Condo tax correction wrong, some say
Maui News
By ILIMA LOOMIS Staff Writer
WAILUKU – A survey sent last year to condo owners requiring them to verify their property tax classifications resulted in “corrections” that brought an estimated $1.4 million in new revenue to the county.
But some condo owners are upset that their tax classifications were “corrected” involuntarily. When they didn’t respond to the survey, their condo units were automatically reclassified to “hotel/resort,” which is charged the county’s highest tax rate.
Many are now appealing to the Real Property Tax Review Board to undo the change.
The board received a total of 309 property tax appeals this year, compared with 243 last year. While finance officials aren’t sure how many cases are directly tied to the condo surveys, they do feel the reclassifications that resulted from the survey had an impact.
Fifty-seven of the appeals were to dispute property tax classification this year, compared with 26 last year. Twenty-seven owners appealed because they were denied owner-occupant status and the related tax exemption, compared with two last year.
“There’s definitely been more appeals because people didn’t fill out the form or filled it out incorrectly,” said Bruce Erfer, vice chairman of the review board.
Real Property Tax Administrator Lance Okumura said the increase should be taken in context of the total number of people involved in the surveys.
“Out of 19,700 or so, that many appeals doesn’t seem very (significant),” he said.
But for condo owners caught in the middle, the reclassification and appeals process has been a source of frustration.
“I think they’re just taking advantage of people, which, for lack of a better word, sucks,” said Christopher Mathews, whose condo was automatically reclassified.
Mathews lives in Boston and bought a Kaanapali condo in January, after the surveys had been sent out. The condo’s previous owners never filled out the questionnaire, so Mathews was stuck with the higher tax rate.
His appeal to the Real Property Tax Review Board was turned down in August.
“We thought it was a slam-dunk, and then we got a letter in the mail from the Finance Department saying, ’Sustain at hotel/resort,’ “ he said.
Mathews estimated the higher tax rate would cost him about $1,200 in additional taxes.
The county sent a letter to about 19,700 condo owners in November 2003, asking them to declare how they were using their apartments.
The idea behind the mailing was to update county real property tax rolls. It was widely believed that some condos classified as long-term residential units, which pay a lower tax rate, were actually being used as short-term vacation rentals.
Condo owners were on an honor system in filling out the questionnaire, and well over half the recipients returned the survey, many voluntarily upgrading their classifications to the hotel rate. But those who did not respond were automatically reclassified to hotel/resort.
Okumura did not know how many were upgraded voluntarily and how many were reclassified because the owners failed to respond.
Before the survey, county tax rolls listed 939 hotel properties; that number increased to 2,606 units after the survey.
Erfer said it was common for new property owners to be stuck with the property tax classifications set by the old owners, and that the issue has come up regularly even before this year.
In some cases, the new owners want a lower tax category than the old owners were using; in other cases, the new owners want a homeowner’s tax exemption, and the old owners didn’t qualify. Of course, it can also work the other way around, where the new owners get a better deal on their taxes because of a property’s old classifications.
This year, there have also been several cases like Mathews’, where new condo owners were automatically reclassified because the old owners didn’t fill out the survey.
“It’s almost like it’s no one’s fault, but it’s just the way it is,” Erfer said.
Whether it’s a new owner or an old one, anyone appealing to the Real Property Tax Review Board needs to present hard evidence to prove his or her claims, Erfer said.
“When the evidence is presented to us that there was a mistake, we’re able to act on it and change the classification,” he said. “When there’s no hard evidence presented, we normally don’t make changes.”
In short, the owner’s word alone is not enough. Successful appeals have included utility bills, letters, leases or other documentation that proves the property is used as a long-term rental or a personal residence, not a vacation rental.
In cases where people claimed they did not receive the condo survey or a second warning letter sent out by the county, the board did accept some appeals when it was shown the intended recipient of the survey had changed addresses.
“But had their address been the same and the county was sending it to that address – no,” Erfer said.
People who are turned down by the review board can take their appeal further, to the Tax Appeal Court.
Or they can simply wait for the start of the next tax cycle to change their classification by filling out a simple form, no evidence or justification necessary.
Erfer said he could understand the frustration of condo owners automatically reclassified in the survey, but that he still felt the county did the right thing. At bottom, he felt it was the responsibility of the condo owners to respond to the survey – and they were warned their homes would be reclassified if they did not.
“A lot of the appeals we get are from people who have not filled out forms properly . . People don’t do what they have to do to get the privilege of paying lower taxes,” he said. “This is kind of one of those instances.”
The goal of the condo survey was a good one, and the effort should probably be repeated every few years to keep tax rolls up to date, he added.
“The county has to do this somehow, and this is a way of doing it, and I think it’s a reasonable way,” he said.
But Mathews did not think the system was fair, calling the reclassification an “absentee owner tax” that penalized condo owners who live off island. Taxing condos as hotels makes no sense in an area where zoning prohibits vacation rentals, he added.
“It’s zoned residential, so what they’re doing is violating their own rules,” he said.
And Mathews was especially disappointed that the property tax board didn’t give him a reason when it rejected his appeal.
“This is really leaving a bad taste in my mouth about Maui, and I’ve been coming there for 12 years,” he said. “Once we became homeowners and all this happened I was totally disillusioned.”
