Agenda Item 3B
May 18,2016
Action
MEMORANDUM
May 16, 2016
TO:
FROM:
County Council
Amanda Mihill, Legislative Attorney
Jacob Sesker, Senior Legislative Analyst
cJ11'4t{Ju
x;;vv­
J
SUBJECT:
Action:
Expedited Bill 10-16, Taxation - Residential Real Property Tax Deferral
- Senior Citizens
Government Operations and Fiscal Policy Committee recommendation
(3-0): enact
Expedited Bil1lO-16 as introduced.
Expedited Bill 10-16, Taxation - Residential Real Property Tax Deferral - Senior Citizens,
sponsored by
Lead
Sponsors Vice President Berliner and Councilmembers Katz and Riemer and
Co-Sponsors Council President Floreen and Councilmembers Rice, Navarro, EIrich, and Hucker
was introduced on April 5, 2016. A public hearing was held on April 26 and a Government
Operations and Fiscal Policy Committee worksession was held on May 12.
Bill 10-16 would provide for a residential real property tax deferral for residents at least 65 years
old with a gross income of $80,000 or less. The statutory change would modify the County's
current property tax deferral program to allow eligible seniors to defer the annual increase in their
residential real property taxes at 0% interest.
Public Hearing Testimony
Joe Beach, Finance Director, testified in favor ofthe legislation on behalf of the County Executive
(©12).
Mr.
Beach stated that the County Executive supports the legislation because "it will
provide another option for seniors on a fixed income to remain in the County by alleviating their
tax
burden."
The Montgomery County Commission on Aging testified in support of the legislation, noting that
the Commission supports increased taxes to provide for the needs of County residents, but has
previously requested an exception for lower income seniors (©13). Jews United for Justice also
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testified in favor the legislation (©14). Several individuals also testified in favor ofthe legislation,
and some of that testimony is attached: Elaine Binder's testimony notes that supportive services
for housing is one of the critical elements of the Council's adopted "Senior Agenda" and that this
legislation is consistent with that policy document (©15); Paul Bessel and Barbara Braswell also
testified in favor of the legislation (©16). Mr. Bessel and Ms. Braswell raised an issue for
consideration: they suggested that "gross income" should
be
changed to "taxable income."
Gross Income vs. Taxable Income
During the public hearing,
Mr.
Bessel recommended that eligibility should be determined
on the basis of "taxable income" rather than "gross income" and indicated that he would be
amenable to reducing the income threshold to reflect the difference between the two measures of
income. He stated that the reason for this proposal is that many seniors have medical expenses
that reduce their taxable income.
First, Council staff notes that the current tax deferral program applies to households with
gross incomes of less than $120,000. In order to be consistent with the current program, gross
income was selected as the best measure ofincome eligibility for seniors who would like to benefit
from the 0% interest deferraL The median income of households with a householder 65 and up is
in between $75,000 and $80,000, and "gross income" is the most comprehensive measure of
income for which statistics (income by age cohort) are readily available.
Second, Finance notes that taxable income is significantly lower than gross income­
Maryland Net Taxable Income is approximately 56% of gross income. Finance notes that some
of the deductions and subtractions from gross income have nothing to do with an individual's
ability to pay, and further notes that the current cap (which was recommended in order to capture
a full 50% of senior headed households
1)
is five times the average annual social security income.
Finally, Finance notes that only 5% of deductions and income modifications between total
income/gross income and Maryland Net Taxable Income are attributed to allowable medical
expenses.
The Government Operations and Fiscal Policy Committee (3-0) recommended using
"gross income" (no change to Expedited Bill 10-16) and recommended approval of Bill 10-16
as introduced.
The $80,000 cap will capture significantly more than 50% of households aged 70 and up. The median income for
individuals aged 65 and up
is
skewed by the growing number ofindividuals (especially those age 65-70) that continue
working.
I
2
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This packet contains:
Expedited Bill 10-16
Legislative Request Report
Fiscal and Economic Impact statement
Public Hearing Testimony
Director Beach
Commission on Aging
Jews United For Justice
Elaine Binder
Paul Bessel
Finance E-mail
Circle
#
1
5
6
12
13
14
15
16
17
F:\LAW\BILLS\1610 Senior Tax Deferral\Action Memo.Docx
3
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Expedited Bill No.
