Members Take D.C. Tax Break
Despite maintaining residency in their home states, a handful of House lawmakers appear to be improperly receiving the Washington, D.C., homestead tax deduction, reducing their annual property tax bills by hundreds of dollars and potentially much more over the long term.
A Roll Call review of District of Columbia tax records revealed at least four Members who receive the property tax benefit from among more than 80 lawmakers who own homes in neighborhoods that popular with lawmakers, including Capitol Hill.
Among those currently receiving the deduction are Rep. Tom Petri (R-Wis.) and his wife, who own a four-bedroom home in Georgetown, with an assessed value of more than $2.9 million, according to 2009 tax records.
Under the District’s homestead program, taxpayers who own a home in the city and use it as their principal residence receive a reduction of $67,500 on the assessed value of their home, or a savings of $573.75 off their 2009 tax bill.
More significantly, properties that qualify for the homestead deduction are also protected from considerable jumps in assessed value. The District caps those increases at 10 percent above the previous year’s tax assessment.
Public records show Petri’s home assessed at $1.4 million in 2009, less than half of its total value. (Estimates for the 2010 tax year predict the home will drop to $2.7 million in total value, with an assessed value of about $1.5 million.)
A spokesman for the Wisconsin lawmaker said Petri legally receives the tax benefit through his spouse, noting that although tax records list only “T.E. Petri— on the property, it is co-owned by Petri’s wife, Anne Neal.
“She pays income taxes here, and she was the one who signed— the form requesting the deduction, Petri spokesman Niel Wright said.
Neal serves as president of the American Council of Trustees and Alumni, a D.C.-based nonprofit founded “to ensure responsible management of higher education resources, end grade inflation, establish a solid core curriculum, and restore intellectual diversity on campus,— according to its Web site.
“The city is charging both of them with property tax, so the city regards her as a co-owner,— Wright said.
Under D.C. property tax laws, spouses of Members are eligible to claim the homestead deduction, even if the property is co-owned by the lawmaker.
“Although the general rule in the District is that spouses have the same domicile, it is possible for a spouse of a Member of Congress to be domiciled in the District (as established by objective factors) for homestead deduction purposes,— states a September 2007 memorandum issued by the D.C. Office of Tax and Revenue to clarify eligibility requirements for the homestead program.
But the memorandum adds that even if a spouse “works in the District, pays District income taxes, and has a District driver’s license— — all factors for establishing residency — those considerations are void if a spouse does not register to vote in the city.
“[T]he spouse cannot be domiciled here if he or she votes in the Member’s home state,— states the memorandum, which includes seven examples dedicated to questions about whether Members and their staffs and respective families may qualify for the program.
Neal, who is also known as Dede Petri, is not registered to vote in the District, according to the D.C. Board of Elections and Ethics, but is registered as Anne Petri in Fond du Lac, Wis. — most recently voting in a February 2009 primary — according to the Wisconsin Government Accountability Board Elections Division.
Petri’s spokesman on Tuesday defended Neal’s application for the homestead deduction, stating that Petri understood the law required either income taxes be filed or voter registration be changed, not a combination of the both. (District law exempts Members from paying city income tax.)
“It wasn’t pay income taxes in the city and vote, it was pay income taxes or vote,— Wright said, adding: “If he is incorrect on that, he’ll fix it.—
The Wisconsin lawmaker, who nabbed the No. 21 spot on Roll Call’s most recent “50 Richest Members of Congress— list with a minimum net worth of $14.63 million, did not list the Georgetown property on his most recent financial disclosure, nor is he required to.
House lawmakers are exempt from divulging the details of their private homes — whether in their Congressional districts or elsewhere — as long as the properties do not produce any income.
Other lawmakers currently receiving the D.C. homestead deduction include Republican Reps. Phil Gingrey (Ga.) and Steve King (Iowa).
Both lawmakers, each of whom owns a Capitol Hill residence, assert that they have received the tax benefit in error.
“I believe the D.C. tax department made a mistake,— King, who owns a one-bedroom condominium, said in a brief statement. A spokesman declined to elaborate.
According to tax records, King’s home is valued at $388,000 for the current year, with a taxable value of $308,000.
District records show Gingrey’s wife, Billie Gingrey, as the sole purchaser of a three-bedroom row house in 2004. In the current tax year, that property is valued at about $705,000, with a taxable value of $637,000.
