Manchester takes no action on homestead tax penalty
By Patrick McArdle
STAFF WRITER | September 19,2013
MANCHESTER — After a vote failed, the Select Board on Tuesday declined to take any further action that would alter the way the town collects a state education tax penalty added to those who filed their homestead declaration late this year.
Other Bennington County towns, including Arlington, Bennington and Dorset, have voted not to collect the penalty this year.
The issue was brought to the Manchester Select Board at their July 23 meeting by resident Orland Campbell, who is a former state representative and Select Board member.
Campbell said his concern was that some people didn’t know the law had been changed during the most recent legislative session and now required property owners to file a declaration by April 15 declaring that their home in a certain town was either their homestead or not.
Vermont municipalities generally charge a different property tax rate on a home depending on whether it’s the owner’s primary residence. The law has changed in the past but, in 2012, the process was that once a homeowner had declared a residence as his or her primary residence, the declaration would remain in effect until that status changed.
The law changed this year and a penalty was enacted that calls for residents in towns like Manchester, where the residential tax rate is higher than the nonresidential tax rate, to pay a penalty equal to 8 percent of the education tax rate on the property.
However, the law also says that municipalities “may collect” the penalty which has been interpreted by several towns in Bennington County to mean that they can either collect or waive the penalty. As a result, Bennington and Dorset have voted not to collect the penalty this year because of the concern that people who didn’t know about the change to the law could face a high penalty.
On Tuesday, Campbell, who admitted he was one of the people who missed the deadline because he didn’t know the law had changed, said his penalty would be around $800 while a neighbor would owe about $2,000 to meet the penalty.
Campbell’s proposal was that Manchester waive the fee for this year only with the hope that residents would understand the new law in 2014 or that the Legislature would make another change in their next session.
David Fielding Jr., the town’s treasurer, and Town Manager John O’Keefe said they had concerns about the town waiving the penalty. Fielding said he was concerned because it would create a situation where a certain group of people, those who filed the homestead declaration late, were being treated in a different way than those who had filed on time.
O’Keefe said waiving the penalty this year might open the door to people who paid other tax penalties in past years and who might request that their money be refunded and the penalty waived too.
However, O’Keefe suggested the town could collect the penalty but give a credit equal to 5 percent from the 8 percent penalty to those who filed late. The credit would be applied to the second half of the tax bill, which is due in February, and would subject people to only a 3 percent penalty which O’Keefe said was more reasonable.
A motion to enact O’Keefe’s suggestion was defeated by a board vote of 3-2.
While no other action was taken to change the penalty or its collection in Manchester, Ivan Beattie, chairman of the Select Board, said action could still be taken at another meeting. Beattie said he thought that was unlikely, however.
The change in the law has had a strong effect in Manchester. Beattie said in the past two years, the town has collected a total amount of penalties of around $2,000 or $3,000 but this year, penalties owed are almost $40,000.