10-16
Conceming: Taxation - Residential Real
Property Tax Deferral - Senior
Citizens
Draft No. 1
Revised:
3/10/2016
Introduced:
April 5. 2016
Expires:
October 5. 2017
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective:
July 1. 2016
Sunset Date: --'-!N.:::.!on.!.!:e:....--_ _ _ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
Lead
Sponsors: Vice President Berliner and Councilmembers
Katz
and Riemer
Co-Sponsors: Council President Floreen and Councilmembers Rice, Navarro, Eirich, and Hucker
AN EXPEDITED ACT
to:
(1)
provide for a residential real property tax deferral for certain residents; and
(2) generally amend the County taxation law.
By amending
Montgomery County Code
Chapter 52, Taxation
Section 52-18F
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
*
*
*
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing
law
by original bill.
Added by amendment.
Deletedfrom existing law or
the
bill by amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves thefollowing Act:
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EXPEDITED BILL
No. 10-16
1
Sec. 1.
Section 52-18F is amended as follows:
52-18F. Residential real property tax deferral[-General].
(a)
2
3
4
Definitions.
In this Section the following words have the meanings
indicated:
5
6
7
Dependent
means
~
dependent under Section 152 ofthe Internal Revenue
Code.
[(1)
"Director"]
Director
means the Director of the Department of
Finance.
[(2)
"Legal interest"]
Legal interest
has the meaning stated in Section
9-104 of the Tax-Property Article ofthe Maryland Code.
[(3)
"Owner"]
Owner
means an individual who has a legal interest in
residential real property.
(b)
Authorization; Amount of Deferral.
An owner may defer payment of
County property taxes due on residential real property occupied by the
owner as the owner's principal residence if the owner meets the
requirements of this Section. The amount of taxes that may be deferred
for anyone year is the amount that County taxes due exceeds the amount
of County property taxes paid in the prior taxable year.
(c)
8
9
10
11
12
13
14
15
16
17
18
19
Program Eligibility.
An owner is eligible for a payment deferral under
this Section if:
(1)
CA)
the gross mcome or combined gross income of all
individuals who actually reside in the dwelling (except a
dependent [under Section 152 of the Internal Revenue
Code] or a person who pays reasonable fIxed charges for
rent or room and board), did not exceed $120,000 for the
calendar year that immediately precedes the taxable year for
which the deferral is sought; and
f:\law\bills\1610 senior tax deferra!\bill 1.docx
20
21
22
23
24
25
26
27
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ExPEDITED BILL
No. 10-16
1
2
[(2)]
ill)
the owner, or at least one ofthe owners, has resided in the
dwelling as that person's principal place of residence for 5
consecutive years and continues to occupy the property for
that purpose[.]; or
(£}
3
4
5
6
CAl
m1
the owner is at least 65 years old; and
the gross income or combined gross income of all
individuals who actually reside in the dwelling (except
!!
dependent or
!!
person who
~
7
8
reasonable fixed charges
9
10
11
12
for rent or room and board), did not exceed $80,000 for the
calendar year that immediately precedes the taxable year for
which the deferral is sought.
For purposes of income determination under paragraph
[(1)]
i£},
and to
the extent consistent with this Section, gross income or combined gross
income must be calculated in accordance with Section 9-104 of the Tax­
Property Article ofthe Maryland Code.
13
14
15
16
17
18
*
(f)
*
*
Interest.
ill
[Interest] Except as provided in paragraph
m
interest accrues on
19
the deferred taxes at a rate set annually by the Director that does
not exceed the prime lending rate generally available on June 1 of
the preceding fiscal year.
The regulations adopted under
20
21
22
subsection
(q)
must specify the source or sources that the Director
must use to calculate the prime rate generally available on June 1
of each year. The annual interest rate set by the Director applies
to any
tax
deferred that year, regardless of the year when the tax
was first deferred.
(£}
Notwithstanding paragraph
23
24
25
26
27
ill
for deferrals
for owners eligible
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EXPEDITED BILL
No.
