[Chat] Refund of homestead tax credit for previous CVCBD tax bills

[Stephen J Gewirtz]

The following applies to owner occupied residential properties subject 
to the CVCBD surtax.  Those are the properties whose owners are entitled 
to the homestead tax credit; what that means is that the effective 
increase in ones assessment for purposes of the Baltimore City real 
estate tax is limited to a maximum of 4% per year (i.e. the effective 
assessment may go up by a factor of 1.04 each year) compounded.  The tax 
bill shows what the tax would be if the full assessment applied, but 
that tax is reduced by what the bill refers to as "City assessment 
credit," so that the assessment effectively has risen by only 4% over 
that for last year.  (Incidentally, for State real estate tax purposes, 
the effective assessment may go up 10% per year compounded, and your 
bill may show a "State assessment credit.")

By now, most of us should have received our bills for the CVCBD surtax.  
Mine shows that the surtax is $168.77, but it shows an assessment credit 
of $66.94 (the homestead tax credit), for a resulting surtax (if paid in 
September) of $101.83.  I want to thank City Council member Mary Pat 
Clarke for her work in getting the homestead tax credit to be applied to 
our CVCBD surtax.  With many of us having had our assessments double or 
triple, her efforts have kept CVCBD much more affordable for long time 
homeowners in Charles Village.

It turns out that the homestead tax credit should have been applied all 
along to the CVCBD surtax and that the City is liable for refunding any 
overpayment of the surtax for the last 3 years.  I am told that a 
neighbor has received a letter from the City Finance Department 
indicating that the City will have a form to request the refund.

Determining the refund due is actually fairly easy.  Take the tax for 
this year for the month in which you paid last year, and divide by 1.04 
to get the tax you should have been billed for in 2007.  Take that 
figure (or the figure so calculated for the month in which you paid in 
2006) and divide again by 1.04 to get the tax you should have been 
billed for in 2006.  Repeat the process for 2005.  For each year, the 
difference between what you should have paid and what you actually paid 
is the refund that you should get.

In my own case, I paid the tax each year in July.  The figures are as 
follows:

My tax to be paid in July, 2008 is $100.81.

In 2007, I paid $99.02 but should have paid 100.81 / 1.04 = 96.93, for 
an overpayment of $2.09.

In 2006, I paid $94.73 but should have paid 96.93 / 1.04 = 93.20, for an 
overpayment of $1.53.

In 2005, I paid $90.46 but should have paid 93.20 / 1.04 = 89.62, for an 
overpayment of $0.84.

Thus, my total overpayment is $4.46.

I am using the figures for payments in July, but the City may use 
September figures (which will be higher).  In any case, this should be a 
good approximation of what is due.

If you have the bill from a previous year for the regular City tax and 
the surtax, you can also calculate the overpayment from those if the 
bill was paid in September.  Take the amount of the City homestead tax 
credit on the regular City tax bill (referred to as "City assessment 
credit" on the bill), multiply it by 0.12 (the CVCBD surtax rate), and 
divide the result by the City tax rate shown on the bill.  The resulting 
figure will be the overpayment of the surtax for that year.

The figures from the different methods may differ slightly because of 
rounding errors, but they will be fairly close.

As you can probably see, the figures are fairly low.  There may be 
exceptions to this.  And the figures are likely to be much higher in the 
Midtown Benefits District.

You can decide for yourself whether it is worth the bother to file for a 
refund.  Joan Floyd has found case law involving a benefits district in 
Friendship Heights, Montgomery County, showing that the County (in our 
case, Baltimore City) clearly is liable for refunding any overpayment 
for three years where that overpayment is due to bills that were too 
high (in that case, because the procedures to raise the surtax rate that 
were set forth in the enabling law for that benefits district had not 
been followed, but Montgomery County had billed anyway for the higher 
surtax rate).  Whether the City can then sue CVCBD to recover the money 
is not clear (especially since the error was the City's and not CVCBD's).

And in cases where a property changed hands in the last three years, the 
situation is likely to be very different, especially if the property was 
reassessed right after the property changed hands.

Steve.