Town to refund 2 percent tax money paid in error

Two people who purchased property in December were unaware they paid a tax they were exempt from and want their money back.

The Town Board agrees with them and is instituting a new policy.

At Tuesday’s Town Board work session, Assessor Al Hammond told the board the new homeowners paid a 2 percent tax on real estate sale prices that goes to fund open space, called the Community Preservation Fund. But there’s an exemption to the tax for first time homeowners who have a salary of $127,320 or less and buy a property that is worth $665,080 or less.

The buyers in question met both criteria, Mr. Hammond said, and should be entitled to a refund of $7,750.

“They weren’t negligent,” Mr. Hammond said. “They were not informed they could be exempted from the two percent tax.”

Mr. Hammond added he believed the homeowners were entitled to a refund. He made the case that the $7,750 was never Shelter Island’s to begin with since Suffolk County collects the 2 percent receipts and then gives it back to the East End towns that participate in Community Preservation Fund programs.

“The return of this money would not be a burden on the tax payers of Shelter Island because it was not in the budget to begin with,” Mr. Hammond said.

Cautioning that he was speaking only in “ball park numbers,” Mr. Hammond reported that since January 1, there had been 41 properties sold on the Island for about $39.3 million. By law, the first $250,000 of any purchase is deductible for the 2 percent tax. Giving back $7,750 “is not a burden in any sense in purchasing open space,” Mr. Hammond said.

Town Attorney Laury Dowd, who has drafted a proposal that there be a one year grace period allowing a refund for people who mistakenly paid the tax, said it was true that buying property is often an overwhelming experience and people overlook details. But all purchasers sign a 2 percent tax form where exemptions are listed “if you had the time to read it,” she said.

“I agree it’s a small amount of money,” Ms. Dowd said, but added that all 2 percent money is used in town decisions to target properties to preserve.

Nevertheless, she believed it was fair to give purchasers a year to get money back they paid that they didn’t owe.
The board was in agreement and will most likely vote on a resolution on the matter at the Town board meeting Friday, August 30.

Mr. Hammond said he was preparing “a package” explaining the 2 percent tax in detail and would give it to all real estate offices on the Island.