Three members of Congress have been notified that they mistakenly received property tax credits on their Montgomery County homes, part of an inquiry into whether thousands of county residents benefited from flawed tax records.
Maryland officials sent letters to Sens. Daniel K. Inouye (D-Hawaii) and Ron Wyden (D-Ore.) and Rep. Rick Larsen (D-Wash.) last week, informing them that they no longer would receive homestead tax credits because their Montgomery homes are not their principal residences, officials said.
The credits totaled about $2,000 combined for the three lawmakers, who all said they had no idea they had received the deduction by mistake.
"If the state has determined we have to pay more, we'll pay more for the public schools that my son goes to and the roads my wife drives on every day," Larsen said.
The errors were discovered by Olney resident Louis M. Wilen, an information technology worker who has spent about a year studying the county's tax records. This year, Wilen noticed about $400,000 in erroneous credits to 2,000 owners of rental properties that were miscoded as their principal residences. Owners must live in their houses for at least six months of the year to receive the deduction.
Recently, Wilen began randomly picking members of Congress and checking their tax bills. Although Inouye, Wyden and Larsen live in their houses for most of the tax year, Wilen found that they did not meet the other state criteria for principal residency: They do not vote, have a driver's license and file income taxes in Maryland.
The homestead credit is granted when a homeowner with a rising assessment faces an annual property-tax increase exceeding 10 percent in Montgomery.
Based on Wilen's latest findings, the county asked for the state to look into why the lawmakers and other Montgomery residents received tax credits after their properties were incorrectly designated as their "principal residences." The state maintains tax records, and the county bills residents based on that information.
Montgomery Finance Director Timothy L. Firestine said yesterday that there could be hundreds, or even thousands, of other residents with incorrect bills. "What else is out there?" he asked.
Larsen, who received $859.67 in credits over two years, said he had made it clear when he bought his house in Bethesda 41/2 years ago that his primary residence was in Washington state. "We're now trying to figure out why the state of Maryland considers it a principal residence," he said.
Inouye received an $812.40 tax credit this year for his Bethesda home. In a written statement, he said he has owned the house since 1965 but considers Honolulu his primary place of residence. He, too, did not know about Maryland's residency requirements. "It has always been my intention to abide by all governmental rules and regulations," Inouye wrote.
Wyden was given a tax credit of $333.47 this year. But because he sold his Potomac house in September and will not pay taxes for the full year, that credit will be prorated, officials said. Wyden's communications director, Carol Guthrie, said, "The residency determination was made without his knowledge or consent."
Dan Ercolani, acting supervisor of Montgomery's state assessment office, said the state will not ask the lawmakers or other residents to repay the money, most of which goes to the county. He also said the homeowners will have a chance to dispute the state's decision to disqualify them from receiving credits.
"Generally when there's an honest mistake, we'll just go forward," Ercolani said.
Going forward could mean correcting more errors. On Monday, after Wilen sent out another list of improperly coded properties via e-mail, the state corrected the tax records of five other members of Congress. Those legislators, who received a total of thousands of dollars in credits, will be informed of the mistakes this week.
Yesterday, Firestine, Montgomery's finance director, sent a letter to the state's Department of Assessments and Taxation, calling its system "unreliable."
"I have lost confidence in the state's ability to maintain accurate and reliable property tax data," he wrote.
Ercolani said his office does not have enough employees to look for errors. They are limited to checking deeds and other legal documents and to information provided by homeowners.
"We don't have enforcement people to look into those things," Ercolani said. "We rely on legal documents and the honesty of the people to let us know."
Responding to Firestine's letter, he said the system has worked well considering that his office maintains records for 300,000 properties. "My only comment would be I think we've done a good job with the available resources we have," he said.
Montgomery is not the only jurisdiction that has discovered errors in legislators' tax bills. In the past three years, about 50 members of Congress have mistakenly received homestead deductions in the District, said Mary Ann Young, a public affairs officer for the Office of the Chief Financial Officer.
In 2002, the District changed its requirement for receiving a deduction to include being registered to vote in the city. That meant that lawmakers who once qualified no longer did and probably did not know that their status had changed, Young said.