10-16
1
under paragraph (c)(2), the interest accrues on the deferred taxes
at
~
rate of 0.0% or another amount set
.by
Council resolution.
2
3
4
5
6
7
*
(h)
*
*
Limits on Deferrals.
The accumulation of deferred taxes and accrued
interest must not exceed [50 percent] 50% of the full cash value of the
property, as determined by the Supervisor of Assessments, or a lesser
amount elected by the taxpayer and specified
in
the agreement required
under subsection
8
0).
When the maximum amounts have been reached,
9
10
11
12
those amounts may continue to be deferred until any of the events
specified
in
subsection (k) occur.
An
owner who receives a tax deferral
under this Section must not also receive a tax deferral under Section
52-18C.
13
*
Sec. 2.
*
*
14
Expedited Effective Date.
15
16
17
The Council declares that this legislation is necessary for the immediate
protection ofthe public interest. This Act takes effect on July 1,2016.
Approved·
18
Nancy Floreen, President, County Council
Date
19
Approved:
20
Isiah Leggett, County Executive
Date
21
This is a correct copy ofCouncil action.
22
Linda M. Lauer, Clerk of the Council
Date
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LEGISLATIVE REQUEST REPORT
Expedited Bill 10-16
Residential Real Property Tax Deferral
-
Senior Citizens
Taxation
DESCRIPTION:
Expedited Bill 10-16 would provide for a residential real property
tax
deferral for residents at least 65 years old with a gross income of
$80,000.
Some individuals desire relief from the burden of increased property
taxes.
To alleviate the tax burden for certain eligible residents.
Department of Finance
To be requested.
To be requested.
To be requested.
To be researched.
Amanda Mihill, 240-777-7815
To
be
researched.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
N/A
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ROCKVILLE. MARYLAND
MEMORANDUM
May 2, 2016·
TO:
FROM:
SUBJECT:
FEiS
for
Bill 10-16, Ta.xation - Residential ReaJ Property
Ta.xDefen'al-
Senior
Citizens
Please find attached the fiscal and economic imNct statements for the above­
referenced legislation.
JAH:fz
cc: Bonnie Kirkland, Assistant Chief
Administrative Officer
Lisa
Austin,
Offices of
the County Executive
Joy
Nurmi,
Special
Assistant to the (-:Ounty Executive
Patrick Lacefield, Director, Public Infonnation Office
Joseph
f.
Beach, Director, Department of finance
David Platt, Department of Finance
J~Ule
Mukira, Office ofManagement and Budget
Alex Espinosa,. Office of Management and Budget
Naeem Mia, Office of Management and Budget
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Fiscal Impatt Statement
Expedited Bill
10-16,
Taxation - Residential Real Property Tax Deferral- Senior Citizens
1. Legislative Summary: This legislation would provide for a residential real property tax
deferral for residentc; at least 65 years old with a gross income of no more than $80,000.
The legislation also amends the County Code
to
amend the interest accrued to deferred
taxes
at
a rate of 0.0 percent for residents at least 65 years old and with a gross income of
up to $80,000.
A taxpayer may defer payment of County property taxes due on residential real property
used as
the
owner's principal residence. The amount oftaxes that may
be
deferred for
anyone year is the amount
that
County taxes
exceed
the amount of County taxes in the
prior taxable year. That is, only the difference in County property taxes paid is subject to
the deferral and not the entire amount of property taxes paid. The amount ofdeferred
taxes cannot exceed 50% of the full cash value ofthe property.
2.
An
estimate ofchanges in County revenues and expenditures regardless of whether the
revenues or expenditures are assumed in the recommended or approved budget Includes
source ofinformation, assumptions, and methodologies used.
Based on data provided by the State ofMarylancL the calculations of the gro",111 rates,
and the experience of Howard County with a similar program, Finance estimates that up
to 250 taxpayers would each defer between $80 and $90 in property taxes in a year,
reducing property tax revenues for that year by between $20,000 and $22,500.
Sources of infonnation include:
• Comptroller of Maryland
staff~
• American Community Survey (ACS).
