Traverse City Record-Eagle

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March 18, 2014

Tax exemption audits fraught with interdepartmental tensions

TRAVERSE CITY — Leelanau County commissioners will discuss who should audit a tax exemption sought — sometimes improperly — by thousands in the county.

The Principal Residence Exemption, or PRE, allows some people who own and occupy a property as their primary home to opt out of paying local school operating costs.

In 2006, county administrators created a part-time position within the county’s equalization department to perform PRE audits and issue denials when they’re falsely claimed.

But this year county Treasurer John Gallagher III sent a letter to state officials informing them his office would take over that responsibility as of October.

Gallagher said he aims to educate the public about the PRE and curb denials.

“It’s just my hope through better communication and support tools for the taxpayers, they will understand the denial, the denial process and the rights they have as a taxpayer to object to the denial,” Gallagher said.

Gallagher said he also hopes to reduce program’s costs.

Gallagher’s move came as a surprise to county Equalization Director Laurie Spencer, who has 37 years of assessment administration experience.

“Our current county treasurer has no experience with assessment administration, or homesteads, or PREs,” Spencer said. “He’s barely been in office.”

The Equalization Department issued 45 PRE denials in 2013, and collected about $111,896 in extra revenues for schools.

One such denial was on a Centerville Township home and adjoining property. A couple who claimed the PRE on the property had a primary home in South Carolina, and in 2013 Spencer’s office issued a denial on the claim, a decision that required the homeowners to pay over $4,000 in school taxes.

Spencer worries Gallagher won’t be able to both cut costs and audit properly.

Gallagher said that’s not the case, and on Monday announced he intends to bring the part-time employee into his department to do the audits.

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