Thursday, November 4, 2010

Fla. Appeals Court Nixes County Official's Attempt To Strip Homeowner Of Tax Exemption In 'Double Homestead' Case As Legal Non-Profit Scores Big Win

A Florida appeals court has recently affirmed longstanding state law that (contrary to popular belief), in certain circumstances, the mere fact that two people are married will not, in and of itself, preclude them from each claiming a real estate tax exemption for their Florida homesteads allowed under Article VII, Section 6 of the Florida Constitution,(1) when living in separate residences.

After receiving an unfavorable trial court ruling and despite the plain language of the applicable rules and existing Florida case law in support thereof, hard-headed Pasco County Property Appraiser Mike Wells took the improvident step of submitting Pasco County Circuit Judge Stanley R. Mills ruling to an appeals court for review, which the latter unanimously upheld.(2)

For the county property appraisers throughout the state of Florida, whose job includes the determination of qualified tax exemption claims filed by homeowners and who probably don't want word to leak out that 'double homesteads' are, in fact, warranted in certain cases, this ruling surely represents an unwelcome defeat.

Conversely, it represents good news for, among others, married people in Florida who can't stand living with each other and who split up, establish their own separate homesteads, and for whatever reason (ie. financial, religious, children, convenience, hatred for divorce attorneys, etc.) never bother to formally get a divorce.

Representing the homeowner who, with the help of a local non-profit law firm, stood up against the property appraiser for improperly stripping an apparently not well-heeled homeowner of his homestead exemption and possibly thinking he could get away with it because the homeowner might lack the savvy and financial wherewithal to get an attorney and put up a fight before the appeals court in this case was Maurice M. Feller and Richard A. Motley, of Bay Area Legal Services, Inc., New Port Richey, Florida.(3)

For the court ruling, see Wells v. Haldeos, Case No. 2D09-4250 (Fla. App. 2d DCA, October 22, 2010).

(1) Not to be confused with Article X, Section 4 of the Florida Constitution, which grants an exemption against forced sale of a state resident's Florida homestead to satisfy most, non-mortgage, debts.

(2) In affirming the lower court ruling in favor of the homeowner, the Florida appeals court made these observations (bold text is my emphasis, not in the original text):

  • Mr. Haldeos and his wife have established two separate permanent residences in good faith. Mr. Haldeos has no financial connection with his wife and they do not provide benefits, income, or support to each other. He has a Florida driver’s license and his vehicle is registered in Pasco County. At the hearing, the attorney for the Property Appraiser stated that

    "we agree in this case that if there isn't an absolute [prohibition on married couples from receiving two homestead exemptions], this case would be the outlier that would surely be entitled to a homestead. We’re not trying to say that they’re trying to disprove factually a family unit, that there’s any financial aspects involved, or that there is any relationship on-going because we have nothing to surmise that or nothing has been developed."

  • The trial court found that it would defy logic for two people "who have no contact with one another, who don’t have any connections of a financial, emotional or any other way to call them a family unit.” Based on this reasoning, the trial court ruled that Mr. Haldeos and his wife constitute separate "family units" and may obtain two separate homestead exemptions.

  • The Property Appraiser argues on appeal that this interpretation of the term "family unit" is contrary to the intent of section 196.031(5), Florida Statutes (2009), which provides as follows:

    A person who is receiving or claiming the benefit of an ad valorem tax exemption or a tax credit in another state where permanent residency is required as a basis for the granting of that ad valorem tax exemption or tax credit is not entitled to the homestead exemption provided by this section.

  • We do not agree that the trial court's ruling is at odds with section 196.031(5), as the statute clearly prohibits an individual from receiving two residency-based tax credits. If the legislature had intended, as the Property Appraiser suggests, to prohibit a married couple from receiving two such tax exemptions, it could have included married couples in the above language.

  • The Property Appraiser further argues that the statute must be strictly construed against the taxpayer where "the homestead exemption provides relief from an ad valorem tax." DeQuervain v. Desguin, 927 So. 2d 232, 236 (Fla. 2d DCA 2006). While we agree with this premise, we note that "[w]here the statute's language is clear or unambiguous, courts need not employ principles of statutory construction to determine and effectuate legislative intent." See Fla. Dep't of Children & Family Servs. v. P.E., 14 So. 3d 228, 234 (Fla. 2009). Section 196.031(5) clearly and unambiguously refers to a "person" and not a married couple or family unit.

  • Although there is no constitutional or statutory guidance on the issue at bar, the Florida Department of Revenue has enacted a rule instructing property appraisers that married couples may be considered separate "family units" in certain circumstances. Florida Administrative Code Rule 12D-7.007(7), provides as follows:

    If it is determined by the property appraiser that separate permanent residences and separate “family units” have been established by the husband and wife, and they are otherwise qualified, each may be granted homestead exemption from ad valorem taxation under Article VII, Section 6, 1968 State Constitution. The fact that both residences may be owned by both husband and wife as tenants by the entireties will not defeat the grant of homestead ad valorem tax exemption to the permanent residence of each.

  • In determining whether Mr. Haldeos was entitled to a homestead exemption, the Property Appraiser was required to follow rule 12D-7.007(7): "The Department of Revenue shall prescribe reasonable rules and regulations for the assessing and collecting of taxes, and such rules and regulations shall be followed by the property appraisers, tax collectors, clerks of the circuit court, and value adjustment boards." § 195.027(1), Fla. Stat. (2009).

