For Immediate Release: June 18, 2014
Press Release by:
Councilmember Mike White
Chair, Budget and Finance Committee
Committee passes homeowner tax credit bill
WAILUKU, Hawaii – The Budget and Finance Committee yesterday recommended passage of a bill amending the criteria that qualify homeowners for the so-called “circuit breaker” tax credit, Committee Chair Mike White announced today.
The purpose of the tax credit is to ensure homeowners are not forced out of their residences because of an inability to pay real property taxes, White noted. Households with a combined income of $100,000 or less are potentially eligible for the tax credit.
“Revisions to the circuit breaker credit were sorely needed,” White said. “There were instances where extravagant homes in Wailea were receiving a tax credit because they were able to show no adjusted gross income.”
“In one instance, a property was receiving a tax break of more than $15,000. These homeowners were unfairly qualifying, but it was not illegal.”
Under the bill, only the income of titleholders who live on the property will be counted. The County Code currently takes into account the income of everyone who has an ownership interest in the property, including those who do not live on the property.
Currently, only homeowners who have been granted a home exemption by the county for five consecutive years are eligible for the tax credit. The committee amended the criteria to require applicants to have had a home exemption on the property for just five out of the prior six years, instead of five years in row.
White said this amendment was based on community feedback and may provide some property owners a respite during a time of hardship, allowing them time to gain back their eligibility.
In addition, the bill deletes the existing restriction on applicants’ having ownership interests’ in other real property.
“The committee agreed it would be more efficient if the county can focus on specific properties and its owners, rather than basing eligibility on the number of properties owned, some of which may be out of state,” White said.
Under existing law, the tax credit is unavailable if the homeowner’s residence is valued at $400,000 or more. The bill continues to allow 100 per cent of the tax credit for homes valued up to $400,000, while creating a sliding scale so that those who own homes valued up to $450,000 may receive a partial tax credit.
As of March 2014, the Department of Finance reported approving 390 tax-credit applications and rejecting 479. White said the committee made strategic revisions to the legislation partly based on a review of the administration’s stated reasons for denied applications.
White said those who previously applied and qualified for the tax credit will not be impacted by the bill. Applicants who were denied will be evaluated under the new criteria, if the bill is enacted.
“We must continuously review our tax laws to ensure only those who need tax relief qualify for subsidies,” White said. “Residents must remember tax credits are not free and should only be disseminated in a prudent manner.”
The proposed bill advances to the full council for first reading, which is anticipated for July 8.
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