Thousands of New Jerseyans who sold their homes in 2014 missed out on Homestead property tax rebates, according to a new audit.
TRENTON — Thousands of New Jerseyans who sold their homes in the year and a half it took the state to issue the most recent Homestead Benefit missed out on $10 million in property tax credits, according to an audit released Tuesday.
Instead, those credits went to the new buyers, who received a credit against a property tax bill they didn't pay, the state auditor said in the new review of the 25-year-old Homestead benefit program, the key weapon against New Jersey's highest-in-the-nation property taxes.
The audit also found the state sent out $2.6 million in benefits to dead people.
The Homestead Benefit residents received in May was a credit against the property taxes they paid in 2012. All told, the state paid out $365 million in credits.
About 19,000 properties were bought and sold by the time the state delivered on those credits. What happened was the 19,000 homeowners who received a revised property tax bill in May were not the same homeowners who had paid the 2012 property tax bill and filed the application, according to the audit.
"We found that because of the timing of the 2012 Homestead Benefit distribution and the process by which applicants were to notify the Division of Taxation of home sales, 19,000 eligible applicants representing $10 million in benefits may not have received their benefit," it said.
N.J. residents are now getting their property tax rebates — from 2012
People can note on their application that they have sold or may sell their home, and the state will issue their benefit as a rebate check rather than a credit on the new owner's property tax bill to "ensure the new owner of the home did not get a homestead benefit intended for another party," the audit said.
But homeowners who weren't contemplating selling or hadn't sold their homes at the time they applied often miss out.
Homeowners waited 13 months for their 2011 rebate and 17 months for their 2012 rebate, which they received in May.
"This time lapse increased the number of sellers that did not have the opportunity to indicate a home sale on their application..." the audit said.
While the application instructs homeowners who sold after the application deadline to work out the credit with buyers during their closing, interviews auditors held with 10 title agents and five real estate attorneys suggest that isn't happening.
The state auditor estimated that if the 2013 credits are distributed this May, at least $2 million will wind up in the wrong hands, and that number grows as payments are delayed.
In a response, the Division of Taxation Acting Director Dennis Shilling agreed to use property sales data to determine if an applicant has sold their home and should receive a check rather than a credit.
The audit also noted that the lag time cost the state $475,000 to reimburse municipalities that had to reissue property tax bills reflecting the new, credited amount. Merely timing the credits to match tax bills going out would eliminate the cost of reprinting and mailing bills.
The audit also found nearly 5,000 benefits worth $2.6 million were paid out to applicants who were no longer alive.
"We performed a match and found 4,853 benefits paid to primary applicants with a date of death prior to October 1, 2012," the audit said. "Of these applicants, 127 died more than 20 years ago, and 16 would be at least 110 years old."
Auditors reviewed individual 30 cases and found that three payments were made to estates, two to the deceased applicant and one to an unrelated person. The balance went to surviving spouses who may or may not be eligible.
Shilling responded that the Division of Taxation has already taken steps to resolve this.
Samantha Marcus may be reached at smarcus@njadvancemedia.com. Follow her on Twitter @samanthamarcus. Find NJ.com Politics on Facebook.
