TAX NEWS - June 2010

Connecticut Tax: Elderly tax relief applications surpass budget allocation

More seniors applied for tax assistance than allocated in the budget, tapping out the funds for the elderly and disabled tax relief program. The shortfall poses the problem of how to equitably distribute the funds, Sandy Dennies, Wilton's chief financial officer, told the Board of Selectmen Monday.

"Let's pro-rate it equitably so that everyone gets something," said First Selectman William Brennan.

Ms. Dennies said applications for the elderly tax credit program spiked to 302 this year, with 170 meeting eligibility criteria. Last year, there were 236 applications, with 113 meeting the requirements.

The reason for the increase in applications was because this year's program offered expanded benefits, Ms. Dennies said.

"The new ordinance increased the maximum credit available from $3,700 to $4,000 and it increased the income level of the individuals who could apply from $63,400 to $74,999," she said.

Last year, the program was budgeted for $650,000, but this year a "floating cap" of $850,000 was available for seniors who met the criteria. This was comprised of $675,000 in tax credits and $175,000 in deferrals.

"This was also the first year that the amount of annual interest due on deferrals was reduced from 5% to 3%," Ms. Dennies said.

According to Jerry Holdridge, a member of the elderly tax committee, residents this year applied for a total of $873,274 in tax credits and for $201,883 in deferrals.

"You can see that with the improved tax relief program, the Board of Selectmen greatly underfunded with the cap," Mr. Holdridge said.

However, at Monday's meeting, the selectmen decided to stick with the cap for the time being and pro-rate the tax credits using a formula that divides the budgeted amount by the amount requested.

"The credits will be prorated across the board by using a factor of $675,000 divided by $873,724, which equals 0.772555," Mr. Holdridge said. "This factor would then be multiplied by the credit that the applicant should get without a cap. For example, if the credit should be $4,000 then $4,000 multiplied by 0.772555 will amount to $3,090."