A spokesman for Gingrey said the Georgia lawmaker did not realize he had received the tax deduction but would examine the rules to correct any improper claim.
“He was kind of taken aback by it a little bit,— Gingrey aide Chris Jackson said. Gingrey may have inadvertently applied for the deduction when the purchase was finalized in 2004, Jackson said.
Property sales documents in the District include a tax transfer form that requires buyers of existing homes to indicate whether they will occupy the property and, if so, whether they have filed an homestead exemption application.
After buying a property, homeowners then receive biannual property tax bills that indicate whether they are receiving the homestead deduction, including a calculation of any savings.
Rep. Mike Rogers (R-Ala.) also received the deduction on a three-bedroom Capitol Hill home that he bought in 2003, but an aide said the lawmaker was receiving the benefit in error and had not applied for it. A spokeswoman for D.C. Office of Tax and Revenue confirmed that information.
According to copies of sales documents for the home provided by Rogers’ office, Rogers indicated he intended to live in the home in response to a question labeled “Homestead/Senior Deduction,— marking the correlating “yes— box with a typed “X—.
However, a subsequent question, asking whether the buyer has filed an application for the tax deduction appears to have been incorrectly answered, then corrected. A handwritten “X— appears in the “no— box, while another mark has been crossed out of the “yes— box.
“The Office of Tax and Revenue in Washington, D.C. confirmed this week that I never claimed nor applied for the Homestead Deduction, and in fact, affirmatively waived this exemption and was not aware it was being applied,— Rogers said in a statement.
A letter issued Tuesday to Rogers from D.C.’s Real Property Tax Administration Director Richie McKeithen states that the Alabama lawmaker will receive a tax bill itemizing the “deduction reversals— within seven days.
“Occasionally, these deductions are carried forward, even with ownership changes, due to the former owner having received such deductions,— McKeithen wrote. “As a result, the property inadvertently received tax deductions for which you neither applied nor were eligible.—
Rogers home is assessed at $747,000 in the current tax year, with a taxable value of $680,000.
Rogers’ case is not the first incident of Members inadvertently receiving the District’s property tax benefit.
A Kansas City Star investigation in 2005 revealed that 22 Senators received the homestead deduction, the result of a computer glitch that issued the discount to each of the District’s owner-occupied properties, according to D.C. officials at that time.
The District undertook an audit of its homestead program in 2006 in an effort to purge its rolls of unqualified beneficiaries and collect back taxes from those who should not have received the benefit. According to the Office of Tax and Revenue’s Web site, the District government continues to conduct periodic audits to verify eligibility for the program. An Office of Tax and Revenue spokeswoman said Members are not specifically targeted by the audit.
While some Members may legally claim the homestead deduction, doing so may still be undesirable for public officials.
“What some of this amounts to is legal tax avoidance,— said Pete Sepp, spokesman for the National Taxpayers Union. “That prompts the question, what does this mean for the Congressman?—
“More than the law here is the appearance,— Sepp added. “Constituents already tend to feel that lawmakers spend too much time in Washington and not enough time at home, so how is this going to help improve that image?—
Earlier this month, two Democratic lawmakers were also reported to have accepted tax breaks on their respective Maryland homes.
Maryland officials have determined Rep. Eliot Engel (D-N.Y.), who owns a home in Potomac, Md., does not qualify for the benefit.
The tax credit is designated for homeowners who live in Maryland six months of the year, have a state driver’s license and register to vote and file income taxes in the state.
But Engel, who rents a New York apartment, is registered to vote in the Empire State and holds a New York driver’s license.
It marked the second time that Maryland revoked the Engels’ home tax credit since 2005.
Similarly, Rep. Pete Stark (D-Calif.) received lost both state and local tax breaks on his home in Anne Arundel County, Md., according to a Bloomberg News report.
Stark, the second-ranking Democrat on the Ways and Means Committee, had received about $3,800 in tax breaks in 2007 and 2008 by listing the property as his primary residence.
The Californian said last week that he expects Maryland officials to revoke his tax status. Stark is registered to vote at his in-laws home in California and holds a driver’s license from the state.
The Constitution require that Representatives be inhabitants of the state, but not the Congressional district, that they represent when they are elected.