Circuit breaker tax law changes pass committee

A Maui County Council committee recommended passage Tuesday of a revised version of the circuit breaker property tax credit program.

The move came after last year’s council changes to the program drew criticism from the mayor, community groups and residents, many of whom no longer qualified for the program that buffers homeowners from extreme increases in property values.

In the version adopted by the Budget and Finance Committee on Tuesday, applicants will no longer be disqualified if they own more than one property, and the total household income threshold of $100,000 will only apply to the homeowner, spouse of the homeowner and titleholders living on the property.

Homeowners have until Sept. 15 to apply for the tax credit for the upcoming tax year that begins July 1 and ends June 30, 2015.

“We made significant changes on the bill,” committee Chairman Mike White told the committee members as he offered up his draft Tuesday, noting that the changes reflected discussions at its June 10 meeting.

Council Members Don Guzman and Mike Victorino proposed amendments throughout the committee’s deliberations. Both were satisfied that their concerns were heard.

Committee Vice Chairman Riki Hokama said he was satisfied with what was recommended Tuesday, noting that it is reasonable and doable for this upcoming tax year.

In spring 2013, the council made amendments to the circuit breaker program to catch cheats and abusers of the program, developed in the 1990s to protect those with limited incomes, longtime residents and kupuna from escalating property assessments and taxes.

For the upcoming tax year, there were 869 circuit breaker applicants. Of those, 390 were approved and 479 were denied under the council’s 2013 revisions.

Although the committee recommended passage of the amended ordinance Tuesday, they kept the subject matter in committee to allow for further discussion on how to best determine household income. Unresolved questions include whether household income should include Social Security and other nontaxable income.

But committee members agreed that for the coming tax year, household income would be determined by adjusted gross income, because some who have already qualified for the credit may be disqualified if changes were made.

At the last committee meeting, Guzman pointed out that some homeowners have reported incomes of as little as 1 cent as a result of deductions allowed in the program.

The amended version of the circuit breaker tax program is tentatively scheduled to be sent to the full council for first reading on July 8.

Other amendments made Tuesday include:

* Allowing homeowners to qualify for a circuit breaker if they have been granted a home property tax exemption for at least five out of the prior six tax years.

* Allowing homeowners with homes of more than $400,000 to take advantage of the circuit breaker but on a sliding scale. For example, those whose building value runs between $400,001 and $412,500 only would be eligible for 80 percent of the tax credit. Those with building values of $450,001 or more do not qualify for a tax credit, and those with gross building assessed value of $400,000 or less qualify for 100 percent of the tax credit.

* Providing that the finance director may require that each member of the household provide copies of a federal income tax return; a tax account transcript, if applicable, from the IRS, and any accompanying forms and schedules that the director may require to verify the transcripts.

For the coming tax year, homeowners would be notified on or before Oct. 31 if they do not qualify for the tax credit. The deadline to file an appeal with the Real Property Tax Board would be Nov. 30.

When the initial revisions were made in 2013, Mayor Alan Arakawa, members of the Committee for More Equitable Taxation and other community members criticized the move. COMET members had led the fight to create the tax credit in the 1990s.

The initial revisions on the bill were vetoed by Arakawa, but the council overrode his veto.

Arakawa had some harsh words for White and the council.

“Mike White should be ashamed of himself for letting this go on for so long,” the mayor said in a statement Tuesday evening. “Hundreds of people have been hurt, and even these latest revisions don’t fix everything.”

He said the revisions do not address issues with estate planning. Previously, he had complained that the revisions will hurt elderly couples who put their homes in their children’s names for inheritance purposes.

“Seniors will still suffer because of this,” Arakawa continued. “This was the most severe act of legislative cruelty that I have seen while in public office. The original circuit breaker requirements should be reinstated to what it was before.”

* Melissa Tanji can be reached at