• Annual HOllsing Survey (AHS), Census Bureau, and
• Howard County
Data provided by staff include property taxes paid by County residents for
tax
years (TY)
2010,2011, and 2012. The data were extracted from the income
tax
files and were
aggregated to protect disclosure restrictions imposed by
the
Internal Revenue Service; U.S.
Department of the Treasury. Using the data provided by the State of Maryland, the
Department of Finance (Finance) estimated the number of taxpayers, total property taxes
paid, and average tax paid for TY2015 and TY2016. The method used to estimate
data
for
TY2015 and TY2016 was
to
apply the annual growth rates calculated from the TY2010 to
TY2012 data and apply those rates to the TY2012 data. Finance also contacted Howard
County fbI' data on the program similar to Bill 10-16. According
to
Howard County, there
are 10 households who have received
the
deferral. Based on that experience and comparative
household data for Howard and Montgomery Counties [TOm ACS and the ratio ofhouse
value to household income from AHS, Finance assumes potentially 250 households may
receive the deferral. This increased workload could be managed within existing resources.
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3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
Revenues deferred
will
be
approximately $20.000 to $22,500 per year and $120.000 to
$150,000 over six years. Finance believes
that
while this wiH increase workload related
to processing applications and responding to related
Me3ll
service requests that they
can manage the increased workload within existing resources V\-ith the projected number
ofparticipants.
4. An actuarial analysis through the entire amortization period for each bill that would affect
retiree pension or group insurance costs.
Not applicable.
5. An estimate of expenditures related
to
County's information technology (IT) systems,
includi11g Enterprise Resource Planning (ERP) systems.
Not applicable. unless participation is very large (over 500). Ifit becomes a very large
program changes to
the
County's Tax Assessment System and MtJNIS billing system
may
be
needed to expedite the changes and track participation and reporting.
6. Later actions that may affect future revenue and expenditures if the bill authorizes future
spending.
Not applicable.
7. An estimate ofthe staff time needed
to
implement the bill.
Original implementation can
be
handled with existing resources.
8. An explanation ofhow the addition ofnew staff responsibilities would affect other duties.
Unless participation is very large (over 500) customer service should not
be
adversely
affected. Below this level there will be an impact of managing MC311 service requests as
well as the Treasury Customer Service Unit for responding to questions, providing
applications, tax refunds, and walk in customers.
9. An estimate of costs when an additional appropriation is needed.
Not applicable, unless participation is
very
large (over 500) in which case additional
resources for system changes and additional staff may be required. The Division of
Treasury
estimates that a program that has over 500 participants
\\111
require 50% ofthe
time ofone clerical staffer (approximately
$30~OOO
per year).
1O. A description of any variable that could affect revenue and cost estimates.
CD
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The variables that could affect the fiscal impact estimates are
the
estimated number of
taxpayers who would receive the deferral and the total property taxes paid in FY17 for
eligible households with incomes at or below $80,000.
11.
Ranges ofrevenue or expenditures that are uncertain or difficult to project.
See #2 above. Finance estimates that
up
to
250 taxpayers would each defer between $80
and $90 in property taxes in a year. reducing property tax revenues for that year by
between $20,000 and $22,500.
12. If a bill is likely to have no fiscal impact, why that is the case.
Not applicable.
13. Other fiscal impacts or comments.
Not
applicable
14. The following contributed to and concurred with this analysis: David Platt, Finance,
Michael Coveyou, Finance.
i
ctor
agement and Budget
(j)
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Economic
.Impact
Statement
BiU 10-16, Taxation - Residential Real
Property
Tax
Deferral-
Senior Citizens
Background:
This legislation would provide tor a residential real property
tax
deferral
for
residents at
least 65 years old \\'ith a gross
income
of no
more
than $80,000. The legislat.ion also
amends
the
County Code to amend
the
interest accrued. to deferred
taxes
at a rate of 0.0
percent for residents at least 65
years
old and
with
a
gross
income of up to $80,000.
A
taxpayer
may defer
payment
of County
property taxes
due
on
residential real
property
used
as
the
o,",'ncris
principal
residence. The amount of
taxes that
may
be
deterred
for
anyone year is
the amount that County taxes
exceed
the amount of County taxes in the
prior taxable year. That
is,
only
the
difference in
County property taxes paid is
subject
to
the deferral and not the
entire
amount
of
property
taxes
paid.
