Legislation that Gov. Janet Mills signed into law Monday will provide property tax relief to thousands of Mainers who are 65 or older and earn less than $40,000 per year.

The property tax deferral program comes with strings attached. The state will pay the property taxes for people who apply and qualify, but the state will have the authority to obtain a lien on the applicant’s real estate. All property taxes paid by the state will be repaid to the state when the property is sold or the participant or participants die.

The bill’s chief sponsor, Sen. Donna Bailey, D-Saco, said the timing of the legislation, which she has been working on for several years, couldn’t have been better as taxpayers in South Portland and Portland struggle to come to terms with new property valuations that in some case have sent their property tax bills soaring into ranges they can’t afford. Bailey said her bill will allow seniors to age in place without fear of municipal reprisal for failure to pay property taxes.

Tax relief amounts under the property tax deferral program would not be capped and would be based solely on a person’s property tax bill, Bailey said.

“I hear too many stories of seniors who simply cannot afford food, medicine and property taxes, which means they end up having to choose one over the other and then go without necessities,” she said. “Seniors worked hard for their entire lives to pay off their mortgages and earn a quiet retirement inside their homes. But the reality is, they are struggling to pay ever-increasing property taxes. Property tax relief for seniors was one of my earliest top priorities since I first became a legislator, and I’m so proud to finally see this become a reality.”

The legislation, L.D. 1638, will rely on federal pandemic relief funds to restore a defunct tax deferral program that started in 1989 but was suspended in 1991 during a state budget crisis caused by a recession. The state continued to collect revenues from the old program and was repaid for all of the tax deferral money it paid to municipalities. The last person from that program died in 2018 – the year the last repayment was collected.

The new law will take effect Oct. 18, 90 days after Mills signed it.

Bailey said the senior tax relief program will not run out of money. Another bill that passed, L.D. 1733, designates that $3.2 million in Federal American Rescue Plan funds be allotted to establish the Senior Tax Deferral Revolving Account. Those tax relief funds will be available through fiscal year 2023. After that, the tax relief funding will be provided from the Housing Opportunities for Maine (HOME) program administered by MaineHousing. The perpetually funded program receives revenues from real estate transfer taxes paid by buyers and sellers.

“The HOME program has always been well-funded and has never run out of money,” Bailey said.

It’s not clear how many seniors would qualify for assistance under “An Act To Help Seniors and Certain Persons with Disabilities Remain in Their Homes by Providing for the Deferral of Property Taxes.” Bailey said it would be accurate to say that thousands of Mainers are likely eligible. The Maine Revenue Services, which was involved in developing L.D. 1638, could not be reached Wednesday night.

“The majority of seniors in Maine who receive Social Security benefits are probably going to qualify,” Bailey added.

A representative for the Maine Council on Aging testified on the bill before the Joint Standing Committee on Taxation in May. He told committee members that there are more than 300,000 Maine residents over 65. The Maine Council on Aging said Social Security benefits, as a source of income, mask poverty in older Mainers.

“While less than 10 percent of older Mainers live at or below the federal poverty level, more than a third of Mainers who are 65 and older live on Social Security alone, with an average income of just over $18,000,” the council said in written testimony. “This is just about 140 percent of the federal poverty level and is not enough income for these people to meet their basic needs.”

One of the co-sponsors of Bailey’s bill was  Sen. Joseph Rafferty, D-Kennebunk.

“Seniors are facing numerous challenges as it is, especially burdensome property taxes. Many seniors have lived in their homes for decades while contributing to the growth and prosperity of their community,” Rafferty said in a statement. “This property tax relief for seniors is designed to ensure they can continue to live without the worry of being displaced.

Since 2020, property taxes have risen sharply largely as a result of a home buying spree fueled by the COVID-19 pandemic.

Bailey and Rafferty said higher property taxes hit seniors especially hard because they often live on fixed incomes that may include retirement savings and Social Security. The legislators said that 29 percent of Maine seniors live in families with low income, and 56.4 percent of Maine seniors who receive Social Security payments get on average $11,964 annually.

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