Giving real estate tax breaks to seniors is a good idea, but one whose time has not yet come, according to the Jefferson County Council.
The council passed a resolution on Sept. 11 expressing support, albeit with some reservations, of Senate Bill 190, which allows counties to exempt seniors from paying increases on their real estate tax bills.
After the Missouri Legislature passed the bill, Gov. Mike Parson signed it into law earlier this year.
The law allows counties to pass an ordinance exempting seniors from the taxes. Or, counties may place the issue on the ballot.
However, County Counselor Jalesia F.M. Kuenzel said it’s not as simple as it sounds.
“There does appear to be many unintended consequences involved with this legislation if enacted as written,” she said.
The County Council’s resolution supports the concept, but concludes that the County Council will consider enacting real estate tax breaks for seniors once the Legislature addresses problems with the current law.
“Nobody knows how to interpret this,” Kuenzel said. “Every time I read it I see something different. People are talking about freezing assessments, but that’s not right. It’s talking about tax credits on property tax bills.”
The main problem, Kuenzel told council members at an Aug. 7 work session, is that it’s not clear which property taxes would be affected.
“Most people who interpret this believe it’s intended to allow tax credits for every taxing entity that you pay property taxes to – your school district, your ambulance district, your fire district and so on.”
Others, she said, believe it affects only property taxes paid to the county, and noted that Jefferson County currently levies no property tax, deciding instead to derive its general operating revenue from a 1/2-cent sales tax.
“So if that’s the case, subtracting zero from zero leaves zero, and that’s not going to make people happy,” Kuenzel said.
However, she said if only county taxes are affected, there’s a question whether three other property taxes levied by the county – for parks, for road and bridge improvements and for law enforcement – would be included.
“Whatever way that goes, there will be people who are not happy,” Kuenzel said. “If it’s only the county property tax, seniors who own real estate will be disappointed because they’ll essentially realize no benefit. If it’s all taxing entities, as seems likely, those taxing bodies will not be happy because they’ll be losing revenue. It’s almost a certainty that someone will file a lawsuit over this.”
The Missouri Association of Counties has estimated that if all taxing entities in Jefferson County are affected, they collectively stand to lose more than $4 million over five years in tax receipts.
Kuenzel said there are other issues with SB190.
“The credit amount goes back to the time that an individual was eligible for Social Security, that tax year. It could be five years ago, it could be 20 years ago. You take that tax liability for that year and subtract it from the current year’s liability.”
The county Collector’s Office would then send out real estate bills with a tax credit for the difference.
“Remembering that we’re supposed to go back to the year that someone is eligible for Social Security, several questions come into play here,” Kuenzel said. “Does it have to be the same house? I would imagine probably it would, because it wouldn’t make sense if it wasn’t. Maybe they lived in a mansion six years ago and now they live in a one-room house. But it’s not that clear in the legislation.
“Another thing is we all know you have to be eligible for Social Security. That apparently means railroad workers and teachers (two professions that pay into their own retirement systems) wouldn’t be eligible,” she said.
“And let’s say an individual has two homes, one in Jefferson County and another, say, in Washington County,” Kuenzel said. “How would we know whether they claimed their eligible homestead here and another one there? Whatever happens, we have to basically come together as counties to decide how to share information. It says here (in the bill) that you can only claim one homestead.”
Because not every county uses the same computer programs, Kuenzel said, sharing that information will likely be problematic.
Kuenzel also said there’s uncertainty about how much it would cost to enact the legislation in the county.
“We’ll have to get over some of the legal hurdles, and how to work with other counties. Also the possible implementation of software, which might be $80,000 to $100,000, at least. If all the counties got together to hammer out one mechanism so we could all communicate, that might be cheaper if we all shared the cost on that. But that won’t happen overnight.”
Councilman Gene Barbagallo (District 2, Imperial) came up with another possible problem.
“I have a question about joint ownership (of a home),” he said. “Did I miss that in the bill?”
“No, you didn’t miss it, because it’s not in there,” Kuenzel said. “If one spouse qualifies for the tax credit, and then the other becomes a senior, do they both get credit on the same house? There’s no clear answer for that.”
County Executive Dennis Gannon also mentioned the example of someone who was eligible for Social Security before Proposition P, a property tax that helps fund the Sheriff’s Office, was passed in April 2018.
“Would they still have to pay it, if they didn’t have to pay it before they were eligible for Social Security?” he asked.
Gannon also brought up the practice of transferring ownership of a home to a trust so that it could easily be passed along to heirs.
“A trust is not eligible for Social Security because it’s an entity,” Kuenzel said.
Kuenzel advised the council to see how the General Assembly might change the law during next year’s session, and to wait for further guidance from the MAC.
“The MAC has put together a task force, and they will come up with some guidance. They’re working diligently on this, not only on education on the current bill, but they’re working with legislators to get some of this language changed to make it a better bill. Right now, it’s very confusing,” she said.
St. Charles County recently enacted the current state legislation in its county, but acknowledged the inconsistencies. After first considering it, the St. Louis County Council has seemingly backed off because of revenue concerns.
Council member Charles Groeteke (District 4, Barnhart) said he supported the idea of the resolution.
“I and other council members have gotten calls from our constituents wanting their tax credit,” he said. “I’m sure the Legislature is going to need to take some time to work out the legal issues so we don’t get into legal difficulties. I think it’s up to the county to do its due diligence.”
Barbagallo agreed.
“Some of the people I’ve run into don’t understand the manifestations of all things in this bill that were left loose-ended. On the surface, it sounds very simple. They don’t understand all the parts of it that need to be cleaned up,” he said.
The resolution passed 5-0. Council members Brian Haskins (District 1, High Ridge) and Shannon Otto (District 3, Arnold) were absent.
“This was a feel-good bill for the Legislature,” Kuenzel said. “They didn’t take any responsibility for it; they just pushed it down to the counties with horrible language and said, ‘Look what we did for seniors.’ That’s what happened.”