The
amount ofdeferred
taxes cannot exceed 50% of the full cash value of the property.
J.
The sources of information, assumptions, and
methodologies
used.
Sources
of
information include:
• Comptroller of
Maryland
staff,
• American Community Survey (ACS),
• Annual Housing Survey (AHS).
Census Bureau,
and
• Howard
County
Data provided by
staff
include property taxes paid by County residents for tax years
(TY) 2010,2011, and 2012. The data were extracted from the income tax files and
were aggregated to
protect
disclosure
restrictions
imposed
by
the Internal Revenue
Service, U.S. Department ofthe Treasury. Using the data provided by
the
State of
MaryJand,
the
Department of Finance
(Finance) estimated the
numb(;,'1' of
taxpayers,
total property taxes paid, and average
tax
paid
for
TY2015 and TY2016. The method
used to estimate
data
tor
TY20 15 and TY20 16
wa.<;
to apply the
annual
grov.'th rates
calculated from the TY201 0 to TY2012
data
and apply
t1lOse
rates to
the
TY20l2
data. Finance also contacted How'ard County
for data
on
the
program similar to
Bill
10-16. According to Howard County, there are 10 households \vho have received the
deferral. Based
on
that experience and comparative household
data for
Howard and
Montgomery Counties from ACS and the ratio ofhouse value to household income
JrOIn
AH8
c
.Finance assumes
potentially 250 households may receive the deferraL
2. A description of any variable that could affect the economic impact estimates.
111e
variables that could affect the economic impact estimates are the estimated
number oftaxpayers who would
receive
the deferral and the total property taxes paid
in FY16 and FY17
for
eligible households with incomes at
or
below $80,000.
Page 1 of2
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Economic Impact Statement
BiIllO-16, Taxation - Residential Real Property Tax Defernd - Senior Citizens
3. The Bill's positive or negative effect,
if
any on employment, spending, savings,
investment, incomes, and property values in the County.
Based on
data
provided by the State of Maryland, the calculations of the growth rates,
and the experience of Howard County with a similar program, Finance estimates that
each taxpayer would defer between $80 and $90
in
property taxes. This estimate
suggests that Bill 10-16 would have no significant impact on employment, spending,
savings, and incomes in the County_
4.
If
a
Bm
is likely to have no economic impact, why is that the case?
Bill 10-16 would have no significant economic impact Please see paragraph #3_
5. The following contributed to or concurred with this analysis:
David
Platt,
Mike
Coveyou, and
Robert
Hagedoorn, Finance.
-f---------------.-.. . . . . . . . .-.. . . . . . . . . . . . . . . .
eph F. Beach, Director
Department of Finance
~/~_-
Date
Page 2 of2
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\
TESTIMONY ON BEHALF OF COUNTY EXECUTIVE ISIAH LEGGETT ON
EXPEDITED BILL 10-16, TAXATION -RESIDENTIAL REAL PROPERTY TAX
DEFERRAL - SENIOR CITIZENS
April 26, 2016
Good afternoon, my name is Joseph Beach, Director of the County Department of
Finance, and I am here on behalf of County Executive Isiah Leggett to testify in support of
Expedited Bill 10-16, Taxation - Residential Real Property Tax Deferral Senior Citizens.
The County Executive supports this legislation because it will provide another option for
seniors on a fixed income to remain in the County by alleviating their
tax
burden. The County
currently has several programs to assist Seniors, the disabled and other residents of limited
means to remain in the County and provide tax relief. In addition to the Homeowners Property
Tax Credit, the County also
has
the Supplemental Homeowners Property Tax Credit, the Senior·
Property Tax Credit, Renters Property Tax Relief, and Design for Life
tax
credit for livable and
visit-able residential improvements.
We want to work with the Council and other stakeholders on implementation issues
related to the program including application process, eligibility for home equity and other
housing financing opportunities, as well as more effective promotion of this and other
tax
relief
programs for eligible home owners.
We urge the Council to support this expedited legislation.
Thank
you for permitting me
the time to address the County Council on this important
matter.
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Charles Kauffman, Esq.
