Out-of-state Homestead Property Tax Credits: to check or not to check?
In the Fall 2016 issue of County Lines, AAC Legal Counsel Lindsey Bailey discussed out-of-state Homestead Property Tax Credits.
By Lindsey Bailey
AAC Legal Counsel
Amendment 79 to the Arkansas Constitution was approved by Arkansas voters during the November 2000 general election. The ballot title read, “An amendment to limit the increase in the assessed value of a taxpayer’s real property after a countywide reappraisal and to require a property tax credit of at least three hundred dollars ($300) on homestead property.” Section 3 of the amendment mandated that the Arkansas General Assembly pass legislation for an annual state credit against property taxes on a homestead in an amount no less than $300, effective for taxes due in 2001. In a special session shortly after the election, the General Assembly passed enabling legislation later codified as ACA § 26-26-1118, which established an annual homestead property tax credit in the amount of $300. In 2009, the legislature increased the credit amount to $350, the current value of the homestead tax credit.
ACA § 26-26-1122 defines “homestead” as “the dwelling of a person that is used as his or her principal place of residence . . . .” ACA § 26-26-1119 prohibits a property owner from claiming more than one homestead property tax credit for each year. Differing opinions have been expressed by experts across the state on whether this law precludes a property owner from lawfully claiming a homestead tax credit in another state in the same calendar year he/she claimed the credit in an Arkansas county. On the one hand, some say that a person can have only one “principal place of residence,” so to claim two credits is unlawful per se.
On the other hand, ACA § 26-26-1119 prescribes the penalties for duplicate homestead claims made in the same county and also for duplicate homestead credit claims made “in a county other than the county where his or her lawfully claimed homestead property tax credit was claimed.” These people further claim that “county” can only reasonably be interpreted as meaning counties within the state of Arkansas. This has led to confusion among county assessors across the state concerning their duty to, in due diligence, perform a search to determine if a person is unlawfully claiming multiple homestead tax credits in the same calendar year. Some assessors search only within the boundaries of Arkansas, while others search beyond the state’s borders for other claimed homestead tax credits.
On October 4, 2016 Arkansas Attorney General Leslie Rutledge issued Opinion 2016-074 and essentially agreed with both positions: a person can have only one primary place of residence, but the Arkansas Legislature likely only intended to prohibit a person from claiming multiple homestead tax credits within the state. Rutledge opined, “the term ‘homestead property tax credit’ [as it applies to an Arkansas property owner being prohibited from claiming more than one credit in a calendar year] does not include a property tax credit claimed under the laws of another state.”
However, the opinion goes on to state that it “does not mean that a property owner may lawfully claim both the Arkansas credit and a similar out-of-state credit in every instance. Instead, the owner’s claim of both credits may be evidence that he or she is improperly claiming at least one of the credits.” A taxpayer may only receive a homestead property tax credit in Arkansas if that property is the person’s “principal place of residence.” Logistically, a person can only have one “principal place of residence.” The opinion points out that if a taxpayer claims a homestead property tax credit both in Arkansas as well as another state with a similar requirement that the homestead be the taxpayer’s principal place of residence, then the property owner has likely defrauded at least one of the states:
[A] property owner’s claim of both credits will necessarily involve misrepresentation to at least one of the states with respect to the location of his principal place of residence. If his principal place of residence is located in the other state, then his claim of the Arkansas credit is unlawful because the Arkansas credit may not be claimed except with respect to the principal place of residence. If his principal residence is located in Arkansas, then his claim of an out-of-state credit that is also available only with respect to the principal place of residence is unlawful. Determining which credit is properly claimed will involve determining the location of the property owner’s principal residence.
In conclusion, a county assessor in Arkansas is now left with the decision of whether to perform a duplicate homestead tax credit search beyond the boundaries of the state when a taxpayer applies for a homestead property tax credit. Although the attorney general’s opinion intentionally leaves this question unanswered, it appears to imply that a check for a duplicate homestead credit claim beyond Arkansas boundaries is not required, but is also not prohibited. Checking for duplicate homestead credit claims in other states would be an act of due diligence, particularly in states where the homestead property tax credit eligibility requirements are similar to that of Arkansas — only for a person’s principal place of residence.