Last year, convinced that landlords and owners of second homes were claiming tax breaks they didn't deserve, legislators unanimously passed a law requiring all Maryland homeowners to apply for a valuable tax credit that they've gotten more or less automatically until now.
Since December, though, state lawmakers have been peppered with questions and complaints from homeowners about the new application requirement.
Now, they're considering calling the whole thing off.
"In an era of foreclosures and recession, we should take a step back and find a better way," said state Sen. Edward J. Kasemeyer, the Senate majority leader. The Howard County Democrat is chief sponsor of a bill to repeal the requirement.
Yet the problem that lawmakers initially said they wanted to correct remains: Some, perhaps many, owners of rental property or second homes are getting a lucrative tax credit meant only for owner-occupied homes.
State officials say they don't know how many of the 1.4 million properties getting Homestead Tax Credits do not deserve them, because there's no easy way to check.
But in one county, Anne Arundel, officials say they revoked 300 improperly claimed tax credits last year, recovering more than $300,000 in revenue.
And in Montgomery County, one of a handful where rental homes have to be registered, officials checked the list a few years ago and found 2,700 improperly claiming the credit.
Statewide, budget analysts have estimated that if 2 percent of property owners are claiming the credit improperly, local governments might be missing out on $10 million a year in property tax revenue. The state, which also levies a small property tax, would miss out on $700,000 a year.
But that 2 percent estimate is just hypothetical, officials acknowledge. The percentage of improperly claimed credits - and the amount of taxes dodged - might be higher.
A spot check by The Sun of about 90 homes listed online for rent in Baltimore and Howard counties found that 1 in 3 is identified in state records as the owner's principal residence. That means the owners of those rental properties claim to be living there, potentially allowing them to get a Homestead Tax Credit they don't deserve.
"There's a serious fraud problem," said Sen. Jim Rosapepe, a Prince George's County Democrat who helped push the law through last year. "We have people claiming they're living in houses they're not in, and that's not fair to taxpayers."