  • In a case involving the protection of a homestead from a judgment, the Fourth District held that when a married couple is separated, the husband can claim a homestead exemption for a residence in which he resides and owns, even though he still owns a home with his estranged wife for which they claim a homestead tax exemption. Law v. Law, 738 So. 2d 522, 524 (Fla. 4th DCA 1999). In that case, the argument was made that the husband's home could not be homestead because the home he owned with his wife was, as a matter of law, his homestead, and a person cannot have two homesteads. Id. The Fourth District held:

    We see nothing inconsistent with our public policy if we extend a homestead exemption to each of two people who are married, but legitimately live apart in separate residences, if they otherwise meet the requirements of the exemption. When we say “legitimately” we mean that there is no “fraudulent or otherwise egregious act” by the beneficiary of the homestead exemption.

  • Id. at 525. The court agreed that the husband could not have two homesteads and that a husband and wife in an intact marriage could not have two homesteads. However, the court held that the husband's homestead could be different from the wife's homestead "where their separation was bonafide," and it was the intent of the husband to live in his separate home. Id.; see generally Judd v. Schooley, 158 So. 2d 514, 517 (Fla. 1963) (holding that the wife could claim a permanent home in Florida and receive a homestead exemption even though her husband was legally domiciled in another state).

  • Although opinions of the Florida Attorney General are not binding on this court, we note that they have favored the granting of two separate homestead exemptions to a husband and wife where they establish separate permanent residences. 75 Op. Att'y Gen. 146 (1975); 05 Op. Att'y Gen. 60 (2005).

  • The Property Appraiser urges that if married couples can be considered separate “family units” in these circumstances, such a result would make his job in reviewing homestead exemptions virtually administratively unworkable, because no property appraiser will have the staff and available resources to verify whether a married couple is, in fact, maintaining two separate permanent residences. While we recognize that property appraisers will be required to review the financial information of separated couples in these unique circumstances, we note that the person claiming the homestead exemption has the burden of proving that he or she qualifies for such. Schooley v. Judd, 149 So. 2d 587, 590 (Fla. 2d DCA 1963), reversed on other grounds, 158 So. 2d 514 (Fla. 1963).

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Note that, in its ruling, the Florida appeals court fails to quote, in its entirety, the applicable Florida Administrative Code Rule 12D-7.007(7), which follows below (bold text is the portion of the Florida Administrative Code Rule 12D-7.007(7) which was inexplicably omitted by the appeals court):

  • (7) A married woman and her husband may establish separate permanent residences without showing “impelling reasons” or “just ground” for doing so. If it is determined by the property appraiser that separate permanent residences and separate “family units” have been established by the husband and wife, and they are otherwise qualified, each may be granted homestead exemption from ad valorem taxation under Article VII, Section 6, 1968 State Constitution. The fact that both residences may be owned by both husband and wife as tenants by the entireties will not defeat the grant of homestead ad valorem tax exemption to the permanent residence of each.

The point here simply (and obviously) is that as long as a husband and wife can demonstrate that they have, in good faith, established separate homesteads, no other reason or grounds for doing so (ie. marital instability or incompatibility, family illness/other health issues, high profile or other working professionals who work in different regions of the state or country, other uncommon circumstances, etc.) is necessary.

(3) Bay Area Legal Services is a regional, non-profit public interest law firm that provides a full range of civil legal services to individuals and non-profit groups that have limited access to legal services, with offices throughout the Tampa Bay region (operating offices in Hillsborough, Pasco, and Pinellas counties).

Inasmuch as this law firm's representation of individuals, like most non-profit law firms, is typically limited to those of low income, it's not too hard to read between the lines in this case and surmise that the Pasco County Property Appraiser may have thought he could get away with screwing over this homeowner by stripping him of his homestead real estate tax exemption, possibly figuring the homeowner didn't have the resources or savvy to challenge him. This, notwithstanding the fact that the Property Appraiser's actions flew in the face of the existing Florida case law, Florida Department of Revenue regulations, and past published opinions of the state attorney general's office, as this ruling clearly articulates.

By the way, contrast this story with the recently reported story (Miami Herald: Official: LePage tax exemption allowed in Fla.) where the Volusia County, Florida Tax Appraiser approved a homestead exemption claimed by the [presumably well-heeled] family of Maine Republican gubernatorial candidate Paul LePage on a Florida home without resorting to the kind of protracted legal battle the Pasco County Property Appraiser engaged in with a less-well-heeled homeowner:

  • Morgan Gilreath Jr., property appraiser in Volusia County, noted that the Florida situation was unusual - so unusual that there's no place on the homestead exemption form or statement of gross income to make note of the exception to Florida's law. There's also no notation on the county website, he said.

  • Because of the exception, Ann LePage can list Maine as her primary residence while continuing to claim the homestead exemption in Florida as long her mother lives in the home and the LePages maintain it and provide for her, making her "naturally dependent," said her attorney, William A. Lee III of Waterville, who is licensed in Maine and Florida.

The Lepage story was also reported by The Maine Public Broadcasting Network and the Bangor Daily News, among other media outlets.

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