ST. JOSEPH COUNTY — St. Joseph County leaders are working to track down hundreds of thousands of dollars in missing revenue that could help pare down a $3-$4 million hole in next year's County budget. They're also sending a message: homeowners cheating the system are about to be caught.
The issue all revolves around homestead deductions or exemptions. The homestead credit is granted to homeowners equivalent to 60% of the assessed value of the property or $45,000, which ever is less.
Mortgage exemptions of up to $3,000 can also be granted.
That can add up to a significant amount of money per property in tax exemptions, said St. Joseph County Auditor Peter Mullen.
"It can be a big deductions. It's a lot of money per house," he said.
But, there's the catch: only one exemption of each kind is allowed per household, no matter how many properties are owned.
"You can only have one. You can't have two," Mullen said.
And Mullen believed that's exactly what most homeowners had. That is, until he took a closer look.
It all began early this year, as printers hummed in the Auditor's office. More than $68 million in homestead exemption checks were being mailed, and some had lots of zeros.
"Some of those checks were as small as $25. Some of them were as high as $20,000," Mullen said. "But, more than 1,000 of the checks came back returned to us. They said, moved — not at this address."
So, Mullen looked closer and says he shocked at what he found.
"In many, many cases, the person had two or three homestead exemptions, but used different names. They may have used their middle name and not their last name. They may have used initials. They may have had their wife's name on one, joint names on one, and the husband's name on one. And, they got three mortgage and homestead exemptions," Mullen said.
In one case alone, Mullen found one property owner with 12 different homestead exemptions.
It all, he said, began to add up.
"It took a lot of time, and a lot of patience to go through the telephone book, to call the houses and find out who owns what. And, in turn, we have received over $56,000 in taxes that were being avoided," Mullen said.
And St. Joseph County isn't alone.
The State of Florida, famous for so-called "snowbird" homes used mainly during the winter months, began a new program last year where inspectors are sent door to door to check and see whether homeowners claiming homestead exemptions actually use the home as their primary residence.
In Marion County, Indiana, Mullen says auditors have already found more than $1 million in lost revenue to undue homestead credits just this year.
It's money that should be going to pay county bills, and Mullen says it's highly likely there's a lot more of it still out there.
WSBT spoke with several St. Joseph County homeowners listed as owning multiple properties at some point over the last three years. None would speak on camera, and most said they had never received multiple homestead credit checks.
But some said if they had received multiple exemptions, the properties had since been sold, or the problem was due to an "honest mistake," and had since been paid off.
Mullen says in some cases the problems aren't the homeowners' faults.
"In some cases, it's the mortgage companies that haven't told us," said Mullen. "Say you sold your house to me, and you're still getting the homestead exemptions, but not telling anybody about it. There are some that are legitimate mistakes. Perhaps, a young couple gets married and they don't realize they can't do that."
"But, I think in many cases, there was an intent to defraud, if that's the right word. And, in a budget situation like we're in, those that avoid paying what they owe, shame on them. $56,000 right there is a couple of employees," Mullen continued.
The problem is, catching those with multiple exemptions has come mostly by chance.
"If we catch it, it's generally by luck," Mullen said. "We can then stop it from happening again. But, we can't go an purge everybody in the county without their numbers. Not until they sell the house."
But, a new state law called House Enrolled Act 1344 is aiming to change that by giving county auditors new powers to crack down.
"Anyone who now applies for the homestead deduction must give either the last five digits of their social security number and the last five digits of their driver's license number, or another comparable form of identification, like a state ID, federal ID or passport," said Indiana Department of Local Government Finance Spokesperson Amanda Stanley.
"Then, that's entered into a statewide, secure database that allows county auditors to log in and search statewide if that person is receiving a homestead, either in their county or another county. That will help cut down on multiple homesteads," Stanley continued.
Starting with 2010 Indiana property tax bills, those requirements will expand to all homeowners — even those already receiving a homestead or mortgage exemption.
But, there's a potential wrinkle in that plan.
Many "duplicate" properties are often in a different state, particularly here on the Indiana-Michigan state line.
"At this time, we're not sharing the database," Stanley said. "But, as we build up the database, I'm sure that sharing that with other states will be something we explore."
The message, both Stanley and Mullen agreed, is a crystal clear one: cheat and you will be caught. And, the penalties can be stiff.
"They're liable for the amount of the deduction the person was allowed, plus a civil penalty equal to 10% of the additional taxes due," Stanley said.
That's in addition to fines that may be assessed for delinquent payment of property taxes.
The goal is simple: honest mistake, or intent to defraud, county leaders want every homeowner to pay their fair share.
"We can go back up to three years to check. And, we'll go after them all," said Mullen.
For more information on HEA 1344 and homestead exemptions in Indiana, click here.
