A proposal to take state income tax refunds from people who are at least three installments behind in property taxes is facing resistance from the Bartholomew County Commissioners.
Taking away tax refunds has the potential to hurt financial struggling families already living in fear of losing their homes, commissioner Larry Kleinhenz said.
“I don’t know if I can support this,” said Kleinhenz, who said the county’s annual tax sale has worked well while providing adequate time for delinquent taxpayers to settle their debts.
But since commissioners chairman Carl Lienhoop was absent Monday, Kleinhenz and fellow commissioner Rick Flohr agreed to wait until their Dec. 18 meeting to consider the proposal made by Bartholomew County Treasurer Pia O’Connor.
The authority to withhold state refunds from property owners who owe a minimum of $25 came last April after the passage of Senate Bill 515 by the Indiana General Assembly. That vote led to the creation of the Tax Refund and Compliance System (TREC), O’Connor said.
“This will be more equitable to all citizens, because those who are not paying their fair share now will be,” O’Connor told the commissioners.
Although the county treasurer said she didn’t know how many local property owners might be impacted, O’Connor said she will have that information in time for next week’s meeting.
TREC is essentially a debt set-off clearinghouse program to allow local units of government to easily and efficiently collect delinquent debt, according to an outline distributed by O’Connor.
It offers an automated data export exchange between counties and the clearinghouse, with a similar back-end data import feature to update county financial records, according to the Association of Indiana Counties website.
The association administers TREC under a Memorandum of Understanding with the Indiana Department of Revenue, the website stated.
According to O’Connor, the TREC program is favorable to delinquent property owners because it:
- Lowers credit-rating impacts.
- Uses notification letters that allows the property owner 30 days to contest the decision.
- Provides an appeals process regarding essential expenses, including medical bills.
“I’m sure there are a lot of merits, but it just doesn’t feel right to me,” Flohr said. “We’d be using income tax to pay a property tax. Income tax is not property tax.”
“It’s a forced collection,” Kleinhenz said. “It’s really intrusive to lean against someone’s tax return.”
In order for the system to work, Social Security numbers would have to be collected _ something Indiana counties do not currently do with property taxes, the website stated.
While the TREC program applies to anything owned by an individual, tax refunds provided to corporations, limited liability business and partnerships are currently not eligible for intercept, the website stated.
As a pilot program in the Indianapolis area, TREC showed good results by revealing more than $1 million in old debts eligible for collection, O’Connor said.
Since the debtor is charged related collection fees, there is no cost to the county to register or participate other than to notify the delinquent property owner, she said.
Several Indiana counties are choosing to implement the program, Bartholomew County Auditor Barb Hackman told the commissioners.
“It sounds like it’s going to be a positive for the counties to collect past-due delinquent revenue,” Hackman said. “It will also mean less properties placed on the tax sale.”
The program places the responsibility of keeping all payment records updated on the treasurer’s office, which county attorney Grant Tucker said causes him concern.
But the county has the right software to ensure that responsibility won’t be a problem, O’Connor said.
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A proposal allowing the interception of state income tax refunds from people at least three installments behind in property taxes will be considered next week.
The Bartholomew County Commissioners will take up the matter when they meet at 10 a.m. Dec. 18.
The commissioners meet in their first floor chambers at the Bartholomew County Governmental Office building at the corner of Third and Franklin streets.
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