Louis M. Wilen, a self-described "computer guy" who finds holes in systems, has found a big one for Montgomery County: helping it locate at least $1 million it didn't know it had. He may also have discovered an even bigger flaw in Maryland's tax system.
Wilen, 48, an information technology worker and Olney resident, spurred county officials this spring to identify owners of nearly 2,700 rental properties who received tax credits to which they weren't entitled. That's because the properties were incorrectly coded on state tax records as "principal residences." Only owner-occupied homes are eligible for the credits.
The miscoding means that the county awarded unwarranted property tax credits of $409,705.33 last year -- money it now says it will recover from the property owners. By not extending credits to owners of miscoded property in the future -- and by reviewing erroneous tax bills from past years -- Montgomery stands to gain $1 million or more of formerly lost revenue, said Montgomery Finance Director Timothy Firestine.
One such property is a five-bedroom Potomac home owned by Edward R. Zech and his wife. Unable to pay his children's tuition bills on a naval surgeon's salary, he said he moved to Washington state several years ago and entered private practice. His wife and family joined him a year and a half ago, when they rented out the Potomac house.
Zech said he was unaware that he should have notified state tax authorities that the house was no longer owner-occupied.
"If we did wrong," he said, "we certainly didn't do it with any malice." His bill for 2004, when the house was rented, shows that it was designated as owner-occupied and that the Zechs were to receive a $768.13 county tax credit, as well as a state credit of $138.14.
The county blames state officials for the coding errors, asserting that they are responsible for the tax database.
"They should make sure it's accurate," said Firestine, who helps administer an annual operating budget in excess of $3 billion.
Robert E. Young, associate director of the state Department of Assessments and Taxation, conceded that the miscoding "is probably happening in other counties, but nowhere near the degree to which it's happening in Montgomery."
He cited Prince George's County in particular for its systematic cross-checking of rental properties against tax records to ensure accuracy, something Montgomery did for the first time in May. He said state tax records are only as accurate as the information local governments provide.
Wilen first looked into the coding question last October, after seeing homes advertised for rent in his neighborhood. Curiosity, vigilance -- something drove him to use the Internet to track down tax records for the properties. They were listed as owner-occupied.
After alerting the Montgomery office of the state Department of Assessments and Taxation, he was pleased to see some days later that the records had been corrected.
But the inequity of landlords receiving unjustified tax credits still irked him. At home, on his computer, he revisited the issue this spring, switching between the Web site of a large real estate firm and online tax records.
"I noticed this discrepancy between homes offered for rent being listed as owner-occupied," Wilen said. "Gee, I thought, this isn't really fair."
He began compiling lists of several dozen miscoded properties at a time and sending them to the state assessment office, eventually engaging in an e-mail dialogue with a receptive bureaucrat.
"I usually do the changes the same day I receive the info," the official wrote Wilen on April 18. "When I do the change the computer sends the owner a letter to verify the information. If the owner wishes to lie on the letter I have no choice but to change it back to owner occupied."
By this time, Wilen had already e-mailed the Montgomery County Council, suggesting that the county Department of Housing and Community Affairs share its list of licensed rental properties with state assessors. Council member Marilyn Praisner (D-Eastern County), his representative, forwarded his suggestion to county housing and finance officials.
Financial programs manager Phavann Chhuan devised a way to cross-reference the housing department's list of 17,441 licensed rental properties with the tax database, yielding a spreadsheet of 2,637 rental properties coded as owner-occupied -- a little over 15 percent -- and tabulating nearly $410,000 in county tax credits for which the property owners were ineligible.
The state, which also offers tax credits, has also missed out on revenue, according to the county's analysis. In the case of the miscoded Montgomery properties, tax records show, the state lost about $73,700.
Praisner was surprised that Montgomery officials did not regularly double-check the accuracy of the tax records.
"It's something you might have assumed was going on but was not," she said.
In fact, county housing officials for the past several years have sent the assessment office an annual list of licensed rental properties. Young complained that the county transmits the information in a format -- described by county officials as an Excel spreadsheet -- that he termed incomplete and "totally unusable."
The tax credit kicks in when a homeowner with a rising assessment is faced with an annual property-tax increase in excess of Montgomery's 10 percent cap. In such cases, the county credits back any amount above 10 percent. County officials found unwarranted credits ranging from under a dollar to $1,711.06.
The cap in Prince George's is 3 percent, Young said, which may give officials there a comparatively greater incentive to ensure that credits are not misapplied. "They do it because it's in their self-interest," he said.
Dan Ercolani, assistant supervisor of the Montgomery state assessment office, said he could not account for so many miscoded properties.
"I don't understand how that could have happened," he said. "If in fact all the 2,700 properties were issued rental licenses, [notification] should have come back to us from the county."
He and Young said the state did not have the resources to verify the accuracy of homeowners' claims about the status of their properties. "We don't have any enforcement people here," Ercolani said.
Young said state assessors inquire about the use of a property when they visit it, but if no one is home, there is little they can do. With tight budgets and low salaries, it is hard to keep people on staff, he added. "Our employees are underpaid compared with what the county and the federal government pays."
Montgomery officials sent Chhuan's spreadsheet to the assessment office on May 24, and it has indeed proved usable. Many of the properties on the list have already been recoded.
Praisner offered to issue Wilen a certificate of appreciation for his efforts, but he declined.
"I'm a little surprised more people aren't noticing this stuff and complaining," Wilen said, noting the vast amounts of information available to anyone with Internet access and the inclination to practice a little vigilance.
"He is very, how shall I say, unassuming," said his wife, Lori. "He does these things and even if they're successful, he's very, very modest."