Montgomery County Commission on Aging
401 Hungerford Drive
Rockville MD 20850
3024679336
April 26th 2016
Montgomery County Council
100 Maryland Avenue
Rockville MD 20850
Councilmembers:
Good Afternoon, my name is Charles Kauffman and I am appearing in behalf of the
Montgon1ery County Commission on Aging in support of Council Bill 10-16.
This bill allows senior citizens with income below $80,000 to defer increases in real
estate taxation. This is an improvement over the existing legislation that deals with real
estate tax deferral.
It
directly targets seniors who often are house rich but income poor.
It allows the deferrals
to
accumulate without interest charges, but recoups the money
owed at the time of sale of the property. This bill is estimated to provide this option of
deferring tax increases to approximately half of the senior households in the County.
Many senior citizens have bought their homes many years ago at prices far below today's
market price. While their income often increased while working, many today are on fixed
income and are burdened by the increasing tax rate and property reevaluation. This bill
allows these citizens to opt to defer their increased tax burden until the house is sold. At
that point the county recoups the money owed.
This legislation will allow many seniors to age in their homes and not be forced out by
ever increasing taxes. Similar legislation provides this safeguard to our neighbors in
Howard County and Washington, DC as well as elsewhere.
While the Commission on Aging supports increased taxes to provide for the needs of our
citizens, it had requested in its testimony before the Council that an exception be made
for lower income seniors.
We believe that this bill is an important step in meeting the needs of lower-income senior
citizen home-owners.
Respectfully submitted,
CHARLES KAUFFMAN
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JEWS UNITED
FORJUSTICE
Hollande Levinson
Jews United for Justice
110 Ridgepoint Place
Gaithersburg, MD 20878
404-823-2404
Testimony
for
Jews United for Justice in Support of Expedited
Bill 1016
Thank you so much for your time. My name is Holli Levinson, and I am the Director of Organizing for Jews United
for Justice. JUFJ is a volunteer driven organization that leads Jews from Montgomery County, as well as in DC and
Baltimore, to act on our shared Jewish values through grassroots civic engagement.
I am here to testify in support of Expedited Bill 10-16, providing residential property tax deferral for senior
citizens.
Jewish tradition teaches us to honor and care for our elders as a sacred obligation. Perhaps the most basic and
prevailing direction we follow is taken from the Holiness Code of Leviticus - Leviticus 19:32 - which instructs, "You
shall rise before the aged and show deference to the old ..." The implications of this law are clear: we are called on
to demonstrate respect for our elders and their life experiences - and by extension we should work to keep them
central in our communities so that they, and we, all thrive.
As you know, JUFJ has testified in favor of a property tax increase, as the only tool the county has to truly raise the
revenue we need to address growing poverty and inequality in our community.
At the same time, we do not take lightly the impact of a regressive tax on specific members of our community­
who are often the same people we most want to protect by increasing services.
If
we say the budget is a moral
document, we have to address these issues as well. We know that many seniors on fixed and retirement incomes
in our county often face challenges paying their property taxes, which are high in proportion to their incomes.
They often bought their homes long ago and now the values have skyrocketed.
We also know the senior population is growing, and we want seniors to have the best opportunity to "age in
place." I want that for my own parents, and I want it for my neighbors in our county.
By carving out the senior eligibility qualifications, so that this programis better utilized, this bill would provide
property tax relief to seniors of limited income and enhance their ability to age in place and stay in their homes,
and we therefore strongly support this legislation.
As Rabbi Reuven Balka writes, "Respect, veneration, admiration these are the basic parameters within which we
approach aging, the aged, and the treatment of the elderly. The rest is commentary,"
I want to thank lead Sponsors Vice President Berliner, Councllmember Katz and Council member Riemer, as well as
Co-Sponsor, Council President Floreen for being proactive in addressing this issue.
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Testimony on behalf of Expedited Bill 10-16, Taxation - Residential Real Property Tax
Deferral - Senior Citizens
April 26, 2016
My name is Elaine Binder, and I am a former chair of the Montgomery County
Commission on Aging. Thank you for the opportunity to speak on behalf of this Bill.
