Court ruling on Section 42 leaves taxpayers on hook for tax repayments
by MBJ Staff
Published: August 15,2014
Tags: Charles Stokes, Chartre Consulting, Clarence Chapman, court, couty government, developer, Hinds County, home, house, housing, IRS, justice, law, legal, Mississippi Supervisors Association, Mississippi Supreme Court, real estate, ruling, Section 42, tax, tax assessor, taxpayer
JACKSON — While some 14 Mississippi counties owe Section 42 housing developers millions in over-charged taxes, Hinds County’s taxpayers are not exposed to such refunds as the tax assessor has levied assessments according to the state law.
Tax Assessor Charles Stokes said Hinds County taxpayers can rest assured his office has calculated property taxes appropriately.
“It’s the law and we have adhered to it,” said Stokes. “It is our policy to treat all taxpayers the same and to follow the law.”
Earlier this year, the Mississippi Supreme Court issued a unanimous ruling that a number of counties should have complied with the law on Section 42 property valuations and that repayments are due. Several counties and the Mississippi Supervisors Association then asked the Court to reconsider their ruling. Last week, the Court issued a final decision upholding their previous ruling.
Taxpayers in DeSoto, Forrest, Grenada, Hancock, Harrison, Humphreys, Jackson, Lauderdale, Lowndes, Madison, Pike, Pontotoc, Rankin and Sunflower counties may be at risk having to fund huge tax refunds to developers. For Hinds County, the Court’s ruling affirms that Stokes’ office valued Section 42 tax credit housing according to Mississippi law and will not owe excessive taxes.
Since 2005 private investors and lenders relying on the state valuation law have invested and loaned over $1 billion dollars to develop needed affordable housing in Mississippi. The families benefiting from these homes are typically families with children already in the local school systems that cannot afford a home of the quality provided by Section 42 housing.
Qualified developers can complete for the limited credits available annually and if successful, use them exclusively to develop affordable housing for working families (police, firemen, teachers, etc.). Hinds County families can earn up to $41,000 per year when qualifying for these homes.
While some contend these developments and the Court’s ruling are costing taxpayers money in the 14 counties that asked the Court to reconsider, proponents of the developments say the taxes they are legally required to pay are monies the counties would otherwise not have collected.
“For elected officials or counties to not follow the law, it would seriously damage Mississippi’s financial credibility and destroy funding for future housing needs,” said Clarence Chapman of Chartre Consulting. “The excessive taxation has damaged all affected housing developments, and in some instances is so abusive that it may force housing developments to close their doors if not corrected.”
For almost 30 years, “Section 42” of the IRS code has provided tax credits that investors exchange for capital that is essential for the development of quality affordable housing. Section 42 tax credit housing has been the most successful federal housing program to date in that it encourages and empowers the residents to become constructive members of their communities, and helps break the cycle of poverty.
The program was initiated as President Ronald Reagan’s effort to make the American Dream of a safe, decent, affordable home obtainable to lower income working families, without having them depend on government housing programs funded entirely by taxpayers.
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