that the tax on the qualifying property be the lower of the tax due for (1) the assessment year beginning October 1 immediately preceding the year of the initial application or (2) any subsequent assessment year. If the property's title is in the name of the qualifying homeowner or spouse and anyone else, the claimant is entitled to pay his fractional share based on the act's freeze formula, and the other owners must pay their fractional share without regard to the freeze.
Effect of Property Transfers on Benefit
If a homeowner benefiting from a tax freeze transfers his interest in the property to someone else between November 1 and August 1 either voluntarily or involuntarily, the tax relief benefit for that year must be prorated. If the transfer happens in October, the homeowner is disqualified from tax relief for that assessment year. If the transfer happens in August or September, there is no proration and the homeowner receives the full benefit.
The act gives the person to whom the property is transferred 10 days after the conveyance date to notify the assessor. If the assessor receives no notice or learns of the conveyance on his own, he can calculate the amount of tax relief to which the original homeowner is entitled, and notify the tax collector of the reduced benefit amount. When the tax collector receives the assessor's notice after the town's tax due date, he has 10 days to mail or hand a bill to the transferee containing the additional amount of tax due. This additional tax is due, payable, and collectible subject to the same liens and processes as other property taxes, but it must be paid in an initial or single installment within 30 days after the tax collector mails or hands the bill to the new owner and in equal amounts for any remaining, regular installments.
Deadlines and Extensions
Applicants must file their claims with the assessor in the town where the property is located, in whatever form and manner the assessor requires. The claim must be filed between February 1 and May 15 of the year that the claim is for and must include required substantiating information. The act allows taxpayers to apply for an extension before August 15. The assessor can grant an extension if (1) there are extenuating circumstances due to illness or incapacitation as shown in a physician's certificate or (2) he decides there is good cause for the extension.
The taxpayer must give the assessor a copy of his and his spouse's federal income tax return for the tax year immediately preceding submission of the application. If the taxpayer does not have to file a federal tax return, he must provide whatever proof of income the assessor requires. The assessor must decide whether to approve the application and examine each application and the other information submitted.
After the taxpayer's claim has been approved for the first year, he must file such applications and supporting information biennially. The assessor must notify each taxpayer of the reapplication requirement by February 1 of the year in which it is required and enclose an application form. The taxpayer can submit the application by mail as long as the
assessor receives it by March 15. By April 1, the assessor must again notify any taxpayer from whom he did not receive an application by March 15. Then, the taxpayer has until May 15 to submit the application in person or, for reasonable cause, through another person acting on his behalf.
False Statement Penalties
Anyone who knowingly makes a false application to claim tax relief is subject to a fine of up to $500. Anyone who fails to disclose all relevant matters or makes a false statement with the intent to defraud must refund to the town all improper tax relief.
EARLIER PROPERTY TAX FREEZE PROGRAM
The Freeze Tax Relief Program was established in 1967. Elderly (65+) and disabled people who applied and qualified for tax relief had their property tax frozen at that year's level, with certain adjustments, if they owned and resided in their home. No new applicants have been allowed since the 1978 program year. Anyone who was in the program before then may stay in the program as long as they continue to meet all the conditions and requirements of CGS § 12-129b. The surviving spouse of a beneficiary is entitled to the benefit if she is 50 or older, lived with the beneficiary at the time of his death, and meets the income limits. To be eligible a household must have $6,000 or less in annual qualifying income, which is considered federal adjusted gross income plus tax-exempt interest. Qualifying income excludes Social Security income, U.S. Postal pensions, and certain other types of income. However, the maximum annual benefit under this program is $2,000. There are currently approximately 800 beneficiaries under the program
The program cost municipalities approximately $ 1.4 million in FY 06, with the state fully reimbursing them for the loss. An Office of Policy and Management booklet addresses frequently asked questions regarding the program. The booklet is available online at http://www.opm.state.ct.us/igp/grants/taxrel/owner04.doc