I would like
to
set the stage for my testimony by giving you some factual information
about seniors in the County. Currently, 130,266 persons 65 years and older,
approximately 13
%
of the total population, reside in Montgomery County. This number
is projected to grow incrementally over the next 25 years to 243,940 by 2040, which then
will be about 20 % of the population. 78% of seniors in the County currently own the
home they live in, and 50
%
of seniors have a household income that is less than $75,000.
To demonstrate the County's commitment to older adults, the County Council adopted in
2012 the
Senior Agenda,
which states positively and affirmatively that we are a
"Community for a Lifetime," a place where older adults can live safe, healthy and vital
lives. Providing supportive services for housing is one of the critical elements of the
Senior Agenda.
In keeping with the County's commitment to seniors and extrapolating from the data
described above, we can see the importance of providing significant fmancial relief for
the many seniors who want to age in place - who want to remain in their homes for as
long as possible.
While the current property tax deferral program can be beneficial, it does not take into
consideration the burden that property tax increases would place specifically on seniors
who are retired and on fixed incomes. Amending the current property tax deferral
program to eliminate the accrual of interest for individuals 65 years or older who have an
individual or combined gross income of $80,000 or less until the property is sold would
provide significant and needed relief for this population.
When I served on the Commission on Aging, I listened to many older adults describe the
financial burdens they faced because of their limited resources. While seniors understand
the importance ofpaying their property taxes, they spoke of finding it extremely difficult
to pay increaSes
in
the tax on their property given the rising costs of utilities and other
services necessary to live in and maintain their property. As a former Commissioner and
a concerned citizen, I feel it is important to advocate for those older adults whose voices
are not necessarily heard. I am grateful for the fact that so many members of the Council
share my concern about the financial plight of seniors in our community.
Approving the Expedited Bill would demonstrate clearly that the County Council
understands the needs of seniors on fixed incomes and is implementing an important
component of the Senior Agenda.
.
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Before the Montgomery County Council
Expedited
Bill 10-16,
Tax Deferral - Senior Citizens
Hearing on Tuesday, April 26, 2016, at 1:30pm
Written
Testimony of
Paul M. Bessel and Barbara Braswell
Support with an Amendment
We are testifying in support of Bill 10-16 with an amendment.
Our names are Paul M. Bessel and Barbara Braswell. We live in Leisure World of Maryland
but we are testifying only as individuals, not representing .any group.
We support Bill 10-16 because most senior citizens in Montgomery County, and our
community of Leisure World, are living on fixed incomes. Contrary to the thoughts of some,
the residents of Leisure World are mostly not wealthy people.
Many of our neighbors tell us that they are living exclusively on Social Security retirement
payments, which as most people know are small. According to the website of the Social
Security Administration, in February 2016 the average monthly retirement benefitfor retired
workers was $1,344.70 (about $16,000 a year) and for surviving spouses of workers was
$693.64 (only about $8,300 per year).1At the same time, the monthly payments for those
living in Leisure World probably averages about $700 per month, and of course that
doesn't include the costs of such things as food, medical expenses, and other necessities.
Thus, seniors are in a very difficult financial position and need assistance.
Rising assessments and tax rates squeeze seniors. Those that wish to continue to live in
Montgomery County, in communities such as Leisure World, find it very difficult as tax rates
go up at the same time as assessments. The do not want to move, and in some cases are
in situations where it is impossible for them to move.
Therefore, the bill introduced by Council Vice President Roger Berliner with lead sponsors
Council Members Sidney Katz and Hans Riember, and co-sponsors Council President
Nancy Floreen, and Council Members Craig Rice, Nancy Navarro, Marc Eirich, and Tom
Hucker, is as welcome to seniors in our county as lifesavers are to those in trouble in the
ocean.
Amendment sought
-
The one amendment that we suggest is that the cap for the senior
tax deferral should be changed from gross income to taxable income. The reason for this
is that taxable income, unlike gross income, recognizes exemptions such as medical
expenses. Medical expenses are often the largest category of expenses for seniors so they
should be recognized in Bill 10-16 and that can only be done if the figure is taxable income
rather than gross income.
1
https:l!www.ssa.gov/policyldocs/guickfactsistat snapshot! , checked April 18, 2016.
