Jul 07, 2008 - 05:12:28 CDT
Former North Dakotans and farmers with elaborate property ownership arrangements were among those left out of the Legislature's plan to use income tax credits for property tax breaks, officials say.North Dakota Tax Department administrators say the program's shortcomings may be irredeemable. Lawmakers say that doesn't mean the two-year program will be scrapped.
Some aspects of the tax credit initiative that have prompted complaints arose from policy choices, lawmakers say, including benefit limits and the denial of income tax benefits to landowners who live out of state.
"Two of the biggest issues are keeping the money, the relief, to in-state residents ... and then having a cap on it," said Sen. Dwight Cook, R-Mandan, who helped write the tax measure during the 2007 Legislature. "I suspect we'll have a debate on that again."
Most North Dakota taxpayers became acquainted with the measure last spring as they filled out their state income tax forms. It will stay in effect during the next filing season.
It offered North Dakota residents an income tax credit equal to 10 percent of the property taxes they paid. Individual filers were limited to a $500 credit while married couples could claim up to $1,000.
More than 154,000 North Dakota income tax filers have claimed more than $37.7 million in credits so far, the Tax Department says. More than 27,000 filers also received almost $5.4 million in certificates, which can be used to pay future property tax bills.
Tax Department officials presented the Legislature's interim Taxation Committee last week with a litany of complaints and administrative difficulties that cropped up over the program.
For example, farm families who have established partnerships or multi-owner limited liability companies to own their agricultural land did not qualify for an income tax credit, said Donnita Wald, a Tax Department attorney. Such arrangements are common, she said.
The agency also heard a number of gripes from former North Dakotans who were not eligible for the income tax break, even though they still owned property in North Dakota and paid property and state income taxes, Wald said.
"We heard from a lot of individuals who were lifelong North Dakota residents, grew up on the farm, moved out of state," she said. "They weren't very happy when they found out they couldn't get property tax relief."
A Tax Department statement, presented to the Taxation Committee, said changes in existing law could silence some of the complaints, but "the vast majority of these issues cannot be solved due to the inherent differences between property tax and income tax concepts, and the numerous ways in which title to property can be held."
"We do not believe that the income tax is the proper vehicle to provide property tax relief," the statement said.
Gov. John Hoeven also is pushing for an end to the income tax credit, saying he wants to replace it with a $200 million state incentive program for schools to lower their property tax rates. A property tax rate reduction would benefit any taxpayer, regardless of the type of property or where its owner lives.
Sen. Connie Triplett, D-Grand Forks, who also helped write the tax-credit legislation, said she was not surprised by the complaints. Triplett and other Democrats in the Legislature had favored proposals to cut school property tax rates instead.
"We all knew (the bill) wasn't perfect, and (the Tax Department) has identified more problems than we anticipated," Triplett said. "I think there is a better way of doing property tax relief. ... It needs to be something more directly associated with education funding."
jamesnd wrote on Jul 8, 2008 3:20 AM:
Also, the most logical way to give the tax credit would have been to be the percentage not $500 to single and $1,000 to married. A % would make it more fair due to over all income. Just because you are single does not mean you make less than married couple.
The government always try to make things easy by just setting a flat rate limit but it is the most unfair to everyone. It should be unlimited and be fair to all. OR! Maybe the 10% is too much for the government to handle so even a 5% people would be happy. But, keep it unlimited! "
CUT wrote on Jul 8, 2008 2:00 AM:
To its so nice wrote on Jul 7, 2008 7:56 PM:
to its so nice wrote on Jul 7, 2008 1:41 PM:
But I do understand your frustration on why people get benefits for being married and having kids. They need to come up with a tax credit for those who are single and have no illegitimate children for once. "
its so nice wrote on Jul 7, 2008 10:25 AM:
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