CATEGORY:

HOMEOWNERS' TAX CREDIT

012

SUBJECT:

Calculation

050

TOPIC:

Audit of Recaptured Tax Credits

020

Date Issued
7/8/79

Revision #2
5/1/88

PROCEDURES FOR LOCAL TAX CREDIT EMPLOYEES ON THE RECAPTURE OF HOMEOWNER'S TAX CREDIT DUE TO PROPERTY TRANSFER

1. Amount Of Tax Credit Recaptured To Be Calculated On A Daily Basis Method: Section 9-104(o) Tax-Property Md. Ann. Code (1986) states that the tax credit is terminated as of the date of transfer of the property and therefore, the Department's employees and those of the county collector are advised that the recaptured tax credit is to be calculated on a daily or prorata basis method. For ease of calculation, the county collector's office has been advised that it may utilize a 360-day or 30-day per month taxable year when it actually collects the money to be credited to the State. In the case of sales of property, the date of settlement shall be deemed the transfer date. No tax credit need be recaptured during the last five days of the taxable year.
   
   
2. Tax Credits Are To Be Recaptured Even In Cases of Intra-Family Transfers Unless Written Authorization From the Department Is Received Excusing the Repayment: The county must collect the recaptured tax credit on every transfer of property, including intra-family transfers for no consideration, unless the local Tax Credit employee in the designated counties has submitted to the county collector signed written authorization excusing the repayment. A copy of the standard authorization or release form the Department will utilize is included as form HTC-17. In the event that a taxpayer objects to the repayment of a tax credit on the basis of a claimed family relationship, then the county collector has been advised to direct that person to contact the local Assessment Office's Tax Credit employee. The only cases where the local Tax Credit employee should submit the written release excusing repayment of the tax credit are instances where it has first been determined that the original applicant homeowner retains a legal interest in the property (such as a life estate) and remains a resident in the subject property. The local Tax Credit employee is directed to forward monthly to the central office in Towson its carbon copy of each release that has been submitted to the county collector for that period excusing repayment of the tax credit on a particular transfer.
   
   The release form can only be prepared by the local Tax Credit employee and all items on that form must be completed in full with an appropriate identifying signature.
   
   
3. Printed Data Listings of Tax Credit Recipients To Be Provided By The Department To County Tax Collectors: Although the county treasurer or finance office has in its possession tax rolls which indicate whether or not a particular property account was subject to a Homeowners' Tax Credit, the Department will provide the county collector with special data processing listings during the year which compile every property account where a Homeowners' Tax Credit has been issued and the specific amount of the credit for that taxable year. The Department has established the policy that after the initial July 1 tax billing each year, that its local Tax Credit employee will not mail out any additional tax credits until: (1) the listing of credits to be issued has been cleared of any transfers by the data processing section of the Preston Street office; and (2) the county collector first has been provided with a copy of that month's listing of the additional accounts receiving the tax credit. If the local Tax Credit employee does not wish to delay the issuance of the credits until after the computerized check of subsequent transfers, then the employee may manually check the credits about to be issued against the recent transfers on the assessment rolls.
   
   
4. Audit And Reconciliation Of Recaptured Tax Credits Between The Department of Assessments and Taxation And The County Collector: The Department is requesting that the county collector submit an additional monthly report showing the account number of each property transferred which had been subject to a Homeowners' Tax Credit, the date of the transfer and the specific amount of tax credit recaptured by the county collector. The Department's local Tax Credit employee should not attempt to answer any questions about this particular report but instead direct all inquiries to the central office in Towson. These monthly reports submitted by the county collector will be reconciled by our central Towson office with a separate data processing report generated at the end of each taxable year comparing the master tax credit file with the master file on property transfers for that county.
   It is essential that the Department's local Tax Credit employee send throughout the year, to the Towson office all copies of any recapture release forms given to the collector in order that these accounts may be excluded from the end of the year reconciliation report. In the event there is a discrepancy between the totals for the monthly reports submitted by the county collector and the Department's end of year report, the central Tax Credit office will conduct a field audit with the assistance of the local Tax Credit employee.
   
   
5. Special Procedures For Baltimore City and Anne Arundel, Baltimore, Montgomery, and Prince George's Counties: The Department has developed a substitute automated transfer checking system for the five largest Tax Credit volume jurisdictions which does not require local employees to prepare the written release forms nor do they need to withhold credits until after the transfer check.
   
   
6. Additional Procedure For Checking Transferred Tax Credit Accounts At the Beginning Of The Application Period: In addition to all of the procedures outlined above for controlling transferred tax credit accounts during the year, there is still another action to be taken at the beginning of each application cycle by every Tax Credit section in all jurisdictions in January. When the central Towson office mails out the preprinted application to the prior year's recipients, it does so in envelopes marked "DO NOT FORWARD" or "ADDRESS CORRECTION REQUESTED". Therefore, local Tax Credit employees are directed to investigate if a property transfer has in fact occurred on any account where the preprinted application has been returned to the Assessment Office as undeliverable to the addresses. The local Supervisor or Tax Credit employee then should advise the county collector of the transfer of the particular tax credit account and check to see if the county collector's office has recaptured an appropriate amount of the tax credit for crediting to the State.