Re-Interpretation of Missouri Property Tax Credit Rules Will Hurt Low-Income Senior and Disabled Citizens, MU Expert Says

March 10th, 2010

The views and opinions expressed in this “for expert comment” release are based on research and/or opinions of the researcher(s) and/or faculty member(s) and do not reflect the University’s official stance.

COLUMBIA, Mo. ­— A new interpretation of a Missouri tax return law may leave thousands of low-income elderly and disabled citizens living in tax-exempt housing without money they have relied on for years, according to a University of Missouri public benefits tax policy expert. Facing declining tax revenue, many states, including Missouri, need ways to reduce the budget. One way the state of Missouri has found to save money is through tightening the rules for the Missouri Property Tax Credit (MO-PTC), which gives a tax credit to low-income senior citizens and disabled individuals for a portion of the housing rent they have paid for the year. Brenda Procter, a University of Missouri Extension specialist in the College of Human Environmental Sciences and public benefits tax policy expert, believes this change will present serious challenges for those who are affected.

“There are many low-income people who have been getting the MO-PTC for years and have relied on it to meet their basic needs,” Procter said. “These people have depended on this money for years to help pay bills during the post-holiday, winter heating season. Now they will have to come up with that money somewhere else. The news of the change came as a shock to many.”

In the past, many low-income disabled and senior citizens in Missouri were entitled to a property tax credit of up to $750 for renters and $1,100 for owners who owned and occupied their homes. The amount each individual receives is based on the amount of real estate taxes or rent paid and total household income. This year, the Missouri Department of Revenue is enforcing a line in the law that says anyone who rents from a facility that does not pay property taxes is not eligible for the credit.

Procter said this will affect many Missourians due to the large number of facilities that do not technically pay property taxes, but do often make local payments in lieu of taxes (PILOT). Procter says rent payments for these people are affected just the same as those whose facilities pay property taxes and pass that cost on in the rent. Procter believes it will be a costly technicality for many low-income people. She says many who are suddenly ineligible are already worried.

“There are many people who are scared that the state is going to make them pay back the credits they had received for several years,” Procter said. “Others are afraid they had broken the law without realizing it. Most of the people I have talked to are either very disappointed, angry, or both.”

Procter believes there aren’t any easy solutions to this problem, but she does hope that lawmakers will recognize the issue and address it as soon as possible as well as look for different ways to trim the budget.

“There needs to be some kind of stop-gap solution this year to ease the transition for low-income and elderly people who have been blindsided by this new interpretation of the law,” Procter said. “I wonder if the same scrutiny is being applied to other tax credits such as developer housing tax credits to build low-income housing. The people who are being affected by this change are among the most vulnerable citizens of Missouri.”

Brenda Procter has been a state Extension specialist with a focus on poverty, serving on the MU Personal Financial Planning faculty for 17 years. Procter has worked extensively with low-income families and maintains the Poverty At Issue Web site, a resource for agencies and educators working with people in poverty. She volunteers as an income tax preparer and educator through the Volunteer Income Tax Assistance or VITA program.