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Sesker, Jacob
Subject:
FW: Testimony on Bill 10-16, Tax Deferral for Seniors
From:
Hagedoorn, Robert
Sent:
Friday, May 06, 2016 5:13
PM
To:
Mihill, Amanda <Amanda.Mihill@montgomerycountymd.gov>
Cc:
Kirkland, Bonnie <Bonnie.Kirkland@montgomerycountymd.gov>; Foncannon, Scott
<Scott.Foncannon@montgomerycountymd.gov>; Beach, Joseph <Joseph.Beach@montgomerycountymd.gov>
Subject:
Testimony on Bill 10-16, Tax Deferral for Seniors
Amanda,
I am responding to the question you posed to Joe Beach on using "taxable income" instead of "gross income" as one of
the eligibility requirements for senior residents on Bill 10-16. I copied the appropriate Section 9-104 ofthe Tax Property
Article that defines "gross income" below:
http://mgaleg.maryland.gov/webmga/frmStatutesText.aspx?article=gtp&section=9­
104&ext=htmI&sessio n=2016RS&tab=su bject5
I also reviewed the latest income tax information as published by the State Comptroller for tax year 2012, with link to
that report copied below:
http://finances.marylandtaxes.com/static files/revenue/statisticsofincome/individual/2012 Personal SOI.pdf
In my opinion (keep in mind that I am not an accountant or tax expert), the term "gross income" in State Law as noted
above appears to be identical to the definition of "total income" (page 22) of that report. Looking at the income
categories for all Maryland residents (there is no such specific breakdown at the county level) up to $75,000 (there is no
$80,000 cut off), "total income" was $62,365,951,000 in 2012. After taxpayers took out expenses, deductions, they
arrived at Federal Adjusted Gross Income (FAGI). They then added additions, but took out significantly higher amount of
subtractions, with some modifications, and they arrived at Maryland Adjusted Gross Income (MAGI). After another
round of deductions, the taxpayers ended up with Maryland Net Taxable Income (MNTI). For this same category, MNTI
was $35,097,746,000 or 56.3% of Total Income.
In
other words, close to 44% of Total Income is deducted to arrive at
MNTI.
Moreover, of all the deductions and income modifications between "Total Income" and "MNTI" (that total
$27,268,205,000 in 2012) $1,420,000,000 are attributed to allowable medical expenses as part ofthe itemized
deductions. That represents only 5% all income modifications.
Back to the issues:
Is "Gross Income" a better measure for this Bill. Generally gross or total income represents an individual's true
income and ability to pay. By contrast, "taxable income" which is intended for computing personal income taxes
is much lower due to the taxpayer's ability to take advantage of the many provisions in the tax law allowing for
deductions and subtractions that may have nothing to do with an individual's ability to pay such as mortgage
interest deductions and property taxes (from principal and possibly investment properties).
Is medical expenses a significant share of deductions? The fact that only 5% of all deductions and income
modifications pertain to medical expenses suggests that this is a minor component that should not materially
impact the eligibility requirement of this Bill. Moreover, since there is no method to modify the Bill to allow an
1
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income modification only for medical expenses, using MNTI instead of Gross Income provides an unintended
benefit to the other 95% of taxpayers with other deductions and income modifications.
• Is the current cap appropriate? The maximum gross income of
$80,000
is five times social security income (e.g.,
the testimony notes an average annual social security income of
$16,000)
which suggests that this cap should
not pose a problem for most individuals living on fixed income.
I hope this information helps and please let me known if you have any questions.
Rob
Robert Hagedoorn
Chief, Division of Fiscal Management
Montgomery County, MD
240-777-8887
From:
Mihill, Amanda
Sent:
Tuesday, April
26, 2016 3:33 PM
To:
Beach, Joseph <Joseph.Beach@montgomerycountymd.gov>
Cc:
Sesker, Jacob <Jacob.Sesker@montgomerycountymd.gov>
Subject:
FW:
Testimony on Bill
10-16,
Tax Deferral for Seniors
Hi
Joe,
Just to follow up from the hearing, could you please give us your thoughts about using taxable income instead of gross
income? And if we use taxable income, I presume that we should change the income limit -any recommendations for
that?
Thanks!
Amanda
2