Condo tax correction wrong, some say
By ILIMA LOOMIS Staff Writer
WAILUKU – A survey sent last year to condo owners requiring them to verify their property tax classifications resulted in “corrections” that brought an estimated $1.4 million in new revenue to the county.
But some condo owners are upset that their tax classifications were “corrected” involuntarily. When they didn’t respond to the survey, their condo units were automatically reclassified to “hotel/resort,” which is charged the county’s highest tax rate.
Many are now appealing to the Real Property Tax Review Board to undo the change.
The board received a total of 309 property tax appeals this year, compared with 243 last year. While finance officials aren’t sure how many cases are directly tied to the condo surveys, they do feel the reclassifications that resulted from the survey had an impact.
Fifty-seven of the appeals were to dispute property tax classification this year, compared with 26 last year. Twenty-seven owners appealed because they were denied owner-occupant status and the related tax exemption, compared with two last year.
“There’s definitely been more appeals because people didn’t fill out the form or filled it out incorrectly,” said Bruce Erfer, vice chairman of the review board.
Real Property Tax Administrator Lance Okumura said the increase should be taken in context of the total number of people involved in the surveys.
“Out of 19,700 or so, that many appeals doesn’t seem very (significant),” he said.
But for condo owners caught in the middle, the reclassification and appeals process has been a source of frustration.
“I think they’re just taking advantage of people, which, for lack of a better word, sucks,” said Christopher Mathews, whose condo was automatically reclassified.
Mathews lives in Boston and bought a Kaanapali condo in January, after the surveys had been sent out. The condo’s previous owners never filled out the questionnaire, so Mathews was stuck with the higher tax rate.
His appeal to the Real Property Tax Review Board was turned down in August.
“We thought it was a slam-dunk, and then we got a letter in the mail from the Finance Department saying, ’Sustain at hotel/resort,’ “ he said.
Mathews estimated the higher tax rate would cost him about $1,200 in additional taxes.
The county sent a letter to about 19,700 condo owners in November 2003, asking them to declare how they were using their apartments.
The idea behind the mailing was to update county real property tax rolls. It was widely believed that some condos classified as long-term residential units, which pay a lower tax rate, were actually being used as short-term vacation rentals.
Condo owners were on an honor system in filling out the questionnaire, and well over half the recipients returned the survey, many voluntarily upgrading their classifications to the hotel rate. But those who did not respond were automatically reclassified to hotel/resort.
Okumura did not know how many were upgraded voluntarily and how many were reclassified because the owners failed to respond.
Before the survey, county tax rolls listed 939 hotel properties; that number increased to 2,606 units after the survey.
Erfer said it was common for new property owners to be stuck with the property tax classifications set by the old owners, and that the issue has come up regularly even before this year.
In some cases, the new owners want a lower tax category than the old owners were using; in other cases, the new owners want a homeowner’s tax exemption, and the old owners didn’t qualify. Of course, it can also work the other way around, where the new owners get a better deal on their taxes because of a property’s old classifications.
This year, there have also been several cases like Mathews’, where new condo owners were automatically reclassified because the old owners didn’t fill out the survey.
“It’s almost like it’s no one’s fault, but it’s just the way it is,” Erfer said.
Whether it’s a new owner or an old one, anyone appealing to the Real Property Tax Review Board needs to present hard evidence to prove his or her claims, Erfer said.
“When the evidence is presented to us that there was a mistake, we’re able to act on it and change the classification,” he said. “When there’s no hard evidence presented, we normally don’t make changes.”
In short, the owner’s word alone is not enough. Successful appeals have included utility bills, letters, leases or other documentation that proves the property is used as a long-term rental or a personal residence, not a vacation rental.
In cases where people claimed they did not receive the condo survey or a second warning letter sent out by the county, the board did accept some appeals when it was shown the intended recipient of the survey had changed addresses.
“But had their address been the same and the county was sending it to that address – no,” Erfer said.
People who are turned down by the review board can take their appeal further, to the Tax Appeal Court.
Or they can simply wait for the start of the next tax cycle to change their classification by filling out a simple form, no evidence or justification necessary.
Erfer said he could understand the frustration of condo owners automatically reclassified in the survey, but that he still felt the county did the right thing. At bottom, he felt it was the responsibility of the condo owners to respond to the survey – and they were warned their homes would be reclassified if they did not.
“A lot of the appeals we get are from people who have not filled out forms properly . . People don’t do what they have to do to get the privilege of paying lower taxes,” he said. “This is kind of one of those instances.”
The goal of the condo survey was a good one, and the effort should probably be repeated every few years to keep tax rolls up to date, he added.
“The county has to do this somehow, and this is a way of doing it, and I think it’s a reasonable way,” he said.
But Mathews did not think the system was fair, calling the reclassification an “absentee owner tax” that penalized condo owners who live off island. Taxing condos as hotels makes no sense in an area where zoning prohibits vacation rentals, he added.
“It’s zoned residential, so what they’re doing is violating their own rules,” he said.
And Mathews was especially disappointed that the property tax board didn’t give him a reason when it rejected his appeal.
“This is really leaving a bad taste in my mouth about Maui, and I’ve been coming there for 12 years,” he said. “Once we became homeowners and all this happened I was totally disillusioned.”
posted by DP at 7:52 PM
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