By Gregory Korte
Enquirer staff writer
Thousands of Hamilton County property owners are getting homeowner tax breaks they may not be entitled to, an analysis of county tax records shows.
Many of those tax breaks are going to investors in rental property. But the list of supposed owner-occupied housing also includes a West End gas station, a Springfield Township car wash and a Silverton car dealership.
In addition, 57 properties receiving the owner-occupied credits aren't occupied because they've been condemned by the city of Cincinnati.
At least 2,893 properties may not qualify for the tax breaks because the owners claimed the credit on more than one home in the 2002 tax year, an analysis of county property records by the Enquirer found. (Because the auditor's tax records aren't updated until the following year, analysis of more recent years is difficult.)
The owners of those properties avoid paying a total of more than $375,000 a year.
At the same time, at least 5,470 owners who may be eligible aren't getting the credits - meaning they may be paying an average of $186 more than they have to. That's the number who own single-family homes with the owner at the same address as the property.
Hamilton County Auditor Dusty Rhodes, the county's chief property assessor, acknowledges there are problems in what he calls a convoluted state property-tax system.
"If you're looking for 100 percent perfection, in the tax system the state lays on us, that's not going to happen," Rhodes said.
Several residences
The most notable example of a property owner listing several principal residences is John T. Killinger of Mason. He is a property investor who listed 14 principal residences on property conveyance forms.
Killinger pleaded guilty in federal court June 1 in a buy low-sell high mortgage scheme known as property "flipping." One property he admitted to defrauding a bank on was at 818 Considine in East Price Hill. It was getting a $39-a-year tax break. With the 13 other properties, Killinger saved $1,054.26 in taxes in 2003.
Killinger's lawyer, Paul M. Laufman, said the federal case did not involve county property taxes and he was unaware of any problems with the conveyance forms. Killinger has not responded to phone calls and letters seeking comment.
Killinger's property-tax savings is dwarfed by the amount of federal income taxes he evaded: $117,444, according to a plea agreement filed June 1.
"Mr. Killinger has accepted full responsibility for his errors and he's working with the government to make restitution," Laufman said.
'Rube Goldberg' tax
The tax breaks are intended to encourage homeownership and come from two separate programs:
• The state 2.5 percent property-tax rollback, first adopted in 1979, was an attempt to give tax relief to people who owned their own homes. For a $100,000 property at Cincinnati's 2003 tax rates, that savings is $55 a year.
The state reimburses local governments for the cost of the rollback. Last year, those payments to Hamilton County totaled $13.1 million.
• The Hamilton County stadium-tax rebate, which sets aside 30 percent of the 0.5 percent countywide sales tax for homeowner tax relief. For the same $100,000 property, that tax break is $74. Hamilton County is the only county in the state that gives such a sales-tax rebate.
Combined with the state program, the total yearly savings in Cincinnati on that $100,000 home is $129. Homeowners in higher-tax jurisdictions save more.
But there's a limited amount of money available for the stadium-tax rollback each year, so everyone who claims a rollback they're not entitled to is taking money from those who are.
State law makes it a fourth-degree misdemeanor to make a false statement to receive the tax breaks. Under that law, it's a property owner's obligation to notify the county auditor if the property becomes ineligible for the rollback because the owner has moved out or claims another residence.
The penalty: up to 30 days in jail and a fine of $250 for individuals and $2,000 for companies. Offenders must pay back taxes with penalties and interest, and can't get the tax breaks for another three years.
Neither Rhodes nor state taxation officials know of anyone being prosecuted in the state or Hamilton County. State law allows the county auditor to examine the financial records of property owners he suspects of violating the law, and Rhodes said he would meet with prosecutors to determine whether any of the 2,893 property owners in the Enquirer's analysis could be charged criminally.
He said the complexity of administering the tax reductions is an example of Ohio's "Rube Goldberg tax system," which has different tax rates for different kinds of properties, different rules for which levies can increase, and targeted tax breaks for the elderly, disabled, homeowners and farmers.
Sunshine law
Coming up with a definitive list of improper tax breaks is all but impossible without having deputy auditors conduct a house-by-house inspection to make sure the owner really lives there, Rhodes said.
But there are some red flags.
For example, of those claiming owner-occupied reductions in Hamilton County, 139 list permanent addresses in Florida, where property assessments are also public record.
Florida gives a $25,000 exemption on the value of a home for full-time residents. Among the owners of the top 20 most expensive Hamilton County homes claiming owner-occupied credits here, 11 also claim the exemption in Florida.
"In Florida, we call that fraud," said Kenneth Wilkinson, the Lee County property appraiser.
Fort Myers and surrounding Lee County are home to 13 Hamilton County property owners, and five of them claim the tax break in both Ohio and Florida - not an easy process considering that Florida requires a Florida driver's license, Florida license plates, and Florida voter registration.
The $25,000 exemption amounts to $500 off the average tax bill in Florida. But that's just the beginning. Under a 1992 state constitutional amendment, valuation increases on owner-occupied properties are capped at 3 percent or less - despite double-digit increases in home values in Florida's hot real-estate market. It's not unusual for property owners to save more than $10,000 a year in property taxes under that program.
One Amberley Village homeowner gets $608 in tax breaks in Hamilton County - on top of the owner-occupied tax exemption he gets in Florida.
"As far as I know, the 2.5 percent reduction is if you own a home and live in it. And we do," said the homeowner, a General Electric retiree. The Enquirer is not naming him because of his concern about publicizing that his home is vacant six months a year.
Besides, the homeowner said, he's never tried to hide his Florida residency. The county auditor knows he lives there - that's where he sends the tax bill.
Ohio law allows the deduction only for properties "owned and occupied as a home by an individual whose domicile is in this state." The county auditor said he would seek a legal opinion about how to apply that definition to residents who live part time in Florida.
Not all homes
Some of the properties claiming a homeowner rollback aren't homes.
Mindy S. Frimer owns the Compton Medical Arts Building in Springfield Township where her husband, who is a doctor, practices. When the property was transferred to her name in 2000 for estate-planning purposes, someone checked the box on the conveyance form saying she planned to make it her home. She's saved $560 a year on her taxes ever since.
Frimer, of Hyde Park, said she wasn't even aware of the stadium-tax reduction, and doesn't know how it happened. "I have no clue at all," she said. "You know what happens when you go through these closings? You have 15 different papers you have to sign and initial."
In this case, Frimer didn't sign the form. Her title agent did - standard practice in almost all property sales.
With more than 30,000 properties transferred in Hamilton County each year - 120 every business day - the auditor's office says it has to rely on the accuracy of the forms.
Auditors in smaller counties say they're able to spend more time going over each form, looking for red flags - like a medical office building - that would clearly disqualify a property owner from getting the reduction.
Rhodes has instructed workers in his Real Estate Division to be "ever more vigilant" in looking for suspicious situations, and a new computer system could make it easier for the auditor to create reports on property owners getting the benefit of more than one residence.
"It's not as if we deliberately turn a blind eye to such things," said Susan Silver, the auditor's director of administration. "From time to time, something happens to arouse our suspicions, but we are not an investigative agency."
Auditor error
Still, many of the reductions given to property owners aren't the fault of the owner. Many clearly answer "no" to the question of whether the property is a residence, but get the tax breaks anyway.
